Item 8. Financial Statements and Supplementary Data
Item 8.
Financial Statements and Supplementary Data.
BENITEC BIOPHARMA INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm Squar Milner
LLP
F-2
Report of Independent Registered Public Accounting Firm Grant Thornton
Audit Pty Ltd
F-3
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations and Comprehensive Income
(Loss)
F-5
Consolidated Statements of Stockholders Equity
F-6
Consolidated Statements of Cash Flows
F-7
Notes to Consolidated Financial Statements
F-8
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Benitec Biopharma Inc.
Opinion on the Financial Statements
We have audited the
accompanying consolidated balance sheet of Benitec Biopharma Inc. and its subsidiaries (the Company) as of June 30, 2020, the related consolidated statements of operations and other comprehensive income (loss), stockholders
equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of June 30, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ SQUAR MILNER LLP
We have served as the Companys
auditor since 2020.
Campbell, California
September 23,
2020
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Table of Contents
Report of independent registered public accounting firm
Board of Directors and Shareholders
Benitec Biopharma
Limited
Opinion on the financial statements
We
have audited the accompanying consolidated balance sheets of Benitec Biopharma Limited and subsidiaries (the Company) as of June 30, 2019, the related consolidated statement of comprehensive income, changes in shareholders equity,
and cash flow for the year ended June 30, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of June 30, 2019, and the results of its operations and its cash flow for the year ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON AUDIT PTY LTD
We have served as the
Companys auditor from 2010 to 2020.
Sydney, Australia
August 14, 2020
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BENITEC BIOPHARMA INC.
Consolidated Balance Sheets
(in thousands, except par value and share amounts)
June 30,
2020
June 30,
2019
Assets
Current assets:
Cash and cash equivalents
$
9,801
$
15,718
Trade and other receivables
59
2,536
Other assets
949
502
Total current assets
10,809
18,756
Property and equipment, net
374
470
Deposits
9
9
Right-of-use
assets
395
Total assets
$
11,587
$
19,235
Liabilities and Stockholders Equity
Current liabilities:
Trade and other payables
$
741
$
2,494
Accrued employee benefits
203
147
Lease liabilities, current portion
192
Total current liabilities
1,136
2,641
Lease liabilities, less current portion
213
Total liabilities
1,349
2,641
Commitments and contingencies (Note 13)
Stockholders equity:
Common stock, $0.0001 par value10,000,000 shares authorized; 1,108,374 and 856,765 shares
issued and outstanding at June 30, 2020 and 2019, respectively
1
1
Additional paid-in capital
128,826
127,327
Accumulated deficit
(116,636
)
(108,870
)
Accumulated other comprehensive loss
(1,953
)
(1,864
)
Total stockholders equity
10,238
16,594
Total liabilities and stockholders equity
$
11,587
$
19,235
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except share and per share amounts)
Year Ended June 30,
2020
2019
Revenue:
Revenues from customers
$
97
$
11,551
Government research and development grants
5
648
Total revenues
102
12,199
Operating expenses
Royalties and license fees
(185
)
435
Research and development
3,001
4,567
General and administrative
5,567
4,614
Total operating expenses
8,383
9,616
Income (loss) from operations
(8,281
)
2,583
Other income (loss):
Foreign currency transaction loss
(88
)
(75
)
Interest income, net
62
122
Other income, net
34
Unrealized loss on investment
(1
)
(21
)
Total other income, net
7
26
Net income (loss)
$
(8,274
)
$
2,609
Other comprehensive loss:
Unrealized foreign currency translation loss
(89
)
(531
)
Total other comprehensive loss
(89
)
(531
)
Total comprehensive income (loss)
$
(8,363
)
$
2,078
Net income (loss)
$
(8,274
)
$
2,609
Net income (loss) per share:
Basic and diluted
$
(8.10
)
$
3.05
Weighted-average shares outstanding:
Basic and diluted
1,021,193
856,765
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Stockholders Equity
(in thousands, except share amounts)
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders
Equity
Shares
Amount
Balance at June 30, 2018
856,765
$
1
$
127,715
$
(112,539
)
$
(1,333
)
$
13,844
Share-based compensation
672
672
Forfeiture of share-based payments
(1,060
)
1,060
Foreign currency translation loss
(531
)
(531
)
Net income
2,609
2,609
Balance at June 30, 2019
856,765
1
127,327
(108,870
)
(1,864
)
16,594
Common stock sold for cash, net of offering costs of $240
186,666
1,720
1,720
Issuance and exercise of pre-funded warrants, net of
transaction costs of $240
27,526
50
50
Cashless exercise of purchase warrants
37,417
Share-based compensation
237
237
Forfeitures of share-based payments
(508
)
508
Foreign currency translation loss
(89
)
(89
)
Net loss
(8,274
)
(8,274
)
Balance at June 30, 2020
1,108,374
$
1
$
128,826
$
(116,636
)
$
(1,953
)
$
10,238
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Cash Flows
(in thousands)
Fiscal Year Ended
June 30,
2020
2019
Cash flows from operating activities:
Net income (loss)
$
(8,274
)
$
2,609
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization
190
158
Amortization of
right-of-use assets
184
Loss on disposal of fixed assets
1
7
Unrealized loss on investment
1
21
Share-based compensation expense
237
672
Changes in operating assets and liabilities:
Trade and other receivables
2,396
607
Other assets
(457
)
(9
)
Trade and other payables
(1,696
)
740
Accrued employee benefit payable
57
(15
)
Lease liability
(174
)
Net cash provided by (used in) operating activities
(7,535
)
4,790
Cash flows from investing activities:
Purchases of property and equipment
(95
)
(404
)
Proceeds from disposal of property and equipment
1
4
Net cash used in investing activities
(94
)
(400
)
Cash flows from financing activities:
Proceeds from issues of shares
2,250
Share issue transaction costs
(480
)
Net cash provided by financing activities
1,770
Net increase (decrease) in cash and cash equivalents
(5,859
)
4,390
Cash and cash equivalents, beginning of year
15,718
11,879
Effects of exchange rate changes on cash and cash equivalents
(58
)
(551
)
Cash and cash equivalents, end of year
$
9,801
$
15,718
Supplemental disclosure of cash flow information:
Initial measurement of operating lease right-of-use assets and liabilities
$
(579
)
$
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
1. Business
Benitec Biopharma Inc. is a
corporation formed under the laws of Delaware, United States, on November 22, 2019. Benitec Biopharma Inc. is the parent entity of a number of subsidiaries including the previous parent entity Benitec Biopharma Limited (BBL). BBL
was incorporated under the laws of Australia in 1995 and was listed on the Australian Securities Exchange, or ASX, since 1997. Since then, the Company has focused on the development of novel genetic medicines. The proprietary platform, called DNA-directed RNA interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease-causing genes.
On November 27, 2019, BBL announced its intention to re-domicile from Australia to the United
States of America (the Re-domiciliation). BBL implemented a Scheme of Arrangement pursuant to which Benitec Biopharma Inc, a newly incorporated company for the purpose of affecting the Re-domiciliation, acquired all of the outstanding BBL shares. BBL shareholders received one Benitec Biopharma Inc. share for every 300 BBL shares in the Re-domiciliation. In
accordance with the U.S. Securities and Exchange Commissions (SEC) Staff Accounting Bulletin Topic 4C, all issued and outstanding shares of the Companys common stock have been retroactively adjusted in these consolidated
financial statements to reflect the 300:1 exchange ratio share consolidation in the Re-domiciliation as if it occurred on July 1, 2018.
BBL announced that the transaction to redomicile from Australia to the United States was fully implemented on April 15, 2020. The Re-domiciliation was approved by BBL shareholders at a Scheme Meeting held on March 26, 2020 and confirmed by the Supreme Court of Queensland on March 30, 2020.
The term the Company refers to (i), prior to the Re-domiciliation to BBL, an Australian
corporation, and its subsidiaries, and (ii), following the Re-domiciliation, to Benitec Biopharma Inc., a Delaware corporation, and its subsidiaries (including BBL).
The shares of Benitec Biopharma Inc. common stock issued in connection with the Re-domiciliation trade
on The Nasdaq Capital Market LLC (Nasdaq) under the symbol BNTC, and Benitec Biopharma Inc. continues to be subject to the reporting requirements of the SEC and applicable corporate governance rules of Nasdaq.
As a result of the Re-domiciliation, BBL became a wholly owned subsidiary of Benitec Biopharma Inc.
and delisted from the ASX on April 15, 2020. On August 14, 2020 BBL had a change of company status and became a Proprietary Limited company.
The Companys fiscal year end is June 30. References to a particular fiscal year are to our fiscal year ended June 30 of
that calendar year.
The consolidated financial statements of the Company are presented in United States dollars and consist of Benitec
Biopharma Inc. and the entities it controls:
Principal place of
business/country of
incorporation
2020
2019
Benitec Biopharma Proprietary Limited (BBL)
Australia
100
%
Benitec Australia Proprietary Limited
Australia
100
%
100
%
Benitec Limited
United Kingdom
100
%
100
%
Benitec, Inc.
USA
100
%
100
%
Benitec LLC
USA
100
%
100
%
RNAi Therapeutics, Inc.
USA
100
%
100
%
Tacere Therapeutics, Inc.
USA
100
%
100
%
Benitec Biopharma Proprietary Limited
Australia
100
%
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
On
April 15, 2020, the Company implemented the transaction to redomicile from Australia to the United States and became the parent company of BBL and the wholly owned subsidiaries listed in Note 1. The historical financial statements of BBL became
the historical financial statements of the combined company upon consummation of the Re-domiciliation. As a result, the financial statements included in this report reflect (i) the historical operating
results of BBL and subsidiaries prior to the Re-domiciliation; (ii) the combined results of the Company, BBL, and subsidiaries following the completion of the
Re-domiciliation; and (iii) the Companys equity structure for all periods presented .
The Companys consolidated financial statements included in this report have been prepared in accordance with accounting principles
generally accepted in the United States of America (US GAAP) and pursuant to the rules and regulations of the SEC. In the opinion of the Companys management, all adjustments (consisting of normal recurring adjustments and
reclassifications and non-recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows for the fiscal years ended June 30, 2020 and 2019 have been made.
Reference is frequently made herein to the Financial Accounting Standards Board (the FASB) Accounting Standards Codification
(ASC). This is the source of authoritative US GAAP recognized by the FASB to be applied to non-governmental entities.
Principles of Consolidation
The
consolidated financial statements include the Companys accounts and the accounts of its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
Segment Reporting
Operating
segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.
The Company views its operations and manages its business in one operating segment.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from these estimates. Significant estimates in the accompanying consolidated financial statements include the estimates of useful lives for depreciation, valuation of the operating lease liability and related right-of-use asset, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash, the valuation allowance on deferred tax assets and foreign currency translation
due to certain average exchange rates applied in lieu of spot rates on transaction dates.
Foreign Currency Translation and Other Comprehensive
Income (Loss)
BBLs functional currency is the Australian dollar (AUD). For financial reporting purposes, the Australian
dollar has been translated into United States dollar $ and/or USD as the reporting currency. Assets and
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.
Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders equity as
Accumulated other comprehensive income (loss). Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive income (loss) as other comprehensive income (loss).
Other Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
As of June 30, 2020, and 2019, the exchange rates used to translate amounts in Australian dollars into USD for the purposes of preparing
the consolidated financial statements were as follows:
June 30,
2020
June 30,
2019
Exchange rate on balance sheet dates
USD: AUD Exchange Rate
0.6877
0.7014
Average exchange rate for the period
USD: AUD Exchange Rate
0.6711
0.7149
The exchange rate used to translate amounts in AUD into USD for the year ended June 30, 2018 is 0.7385 as of the balance
sheet date.
Fair Value Measurements
The Company measures its financial assets and liabilities in accordance with US GAAP using ASC 820, Fair Value Measurements. For
certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities.
The Company follows accounting guidance for financial assets and liabilities. ASC 820 defines fair value, provides guidance for measuring fair
value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance discusses valuation
techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).
The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad
levels. The following is a brief description of those three levels:
Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:
Unobservable inputs in which little or no market data exists, therefore developed using estimates and
assumptions developed by us, which reflect those that a market participant would use.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
The carrying amounts of the Companys cash and cash equivalents, trade and other
receivables, and trade and other payables are considered to be representative of their respective fair values because of the short-term nature of those instruments. As of June 30, 2020, and 2019, the Company had no financial assets or
liabilities measured at fair value on a recurring basis.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less with
financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the consolidated balance sheets.
Concentrations of Risk
Financial
instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash. The Company maintains deposits at federally insured financial institutions in excess of federally insured limits. The Company has
not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Trade and Other Receivables
As
amounts become uncollectible, they will be charged to an allowance and operations in the period when a determination of collectability is made. Any estimates of potentially uncollectible customer accounts receivable will be made based on an analysis
of individual customer and historical write-off experience. The Companys analysis includes the age of the receivable account, creditworthiness of the customer and general economic conditions.
Property and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals, and improvements are capitalized. When property and equipment are retired or
otherwise disposed of, the related cost and accumulated depreciation and amortization are removed from the respective accounts, and any gain or loss is included in operations.
Depreciation and amortization of property and equipment is calculated using the straight-line basis over the following estimated useful lives:
Software
3-4 years
Lab equipment
3-7 years
Furniture and fixtures
3-7 years
Computer hardware
3-5 years
Leasehold improvements
shorter of the lease term or estimated useful lives
Impairment of Long-Lived Assets
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined
using the assets expected future discounted cash flows or market value, if readily determinable.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the period and which are unpaid. Due to
their short-term nature, they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Australian Goods and Services Tax (GST) and other similar taxes
Revenues, expenses, and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown
inclusive of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash
flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Leases
At lease commencement, the
Company records a lease liability based on the present value of lease payments over the expected lease term. The Company calculates the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily
determined. In that case, the Company uses its incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments over the expected lease term. The
Company records a corresponding right-of-use lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to
the lessor prior to the lease commencement date.
After lease commencement, the Company measures its leases as follows: (i) the lease
liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement; and (ii) the right-of-use lease asset
based on the remeasured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement. Any lease incentives
received and any initial direct costs are amortized on a straight-line basis over the expected lease term. Rent expense is recorded on a straight-line basis over the expected lease term.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding
during the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding plus potential common shares. Stock options, warrants and convertible instruments are
considered potential common shares and are included in the calculation of diluted net income (loss) per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted net
income (loss) per share when their effect is anti-dilutive. As of June 30, 2020, and 2019, there were 145,421 and 38,326 potential common shares, respectively, that were excluded from the calculation of diluted net income (loss) per share
because their effect was anti-dilutive.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
Revenue Recognition
The Company adopted ASC 606 Revenue from Contracts with Customers (ASC 606) on July 1, 2018. The adoption of ASC
606 did not have a material impact on the consolidated financial statements.
Upon adoption of ASC 606, the Company recognizes revenue in
accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Company applies judgement in determining whether contracts entered into fall within the scope of ASC 606. In doing so, management
considers the commercial substance of the transaction and how risks and benefits of the contract accrue to the various parties to the contract. In determining the accounting treatment of the contract with Axovant, management assessed that the
contract was within the scope of ASC 606.
Management has also made the judgement that the grant of the license and transfer of associated
know-how and materials are accounted for as one performance obligation as they are not considered to be distinct; they are highly interrelated and could not provide benefits to the customer independently from
each other. Judgements were made in relation to the transfer of the license and know-how and whether this should be recognized over time or a point in time. The point in time has been determined with regard to
the point at which the transfer of know-how has substantially been completed and the customer has control of the asset and the ability to direct the use of and receive substantially all of the remaining
benefits.
Licensing revenues
Revenue from licensees of the Companys intellectual property reflects the transfer of a right to use the intellectual property as it
exists at the point in time in which the license is transferred to the customer. Consideration can be variable and is estimated using the most likely amount method. Subsequently, the estimate is constrained until it is highly probable that a
significant revenue reversal will not occur when the uncertainty is resolved. Revenue is recognized as or when the performance obligations are satisfied.
The Company recognizes contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these
amounts as other liabilities in the consolidated balance sheet. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognizes either a contract asset or a receivable in its consolidated
balance sheet, depending on whether something other than the passage of time is required before the consideration is due.
Royalties
Revenue from licensees of the Companys intellectual property reflect a right to use the intellectual property as it exists at
the point in time in which the license is granted. Where consideration is based on sales of product by the licensee, revenue is recognized when the customers subsequent sales of product occurs.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
Services revenue
Revenue is earned (constrained by variable considerations) from the provision of research and development services to customers. Services
revenue is recognized when performance obligations are either satisfied over time or at a point in time. Generally, the provision of research and development services under a contract with a customer will represent satisfaction of a performance
obligation over time where the Company retains the right to payment for services performed but not yet completed.
Government Research and
Development Grants
Government grants are recognized at fair value where there is reasonable assurance that the grant will be
received, and all grant conditions will be met. Grants relating to expense items are recognized as income over the periods necessary to match the grant costs they are compensating.
Grant income is generated through the Australian federal governments Research and Development Tax Incentive program, under which the
government provides a cash refund for the 43.5% (2019: 43.5%) of eligible research and development expenditures. This grant is available for our research and development activities in Australia, as well as activities in the United States to the
extent such U.S.-based expenses relate to our activities in Australia, do not exceed half the expenses for the relevant activities and are approved by the Australian government. Grants are recorded when a reliable estimate can be made.
The Company will not be claiming the Australian Government research and development grants going forward due to the Re-domiciliation of the Company to the United States.
Research and Development Expense
Research and development costs are expensed when incurred. These costs have been recognized as an expense when incurred. Research and
development expenses relate primarily to the cost of conducting clinical and pre-clinical trials. Clinical development costs are a significant component of research and development expenses. Estimates have
been used in determining the expense liability under certain clinical trial contracts where services have been performed but not yet invoiced. Generally, the costs, and therefore estimates, associated with clinical trial contracts are based on the
number of patients, drug administration cycles, the type of treatment and the outcome being the length of time before actual amounts can be determined will vary depending on length of the patient cycles and the timing of the invoices by the clinical
trial partners.
Equity-based Compensation Expense
The Company records share-based compensation in accordance with ASC 718, Stock Compensation . ASC 718 requires the fair value of all
share-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period or the vesting period. The Company values employee and non-employee share-based
compensation at fair value using the Black-Scholes Option Pricing Model.
The Company adopted FASB Accounting Standard Update
(ASU) 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair
value of such awards over the service period.
Income Taxes
The Company is governed by Australia and United States income tax laws, which are administered by the Australian Taxation Office and the United
States Internal Revenue Service, respectively. The Company follows
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
ASC 740 Accounting for Income Taxes , when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized.
For uncertain tax positions that meet a more likely than not threshold, the Company recognizes the benefit of uncertain tax
positions in the consolidated financial statements. The Companys practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations.
Comprehensive Loss
Comprehensive
loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company records unrealized foreign currency translation loss which
qualifies as other comprehensive loss.
Accounting Standards recently adopted
In February 2016, the FASB issued ASU No. 2016-02: Leases (Topic 842) whereby lessees will
need to recognize most leases on their balance sheet as a right of use asset and a lease liability. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018. The Company adopted this ASU effective
July 1, 2019.
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.
The Companys only lease is the lease on its research and development facilities. The Companys existing lease
commitments are set out in Note 10.
In June 2018, the FASB issued ASU 2018-07,
Compensation Stock Compensation (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for
example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based
payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially
aligned. This standard is effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. The Company adopted this ASU on July 1, 2019. There was no effect on the
financial statements on adoption.
New Accounting Standards and Interpretations not yet mandatory or early adopted
In June 2016, the FASB issued ASU No. 2016-13: Financial Instruments Credit Losses
(Topic 326). This ASU represents a significant change in the accounting for credit losses model by requiring immediate recognition of managements estimates of current expected credit losses (CECL). Under the prior model, losses were recognized
only as they were incurred, which FASB has noted delayed recognition of expected losses that might not yet have met the threshold of being probable. This guidance is effective for interim and annual reporting
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
periods beginning after December 15, 2019. The Company has determined that it has met the criteria of a smaller reporting company (SRC) as of November 15, 2019. As such, ASU
2019-10: Financial Instruments-Credit Losses, Derivatives and Hedging, and Leases: Effective Dates amended the effective date for the Company to be for reporting periods beginning after
December 15, 2022. The Company will adopt this ASU effective July 1, 2023.
3. Going Concern
The accompanying consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the
Company as a going concern. For the fiscal years ended June 30, 2020, and 2019, the Company had a net (loss) income of $(8.3) million and $2.6 million, respectively, and net cash (used in) provided by operations of $(7.5) million and
$4.8 million, respectively.
As of June 30, 2020, the Company had $9.8 million in cash and cash equivalents. The Company
has incurred operating losses and negative cash flows from operations since inception, except for the year ended June 30, 2019. Management believes the Companys existing cash together with the net proceeds of a public offering of common
stock will be sufficient to fund the Companys operations at least for the next twelve months. In connection with the Companys public offering, on August 14, 2020, the Company filed a registration statement on Form S-1 with the SEC.
Management having performed a review of the cash flow forecasts, considering the cash
flow needs of the Company, believe that current funding and the proceeds of the upcoming capital raise will be sufficient for a period of at least twelve months from the date of this report.
Although management believes that the additional required funding will be obtained, there is no guarantee the Company will be able to obtain
the additional required funds on a timely basis or that funds will be available on acceptable terms. If such funds are not available when required, management will be required to curtail its expenditures, which may have a material adverse effect on
its future cash flows and results of operations, and its ability to continue operating as a going concern. The accompanying financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a
going concern.
4. Revenue (US$000)
Revenues from customers
June 30,
2020
June 30,
2019
Licensing revenue*
$
$
10,273
Royalty revenue
93
183
Service revenue*
4
1,095
Total
$
97
$
11,551
*
On July 9, 2018, the Company entered into a License and Collaboration Agreement with Axovant. Pursuant to
the Agreement, the Company granted Axovant an exclusive worldwide license to develop, manufacture, and commercialize products containing the Companys product known as BB-301, which was designed for the
potential treatment of Oculopharyngeal Muscular Dystrophy. Licensing revenue consists of payments for the Companys intellectual property related to BB-301 and the transfer of the right to use the
intellectual property of the Companys BB-301 license to Axovant. Service revenue consists of payments for services provided to Axovant during the term of the license agreement signed in July 2018. On
June 6, 2019, the termination of the License and Collaboration Agreement with Axovant was announced. The termination of the Agreement was
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
effective as of September 3, 2019. The termination discharges all future performance obligations under the contract at the termination date.
Other revenues (US$000)
June 30,
2020
June 30,
2019
Government research and development grants
$
5
$
648
Total
$
5
$
648
Disaggregated revenue (US$000)
Fiscal year ended June 30, 2020
Licensing
Royalties
Development
activities
Total
Services transferred at a point in time
$
$
$
4
$
$4
Services transferred over time
93
93
Total
$
$
93
$
4
$
$97
Disaggregated revenue (US$000)
Fiscal year ended June 30, 2019
Licensing
Royalties
Development
activities
Total
Services transferred at a point in time
$
10,136
$
$
$
10,136
Services transferred over time
137
183
1,095
1,415
Total
$
10,273
$
183
$
1,095
$
11,551
5. Cash and Cash equivalents
(US$000)
June 30,
2020
June 30,
2019
Cash at Bank
$
5,231
$
10,779
Term Deposit
4,570
4,939
Total
$
9,801
$
15,718
6. Trade and other receivables
(US$000)
June 30,
2020
June 30,
2019
Research & development grants
$
$
636
Other receivables*
59
1,900
Total
$
59
$
2,536
*
The Company had a contract asset of $0 and approximately $1.7M as of June 30, 2020, and 2019,
respectively, related to the contract with Axovant which is included in other receivables on the consolidated balance sheet.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
7. Other assets
(US$000)
June 30,
2020
June 30,
2019
Prepaid expenses
$
861
$
375
Security deposit
69
103
Other deposit
18
23
Market value of listed shares
1
1
Total
$
949
$
502
8. Property and equipment, net
(US$000)
June 30,
2020
June 30,
2019
Software
$
11
$
11
Lab equipment
1,109
1,014
Furniture and fixtures
6
Computer hardware
26
32
Leasehold improvements
24
77
Total property and equipment, gross
1,170
1,140
Accumulated depreciation and amortization
(796
)
(670
)
Total property and equipment, net
$
374
$
470
Depreciation expense was $190,000 and $158,000 for the fiscal years ended June 30, 2020 and 2019,
respectively.
9. Trade and other payables
(US$000)
June 30,
2020
June 30,
2019
Trade payable
$
282
$
1,474
Accrued license fees
54
385
Accrued research and development fees
498
Accrued professional fees
155
61
Other payables
250
76
Total
$
741
$
2,494
10. Leases
On July 1, 2019, the Company adopted ASC 842, Leases (ASC 842). ASC 842 requires lessees to recognize at the
lease commencement date a lease liability, which is the lessees obligation to make lease payments arising from a lease, measured on a discounted basis, and a
right-of-use asset, which is an asset that represents the lessees right to use, or control the use of, a specified asset for the lease term. Lessees and lessors
must either (i) apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements or (ii) recognize a
cumulative-
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
effect adjustment to the opening balance of retained earnings in the period of adoption. The Company elected to use the cumulative-effect transition method upon adoption.
ASC 842 also allows lessees and lessors to elect certain practical expedients. The Company elected the following practical expedients:
Transitional practical expedients:
The Company need not reassess whether any expired or existing contracts are or contain leases.
The Company need not reassess the lease classification for any expired or existing leases (that is, all existing
leases that were classified as operating leases in accordance with the previous guidance will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with the previous guidance will be
classified as finance leases).
The Company need not reassess initial direct costs for any existing leases.
Hindsight practical expedient:
The Company elected the hindsight practical expedient in determining the lease term (that is, when considering
lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the Companys right-of-use assets.
The Company has entered into an operating lease for office space under an agreement that expires in 2022. The lease
requires the Company to pay utilities, insurance, taxes and other operating expenses. The Companys lease does not contain any residual value guarantees or material restrictive covenants.
Upon adoption of ASC 842, the Company recognized on its consolidated balance sheet as of July 1, 2019 an initial measurement of
approximately $579,000 of operating lease liabilities, and approximately $579,000 of corresponding operating right-of use assets, net of tenant improvement allowances. There was also no cumulative effect
adjustment to retained earnings as a result of the transition to ASC 842. The Company recorded the initial recognition of the operating lease as a supplemental noncash financing activity on the accompanying consolidated statement of cash flows. The
adoption of ASC 842 did not have a material impact on the Companys consolidated statement of operations.
The tables below show the
changes during the year ended June 30, 2020:
(US$000)
Operating lease right-of-use assets
Initial measurement at July 1, 2019
$
579
Amortization of right of use asset
(184
)
Operating lease
right-of-use asset at June 30, 2020
$
395
(US$000)
Operating lease liabilities
Initial measurement at July 1, 2019
$
579
Principal payments on operating lease liabilities
(174
)
Operating lease liabilities at June 30, 2020
405
Less: non-current portion
213
Current portion at June 30, 2020
$
192
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
As of June 30, 2020, the Companys operating lease has a remaining lease term of
1.96 years and a discount rate of 4.67%. The maturities of the operating lease liabilities are as follows:
(US$000)
June 30, 2020
2021
$
207
2022
218
Total operating lease payments
425
Less imputed interest
(20
)
Present value of operating lease liabilities
$
405
For the fiscal years ended June 30, 2020 and 2019, total lease expense under operating leases was
approximately $208,000 and $221,000, respectively, and was recorded in general and administrative expenses.
11. Stockholders equity
Common Stock
On
September 30, 2019, BBL entered into a securities purchase agreement (SPA) with certain sophisticated and professional investors (Investors) in the United States to issue 186,666 shares of common stock at a
purchase price of US$10.50 per share, in a registered direct offering.
Warrants
On September 30, 2019, the Investors were issued 4 Pre-Funded Warrants that are exercisable into
27,526 fully paid shares of common stock should the Pre-Funded Warrants be exercised in full (Pre-Funded Warrants). The exercise price for the Pre-Funded Warrants is US$10.50 per share issued on exercise of a Pre-Funded Warrant. The Pre-Funded Warrants were exercisable at any
time from issue, in whole or in part, provided that the beneficial ownership of the relevant investor in the total number of shares on issue could not exceed 9.99%. All of the Pre-Funded Warrants have been
exercised.
On December 6, 2019, the Investors were issued 4 Purchase Warrants that were exercisable into 214,190 fully paid shares
of common stock should the Purchase Warrants be exercised in full (Purchase Warrants). The exercise price for the Purchase Warrants is US$10.50 per share issued on exercise of a Purchase Warrant. The Purchase Warrants are exercisable, in
whole or in part, any time from the date of issue until the fifth anniversary of the date of issue (December 6, 2024). On April 22, 2020, the Company issued 37,417 shares of common stock in connection with a cashless exercise of Purchase
Warrants exercisable for 107,095 shares of common stock. The Company did not have an effective registration statement registering, the resale of the Warrant Shares by the Holder at the time the Holder wanted to exercise the warrant therefore the
Holder carried out a cashless exercise. The formula for conducting a cashless exercise was outlined in the Warrant agreement. Based on this formula, the Holder would have been entitled to receive 107,095 shares of common stock if they had exercised
the Purchase Warrants for cash. Because of the cashless exercise, the holder received 37,417 shares.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
The activity related to warrants during for the fiscal years ended June 30, 2020 and
2019, is summarized as follows:
Common Stock
from Warrants
Weighted-
average Exercise
Price (per share)
Outstanding at July 1, 2018
38,326
$
82.50
Granted
Exercised
Forfeited
Outstanding and exercisable at June 30, 2019
38,326
82.50
Granted
241,716
10.50
Exercised
(27,526
)
10.50
Cashless exercise
(107,095
)
10.50
Forfeited
Outstanding and exercisable at June 30, 2020
145,421
$
29.48
Equity Incentive Plan
Employee Share Option Plan
Upon the Re-domiciliation, the Company assumed BBLs obligations with respect to the settlement of options that were issued by BBL prior to the Re-domiciliation pursuant to the
Benitec Officers and Employees Share Option Plan (the Plan). This includes the Companys assumptions of the Plan and all award agreements pursuant to which each of the options were granted. Each option when exercised
entitles the option holder to one share in the Company. Options are exercisable on or before an expiry date, do not carry any voting or dividend rights and are not transferable except on death of the option holder or in certain other limited
circumstances . Employee options vest one third on each anniversary of the applicable grant date for three years. If an employee dies, retires or otherwise leaves the organization, and certain other conditions have been satisfied, generally the
employee has 12 months to exercise their options or the options are cancelled. After the Re-domiciliation, no new options have been or will be issued under the Plan.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
Equity Awards
The activity related to equity awards, which comprised of stock options during the fiscal years ended June 30, 2020 and 2019,
respectively, is summarized as follows:
Stock Options
Weighted-average
Exercise Price
Weighted-average
Remaining Contractual
Term
Aggregate Intrinsic
Value
Outstanding at July 1, 2018
81,591
$
92.10
3.83 years
$
Granted
27,333
43.20
Exercised
Forfeited
(22,457
)
125.40
Outstanding at June 30, 2019
86,467
64.20
3.58 years
Exercisable at June 30, 2019
27,022
64.20
Granted
Exercised
Forfeited
(16,306
)
102.66
Outstanding at June 30, 2020
70,161
60.42
2.89 years
Exercisable at June 30, 2020
41,829
$
69.81
2.59 years
$
Equity-based Compensation Expense
The Company estimated the fair value of each equity award on the grant date using the Black-Scholes option-pricing model with the following
assumptions:
Fiscal Year Ended
June 30,
2020
2019
Expected volatility
102.9-104.1
%
102.9-104.1
%
Expected life
5 years
5 years
Risk-free interest rate
1.28-1.67
%
1.28-1.67
%
Expected dividend yield
%
%
Expected Volatility. Due to the lack of Company-specific historical or implied volatility data, the
Company has based its estimate of expected volatility on the historical volatility of a group of similar public companies in the life sciences industry. The Company selected the peer group based on comparable characteristics, including development
stage, product pipeline and enterprise value. The Company computed historical volatility data using the daily closing prices for the selected companies shares during the equivalent period of the calculated expected term of the equity-based
awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own share price becomes available.
Expected Life. The expected life represents the period that the equity awards are expected to be outstanding. For stock options with
service conditions, it is based on the simplified method for developing the estimate of the expected life. Under this approach, the expected life is presumed to be the midpoint between the average vesting date and the end of the
contractual term.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
Risk-free Interest Rate. The Company bases the risk-free interest rate assumption on
U.S. Treasury constant maturities with maturities similar to those of the expected term of the equity award being valued.
Expected
Dividend Yield. The Company bases the expected dividend yield assumption on the fact that it has never paid dividends and does not expect to pay dividends in the foreseeable future.
In addition to assumptions used in the Black-Scholes option-pricing model, the Company estimates a forfeiture rate to calculate the
equity-based compensation expense for equity awards. The forfeiture rate is based on an analysis of actual and estimated forfeitures.
Share-Based Compensation Expense
The classification of share-based compensation expense for the fiscal years ended:
(US$000)
Fiscal Year Ended
June 30,
2020
2019
Research and development
$
16
$
87
General and administrative
221
585
Total share-based compensation expense
$
237
$
672
As of June 30, 2020, and 2019, there was $242,000 and $907,000, respectively, of unrecognized share-based
compensation expense related to shares of common stock issued under the Plan.
12. Income taxes
Income (loss) before provision for income taxes consisted of the following:
(US$000)
Fiscal Year Ended
June 30,
2020
2019
United States
$
(299
)
$
169
International
(7,975
)
2,440
Total
$
(8,274
)
$
2,609
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
The tax effects of significant items comprising the Companys deferred taxes are as
follows:
(US$000)
Fiscal Year Ended
June 30,
2020
2019
Deferred tax assets:
Net operating losses
$
13,153
$
10,632
Capital losses
250
Other
209
193
Lease liability
85
Gross deferred tax assets
13,447
11,075
Less valuation allowance
(13,290
)
(11,075
)
Deferred tax liabilities:
Right-of-use
assets
(83
)
Fixed assets
(74
)
Total deferred tax liabilities
(157
)
Net deferred taxes
$
$
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards
be recorded as an asset to the extent that management assesses that realization is more likely than not. Realization of the future tax benefits is dependent on the Companys ability to generate sufficient taxable income within the
carryforward period. Because of the Companys recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and,
accordingly, has provided a valuation allowance. As of June 30, 2020, and 2019, the Company established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
The valuation allowance increased by $2,215 during the year ended June 30, 2020. Net
operating losses and tax credit carryforwards as of June 30, 2020 are as follows:
(US$000)
Amount
Expiration Years
Net operating losses, federal (post-December 31, 2017)
$
629
Do not expire
Net operating losses, federal (pre-January 1,
2018)
192
2034-2036
Net operating losses, state
5,314
2031-2034
Net operating losses, foreign
45,847
Do not expire
Tax credits, foreign
The effective rate of the Companys provision (benefit) for income taxes differs from the federal
statutory rate as follows:
Fiscal Year Ended
June 30,
2020
2019
Statutory rate
21.00
%
27.50
%
Permanent differences
(2.4
%)
6.18
%
Research and development expenditures
15.73
%
Research and development incentive
(6.87
%)
Share-based payments
(0.74
%)
7.06
%
Net operating losses
(42.3
%)
Change in valuation allowance
(24.12
%)
(7.3
%)
Foreign tax rate differential
6.26
%
Total
(0.00
%)
0.00
%
The Company is subject to taxation in the U.S., various state jurisdictions and Australia. The Companys
tax returns for the tax years 2014 through 2019 are open and are subject to examination by federal taxing authorities and the Companys tax returns for tax years 2011 through 2019 are subject to examination by state taxing authorities. The
Company is not currently undergoing a tax audit in any federal, state or Australian jurisdiction. The Company does not have any uncertain tax benefits (UTBs) as of June 30, 2020 and does not expect its UTBs to change significantly over
the next 12 months.
In the fiscal year ended June 30, 2019, the Company was domiciled in Australia where the statutory rate was 27.5%. As
a result, the presentation of the tax disclosures, including effective tax rate, were based on Australian statutory rules. In the fiscal year ended June 30, 2019, the net operating losses presented in the effective tax rate could also be viewed as a
chance in valuation allowance.
Internal Revenue Code Section 382 places a limitation (Section 382 Limitation) on
the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change
in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these change in ownership provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual
limitation regarding their utilization against taxable income in future periods.
Under Australian income tax legislation, losses can be
utilized by the Company if it satisfies firstly the Continuity of Ownership Test (COT) or if failing that, the Similar Business Test (SBT). Broadly, the COT requires a company to show that it maintained continuity of majority
beneficial ownership from the beginning of the year in which a loss is incurred to the end of an income year in which a tax loss is sought to be recouped. The
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
SBT requires a company to demonstrate that a similar business has been maintained from the time when the COT is failed and throughout the period until the end of the income year that
the losses are being recouped.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted
and signed into law and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act includes changes to the tax provisions that benefits business entities, and makes
certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for businesses in the CARES Act include a five-year net operating loss carryback for certain net operating losses, suspension of the annual deduction limitation
of 80% of taxable income for certain net operating losses, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified
improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined that there is no material impact to the income tax provision for the
fiscal year ended June 30, 2020.
On June 29, 2020, California Assembly Bill 85 (AB 85) was signed into law, which suspends the use of net
operating losses and limits the use of research tax credits for 2020, 2021 and 2022, respectively. The Company evaluated the impact of AB 85 and determined that the new legislation did not materially impact the Companys income tax provision
for the fiscal year ended June 30,2020.
13. Commitments and contingencies
Contract commitments
The
Company enters into contracts in the normal course of business with third-party contract research organizations, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for
termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.
On
December 18, 2012, the Company announced the appointment of Synteract, Inc. as its Clinical Research Organization responsible for the progression of TT-034 into Phase I/IIa clinical trials in the U.S. The
Company has negotiated a contract for Synteract to continue to manage the Phase I/IIa clinical trial and the long-term patient follow up through 2016 and beyond. The Company announced on February 20, 2016 that it was terminating the HCV
program, and at the end of the 2018 financial year had assumed all patients would remain in the study and the follow up would continue to 2021 at a maximum cost of $462,000. However, in July 2018, the Company applied to the FDA for, and the FDA
approved, the discontinuation of the study which will result in minimal costs being incurred in the future.
There are no contingent
liabilities as of June 30, 2020 and 2019, respectively. See Note 10 above for lease commitments.
Contingencies
From time to time, the Company may become subject to claims and litigation arising in the ordinary course of business. The Company is not a
party to any material legal proceedings, nor is it aware of any material pending or threatened litigation.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
14. Related party transactions
The following transactions occurred with related parties:
(US$000)
June 30,
2020
2019
Legal services paid/payable to a law firm in which a director of the Company is a partner and has
a beneficial interest.
$
$
1
All transactions were made on normal commercial terms and conditions and at market rates.
In December 2018, the Company accrued a milestone payment of $300,000 (AUD 425,411) payable to NantWorks, LLC pursuant to a sublicense
agreement. It was later determined that the milestone was not required to be paid and therefore the accrual was reversed in December 2019. NantWorks, LLC is an affiliate of Nant Capital which owns 26.44% of the issued and outstanding common
stock of the Company as of June 30, 2020.
15. Earnings (Loss) per share
(US$000)
Fiscal Year Ended
June 30,
2020
2019
Net Income (Loss) attributable to common stockholders
($
8,274
)
$
2,609
Weighted average number of shares used in calculating basic and diluted earnings per
share
1,021,193
856,765
Basic and diluted earnings (loss) per share
($
8.10
)
$
3.05
Outstanding options to acquire ordinary shares are not considered dilutive for the fiscal years ended
June 30, 2020 and June 30, 2019, because they are anti-dilutive, as the strike price was higher than the share price.
16. Subsequent events
The Company is closely monitoring the impact of the pandemic of the novel strain of coronavirus
COVID-19 (COVID-19) on all aspects of its business and geographies, including how it will impact its team members, suppliers, vendors and business partners.
While the Company did experience some disruption from COVID-19 through the delay of the initiation of the pre-clinical trials through the date of issuance, of these
financial statements, it is unable to predict the impact that COVID-19 will have on its financial position and operating results due to numerous uncertainties.
On August 14, 2020, the Company filed a registration statement on Form S-1 (File No. 333-246314) with the SEC.
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Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The information required by this Item 9 was previously reported in the Companys Current Report on Form 8-K that was filed with the SEC on June 5, 2020, and amended on August 19, 2020.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.