Benitec Biopharma Inc. 10-K

Item 8. Financial Statements and Supplementary Data. BENITEC BIOPHARMA INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm – Baker Tilly US, LLP F-2 Consolidated Balance Sheets F-4 Consolidated Statements of Operations and Comprehensive 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 sheets of Benitec Biopharma Inc. and its subsidiaries (the “Company”) as of June 30, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years 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, 2021 and 2020, and the results of its operations and its cash flows for the years 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 Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 Company’s 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. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F-2 Table of Contents ACCRUED RESEARCH AND DEVELOPMENT COSTS Critical Audit Matter Description As discussed in Notes 2 and 8 to the consolidated financial statements, the Company records expenses for research and development activities based on management’s estimates of services received and efforts expended pursuant to contracts with vendors that conduct research and development on the Company’s behalf. The financial terms vary from contract to contract and may result in uneven payment flows as compared with services performed. As a result, the Company is required to estimate research and development expenses incurred during the period, which impacts the amount of accrued expenses related to such costs as of each balance sheet date. Management makes significant judgments and estimates in determining the accrued balance at the end of each reporting period. We identified the evaluation of research and development accrued costs as a critical audit matter. The Company’s estimates are based on a number of factors, including the Company’s knowledge of the status of each of the research and development project milestones, and contract terms together with related executed change orders. Higher degree of auditor judgment was required in evaluating the results of our audit procedures regarding the Company’s estimates, because of the subjectivity and estimation uncertainty in the significant assumptions used in the calculation. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: • Obtaining an understanding and evaluating the design of certain internal controls related to the critical audit matter. This included controls over the development of the estimated amount of accrued costs incurred by the contract research organizations and contract manufacturing organizations (the “R&D service providers”) during the period. • Inquiring with Company personnel responsible for overseeing the research and development activities to understand progress of the activities completed to date for selected R&D service providers. • Confirming with selected R&D service providers or inspecting the key terms and conditions of the contracts between the Company and the respective R&D service providers, the documentation of the Company as to the completion status and arriving at an estimate of the accrual amounts based thereon and comparing it to the amounts recorded by the Company. • Performing an analysis by comparing the estimated accrual balances at year end to the actual amounts that were ultimately invoiced by the R&D service providers and/or paid by the Company for selected R&D service providers. /s/ BAKER TILLY US, LLP We have served as the Company’s auditor since 2020. Campbell, California September 20, 2021 F-3 Table of Contents BENITEC BIOPHARMA INC. Consolidated Balance Sheets (in thousands, except par value and share amounts) June 30, 2021 June 30, 2020 Assets Current assets: Cash and cash equivalents $ 19,769 $ 9,801 Trade and other receivables 25 59 Prepaid and other assets 814 949 Total current assets 20,608 10,809 Property and equipment, net 375 374 Deposits 9 9 Other assets 185 — Right-of-use assets 202 395 Total assets $ 21,379 $ 11,587 Liabilities and Stockholders’ Equity Current liabilities: Trade and other payables $ 880 $ 741 Accrued employee benefits 276 203 Lease liabilities, current portion 213 192 Total current liabilities 1,369 1,136 Lease liabilities, less current portion — 213 Total liabilities 1,369 1,349 Commitments and contingencies (Note 12) Stockholders’ equity: Common stock, $ 0.0001 par value— 10,000,000 shares authorized; 8,171,690 and 1,108,374 shares issued and outstanding at June 30, 2021 and 2020, respectively 1 0 Additional paid-in capital 151,583 128,827 Accumulated deficit ( 130,119 ) ( 116,636 ) Accumulated other comprehensive loss ( 1,455 ) ( 1,953 ) Total stockholders’ equity 20,010 10,238 Total liabilities and stockholders’ equity $ 21,379 $ 11,587 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Table of Contents BENITEC BIOPHARMA INC. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share amounts) Year Ended June 30, 2021 2020 Revenue: Revenues from customers $ 59 $ 97 Government research and development grants — 5 Total revenues 59 102 Operating expenses Royalties and license fees 123 ( 185 ) Research and development 7,020 3,001 General and administrative 6,512 5,567 Total operating expenses 13,655 8,383 Loss from operations ( 13,596 ) ( 8,281 ) Other income (loss): Foreign currency transaction loss ( 333 ) ( 88 ) Interest income (expense), net ( 6 ) 62 Other income, net 37 34 Unrealized gain (loss) on investment 16 ( 1 ) Total other income (loss), net ( 286 ) 7 Net loss $ ( 13,882 ) $ ( 8,274 ) Other comprehensive income (loss): Unrealized foreign currency translation gain (loss) 498 ( 89 ) Total other comprehensive income (loss) 498 ( 89 ) Total comprehensive loss $ ( 13,384 ) $ ( 8,363 ) Net loss $ ( 13,882 ) $ ( 8,274 ) Net loss per share: Basic and diluted $ ( 3.23 ) $ ( 8.10 ) Weighted-average shares outstanding: Basic and diluted 4,295,416 1,021,193 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Table of Contents 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, 2019 856,765 $ — $ 127,328 $ ( 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 $ — $ 128,827 $ ( 116,636 ) $ ( 1,953 ) $ 10,238 Common stock sold for cash, net of offering costs of $ 3,228 6,504,154 1 22,518 — — 22,519 Exercise of pre-funded warrants 559,162 — 3 — — 3 Share-based compensation — — 634 — — 634 Forfeitures of share-based payments — — ( 399 ) 399 — — Foreign currency translation gain — — — — 498 498 Net loss — — — ( 13,882 ) — ( 13,882 ) Balance at June 30, 2021 8,171,690 $ 1 $ 151,583 $ ( 130,119 ) $ ( 1,455 ) $ 20,010 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Table of Contents BENITEC BIOPHARMA INC. Consolidated Statements of Cash Flows (in thousands) Year Ended June 30, 2021 2020 Cash flows from operating activities: Net loss $ ( 13,882 ) $ ( 8,274 ) Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization 231 190 Amortization of right-of-use assets 193 184 Loss on disposal of fixed assets — 1 Unrealized (gain) loss on investment ( 16 ) 1 Share-based compensation expense 634 237 Changes in operating assets and liabilities: Trade and other receivables 28 2,396 Prepaid and other assets ( 4 ) ( 457 ) Trade and other payables 55 ( 1,696 ) Accrued employee benefit payable 121 57 Lease liability ( 192 ) ( 174 ) Net cash used in operating activities ( 12,832 ) ( 7,535 ) Cash flows from investing activities: Purchases of property and equipment ( 221 ) ( 95 ) Proceeds from disposal of property and equipment — 1 Net cash used in investing activities ( 221 ) ( 94 ) Cash flows from financing activities: Proceeds from issues of shares and pre-funded warrants 25,750 2,250 Share issue transaction costs ( 3,228 ) ( 480 ) Net cash provided by financing activities 22,522 1,770 Net increase (decrease) in cash and cash equivalents 9,469 ( 5,859 ) Cash and cash equivalents, beginning of year 9,801 15,718 Effects of exchange rate changes on cash and cash equivalents 499 ( 58 ) Cash and cash equivalents, end of year $ 19,769 $ 9,801 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. F- 7 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 1. Business Benitec Biopharma Inc. (the “Company”) is a corporation formed under the laws of Delaware, United States of America, on November 22, 2019 and listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BNTC”. 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, from 1997 until April 15, 2020. On August 14, 2020, BBL reorganized as a Proprietary Limited company and changed its name to Benitec Biopharma Proprietary Limited. The Company’s business focuses on the development of novel genetic medicines. Our proprietary platform, called DNA-directed RNA interference, or ddRNAi, combines RNA interfer e nce, 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. BBL implemented a Scheme of Arrangement pursuant to which Benitec Biopharma Inc, a newly incorporated company for the purpose of effecting the re-domiciliation (“the Re-domiciliation”), acquired all BBL shares and BBL became a wholly-owned subsidiary of Benitec Biopharma Inc. BBL shareholders received one Benitec Biopharma Inc. share for every 300 BBL shares . Holders of BBL’s American Depository Shares, or ADSs (each of which represented 200 ordinary shares), received two shares of the Company’s common stock for every three ADSs held. The re-domiciliation was completed on April 15, 2020 following approval by BBL shareholders at a Scheme Meeting held on March 26, 2020 and by the Supreme Court of Queensland on March 30, 2020. In accordance with the U.S. Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin Topic 4C , all issued and outstanding shares of the Company’s common stock have been retroactively adjusted in these consolidated financial statements to reflect the 300:1 ratio and share consolidation as if it occurred on July 1, 2019. The terms the “Company,” “we,” “us,” “our” and similar terms used herein refer (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). During the year ended June 30, 2021, the Company completed an organization restructure as part of the commercial desire to provide a more efficient structure for the future as the Company continues to transition its operations to the US. The Company’s fiscal year end is June 30. References to a particular “fiscal year” are to our fiscal year end June 30 of that calendar year. The consolidated financial statements of Benitec Biopharma Inc. are presented in United States dollars and consist of Benitec Biopharma Inc. and the following wholly owned subsidiaries: Principal place of business/country of incorporation Benitec Biopharma Proprietary Limited (“BBL”) Australia Benitec Australia Proprietary Limited Australia Benitec Limited United Kingdom Benitec, Inc. USA Benitec LLC USA RNAi Therapeutics, Inc. USA Tacere Therapeutics, Inc. USA Benitec IP Holdings, Inc. USA F- 8 Table of Contents 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 Company’s equity structure for all periods presented . The Company’s 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. 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 Company’s 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 requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The most significant estimates and assumptions in the Company’s consolidated financial statements include the estimates of useful lives of property and equipment, 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, foreign currency translation due to certain average exchange rates applied in lieu of spot rates on transaction dates, and accrued research and development expense. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Risks and Uncertainties The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection F- 9 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements of proprietary technology, dependence on key personnel, reliance on single-source vendors and collaborators, availability of raw materials, patentability of the Company’s products and processes and clinical efficacy and safety of the Company’s products under development, compliance with government regulations and the need to obtain additional financing to fund operations. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties. Moreover, the current COVID-19 pandemic, which is i m pacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time which may delay the start-up and conduct of the Company’s clinical trials, and negatively impact manufacturing and testing activities performed by third parties. Any significant delays may impact the use and sufficiency of the Company’s existing cash reserves, and the Company may be required to raise additional capital earlier than it had previously planned. The Company may be unable to raise additional capital if and when needed, which may result in delays or suspension of its development plans. The extent to which the pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time. Foreign Currency Translation and Other Comprehensive Income (Loss) The Company’s functional currency and reporting currency is the United States dollar. BBL’s functional currency is the Australian dollar (AUD). Assets and 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 loss.” Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive 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, 2021, and 2020, 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, 2021 June 30, 2020 Exchange rate on balance sheet dates USD: AUD Exchange Rate 0.7506 0.6877 Average exchange rate for the period USD: AUD Exchange Rate 0.7470 0.6711 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, F- 10 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 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. As of June 30, 2021, and 2020, 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 Company’s 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 F- 11 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 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 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 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 asset’s 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. 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 Loss Per Share Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted- F- 12 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 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 loss per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted net loss per share when their effect is anti-dilutive. As of June 30, 2021 and 2020, there were 809,159 and 215,578 potential common shares, respectively, that were excluded from the calculation of diluted net loss per share because their effect was anti-dilutive. Revenue Recognition The Company recognizes revenue 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 – Revenue from Contracts with Customers (“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. 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 Company’s 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 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. F- 13 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements Royalties Revenue from licensees of the Company’s 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 customer’s subsequent sales of products occur. 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 obliga t ions 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 government’s Research and Development Tax Incentive program, under which the government provides a cash refund for 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. Research and Development Expense Research and development expenses relate primarily to the cost of conducting clinical and pre-clinical trials. Pre-clinical and clinical development costs are a significant component of research and development expenses. The Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of pre-clinical studies and clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in trade and other payables on the consolidated balance sheets and within research and development expenses on the consolidated statements of operations and comprehensive loss. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilities balance at the end of each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred. 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 and non-employees to be F-1 4 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 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. Income Taxes The Company is governed by Australia and United States income tax laws. The Company follows 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 Company’s 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 gain (loss) which qualifies as other comprehensive income (loss). Recent Accounting Pronouncements 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 management’s estimates of current expected credit losses (CECL). Under the prior model, losses were recognized only as they were incurred. 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 2016-13 effective July 1, 2023. 3. Liquidity 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, 2021, and 2020, the Company had a net loss of $ 13.9 million and $ 8.3 million, respectively, and net cash used in operations of $ 12.8 million and $ 7.5 million, respectively. As of June 30, 2021, the Company had $ 19.8 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 having performed a review of the cash flow forecasts, considering the cash flow needs of the Company, believe that our cash and cash equivalents will be sufficient for a period of at least twelve months from the date this Annual Report is filed. F-1 5 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements The Company’s ability to continue as a going concern is dependent upon its ability to generate revenue and obtain adequate financing. While the Company believes in its ability to generate revenue and raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern due to unsuccessful product development or commercialization, or the inability to obtain adequate financing in the future. 4. Revenue Revenues from customers (US$’000) Year ended June 30, 2021 Year ended June 30, 2020 Licensing revenue $ 59 $ — Royalty revenue — 93 Service revenue* — 4 Total $ 59 $ 97 * 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 Company’s product known as BB-301, which was designed for the potential treatment of Oculopharyngeal Muscular Dystrophy. Licensing revenue consists of payments for the Company’s intellectual property related to BB-301 and the transfer of the right to use the intellectual property of the Company’s 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 effective as of September 3, 2019. The termination discharges all future performance obligations under the contract at the termination date. Other revenues (US$’000) Year ended June 30, 2021 Year ended June 30, 2020 Government research and development grants $ — $ 5 Total $ — $ 5 Disaggregated revenue (US$’000) Year ended June 30, 2021 Licensing Royalties Development activities Total Services transferred over time $ 59 $ — $ — $ 59 Total $ 59 $ — $ — $ 59 Disaggregated revenue (US$’000) 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 F-1 6 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 5. Cash and Cash equivalents (US$’000) June 30, 2021 June 30, 2020 Cash at Bank $ 19,769 $ 5,231 Term Deposit — 4,570 Total $ 19,769 $ 9,801 6. Prepaid and other assets (US$’000) June 30, 2021 June 30, 2020 Prepaid expenses $ 967 $ 861 Security deposit 15 69 Other deposit — 18 Market value of listed shares 17 1 Total other assets 999 949 Less: non-current portion ( 185 ) — Current portion $ 814 $ 949 7. Property and equipment, net (US$’000) June 30, 2021 June 30, 2020 Software $ 14 $ 11 Lab equipment 1,329 1,109 Computer hardware 26 26 Leasehold improvements 24 24 Total property and equipment, gross 1,393 1,170 Accumulated depreciation and amortization ( 1,018 ) ( 796 ) Total property and equipment, net $ 375 $ 374 Depreciation and amortization expense was $ 231,000 and $ 190,000 for the years ended June 30, 2021 and 2020, respectively. 8. Trade and other payables (US$’000) June 30, 2021 June 30, 2020 Trade payable $ 274 $ 282 Accrued license fees 140 54 Accrued professional fees 13 155 Accrued CRO fees 279 49 Other payables 174 201 Total $ 880 $ 741 F-1 7 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 9. 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 lessee’s 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 lessee’s 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-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 Company’s 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 Company’s 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 Company’s consolidated statement of operations. F-1 8 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements The tables below show the changes during the year ended June 30, 2021 and 2020: (US$’000) Operating lease right-of- use assets Initial measurement at July 1, 2019 $ 579 Amortization of right of use asset ( 184 ) Balance at June 30, 2020 395 Amortization of right of use asset ( 193 ) Operating lease right-of-use asset at June 30, 2021 $ 202 (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 Principal payments on operating lease liabilities ( 192 ) Operating lease liabilities at June 30, 2021 213 Less: non-current portion — Current portion at June 30, 2021 $ 213 As of June 30, 2021, the Company’s operating lease has a remaining lease term of 0.96 years and a discount rate of 4.67 %. The maturities of the operating lease liabilities are as follows: (US$’000) June 30, 2021 2022 218 Less imputed interest ( 5 ) Present value of operating lease liabilities $ 213 For the fiscal years ended June 30, 2021 and 2020, total lease expense under operating leases was approximately $ 208,000 and $ 208,000 , respectively, and was recorded in general and administrative expenses. 10. 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. On October 6, 2020, the Company announced the closing of an underwritten public offering 2,666,644 shares of its common stock at a price to the public of $ 3.10 per share. The Company also announced that the underwriter fully exercised its over-allotment option to purchase 483,870 additional shares of its common stock at the offering price of $ 3.10 per share. F-1 9 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements On April 30, 2021, the Company announced the closing of an underwritten public offering of 3,036,366 shares of its common stock at a price to the public of $ 4.25 per share. The Company also announced that the underwriter exercised the over-allotment option to purchase 317,274 additional shares of its common stock at the offering price of $ 4.25 per share. 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. On October 6, 2020, the Company announced the closing of an underwritten public offering of 559,162 shares of common stock underlying pre-funded warrants initially purchased for $ 3.09 per share and immediately exercisable at $ 0.01 per share (“Pre-Funded Warrants”). All 559,162 Pre-Funded Warrants issued had been exercised as of June 30, 2021. The activity related to warrants during for the fiscal years ended June 30, 2021 and 2020, is summarized as follows: Common Stock from Warrants Weighted- average Exercise Price (per share) Outstanding at July 1, 2019 38,329 $ 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 145,424 29.48 Granted 559,162 3.09 Exercised ( 559,162 ) 3.10 Forfeited ( 38,329 ) 82.50 Outstanding and exercisable at June 30, 2021 107,095 $ 10.50 F- 20 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements Equity Incentive Plan Employee Share Option Plan Upon the Re-domiciliation, the Company assumed BBL’s 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 Company’s 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. Equity and Incentive Compensation Plan On December 9, 2020, the Company’s stockholders approved the Company’s 2020 Equity and Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan provides for the grant of various equity awards. Currently, only stock options are outstanding under the 2020 Plan. Each option when exercised entitles the option holder to one share of the Company’s common stock. 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 stock options vest in increments of one-third on each anniversary of the applicable grant date over three years. Non-employee director options vest in increments of one-third on the day prior to each of the Company’s next three annual stockholder meetings following the grant date. If an option holder dies or terminates employment or service due to Disability (as defined in the 2020 Plan), the option holder generally has 12 months to exercise their vested options or the options are cancelled. If an option holder otherwise leaves the Company, other than for a termination by the Company for Cause (as defined in the 2020 Plan), the option holder generally has 90 days to exercise their vested options or the options are cancelled. Upon the consummation of a Change in Control (as defined in the 2020 Plan), all unvested stock options will immediately vest as of immediately prior to the Change in Control. Equity Awards The activity related to equity awards, which comprised of stock options during the fiscal years e n ded June 30, 2021 and 2020, respectively, is summarized as follows: Stock Options Weighted- average Exercise Price Weighted- average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at July 1, 2019 86,462 64.20 3.58 years $ — Forfeited ( 16,308 ) 102.66 Outstanding at June 30, 2020 70,154 60.42 2.89 years — Exercisable at June 30, 2020 41,829 69.81 2.59 years — Granted 640,320 3.29 Forfeited ( 8,410 ) 153.79 Outstanding at June 30, 2021 702,064 7.16 8.07 years — Exercisable at June 30, 2021 54,158 $ 47.90 2.09 years $ — F-2 1 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements Equity-based Compensation Expense The weighted-average grant-date fair value of stock options granted during the year ended June 30, 2021 was $ 2.68 . There were no grants during the year ended June 30, 2020. 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, 2021 2020 Expected volatility 112.0 - 127.4 % 102.9 - 104.1 % Expected term 3.5 - 6 years 5 years Risk-free interest rate 0.44 - 0.55 % 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. Term. The expected term 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 term is presumed to be the midpoint between the average vesting date and the end of the contractual term. 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 years ended: (US$’000) June 30, 2021 2020 Research and development $ 212 $ 16 General and administrative 422 221 Total share-based compensation expense $ 634 $ 237 F-2 2 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements As of June 30, 2021, and 2020, there was $ 1,266,000 and $ 242,000 , respectively, of unrecognized share-based compensation expense related to stock options granted under the Plan and 2020 Plan. 11. Income taxes Loss before provision for income taxes consisted of the following: (US$’000) Year Ended June 30, 2021 2020 United States $ ( 7,911 ) $ ( 299 ) International ( 5,971 ) ( 7,975 ) Total $ ( 13,882 ) $ ( 8,274 ) The tax effects of significant items comprising the Company’s deferred taxes are as follows: (US$’000) Year Ended June 30, 2021 2020 Deferred tax assets: Net operating losses $ 15,902 $ 13,153 Other 230 209 Lease liability 45 85 Share-based compensation 88 — Intangible assets 212 — Gross deferred tax assets 16,477 13,447 Less valuation allowance ( 16,223 ) ( 13,290 ) 254 157 Deferred tax liabilities: Right-of-use assets ( 42 ) ( 83 ) Fixed assets ( 76 ) ( 74 ) Prepaid expenses ( 136 ) — Total deferred tax liabilities ( 254 ) ( 157 ) Net deferred taxes $ — $ — ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforw a rds 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 Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s 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, 2021, and 2020, the Company established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. F-2 3 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements The valuation allowance increased by $ 2,933 during the year ended June 30, 2021. Net operating losses and tax credit carryforwards as of June 30, 2021 are as follows: (US$’000) Amount Expiration Years Net operating losses, federal (post-December 31, 2017) $ 8,797 Do not expire Net operating losses, federal (post-December 31, 2017) — — Net operating losses, state 5,314 2031 - 2034 Net operating losses, Australia 52,623 Do not expire The effective rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows: Year Ended June 30, 2021 2020 Statutory rate 21.00 % 21.00 % Permanent differences ( 8.9 %) ( 2.4 %) Share-based payments ( 0.32 %) ( 0.74 %) Change in valuation allowance ( 13.9 %) ( 24.12 %) Foreign tax rate differential 2.12 % 6.26 % Total ( 0.00 %) ( 0.00 %) The Company is subject to taxation in the U.S., various state jurisdictions and Australia. The Company’s tax returns for the tax years 2014 through 2019 are open and are subject to examination by federal taxing authorities and the Company’s 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 no t have any uncertain tax benefits “(UTBs)” as of June 30, 2021 and does no t expect its UTBs to change significantly over the next 12 months. 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 lo s s is incurred to the end of an income year in which a tax loss is sought to be recouped. The 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 F-2 4 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 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, 2021. 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 no t materially impact the Company’s income tax provision for the fiscal year ended June 30, 2021. 12. 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. 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. There are no contingent liabilities as of June 30, 2021 and 2020, respectively. See Note 9 above for lease commitments. 13. Related party transactions 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 owned 26.44 % of the issued and outstanding common stock of the Company as of June 30, 2020. During the year ended June 30, 2021, the Company had entered into a related party transaction with Francis Abourizk Lightowlers for legal fees totaling $ 2 thousand. Peter Francis, a non-executive director of the Company is a partner at Francis Abourizk Lightowlers. As of June 30, 2021 there was an amount due to this related party of $ 2 thousand included in trade and other payables on the accompanying consolidated balance sheet. F-2 5 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements 14. Loss per share (US$’000) Year Ended June 30, 2021 2020 Net loss attributable to common stockholders ($ 13,882 ) ($ 8,274 ) Weighted average number of shares used in calculating basic and diluted earnings per share 4,295,416 1,021,193 Basic and diluted loss per share ($ 3.23 ) ($ 8.10 ) Outstanding warrants and options amounting to 809,159 and 215,578 to acquire common stock are considered anti-dilutive for the fiscal years ended June 30, 2021 and June 30, 2020. 15. Subsequent events The Company has evaluated subsequent events through the filing of this Annual Report on Form 10-K, and determined that there have been no events that have occurred that would require adjustments or disclosures in the consolidated financial statements. F-2 6 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.