Benitec Biopharma Inc. 10-Q

ITEM 1. Financial Statements BENITEC BIOPHARMA INC. Consolidated Balance Sheets (in thousands, except par value and share amounts) March 31, June 30, 2022 2021 (Unaudited) Assets Current assets: Cash and cash equivalents $ 8,630 $ 19,769 Trade and other receivables 5 25 Prepaid and other assets 206 814 Total current assets 8,841 20,608 Property and equipment, net 214 375 Deposits 25 9 Other assets 156 185 Right-of-use assets 828 202 Total assets $ 10,064 $ 21,379 Liabilities and Stockholders’ Equity Current liabilities: Trade and other payables $ 1,320 $ 880 Accrued employee benefits 357 276 Lease liabilities, current portion 232 213 Total current liabilities 1,909 1,369 Lease liabilities, less current portion 635 — Total liabilities 2,544 1,369 Commitments and contingencies (Note 10) Stockholders’ equity: Common stock, $ 0.0001 par value- 40,000,000 shares authorized; 8,171,690 shares issued and outstanding at March 31, 2022 and June 30, 2021 1 1 Additional paid-in capital 152,285 151,583 Accumulated deficit ( 143,260 ) ( 130,119 ) Accumulated other comprehensive loss ( 1,506 ) ( 1,455 ) Total stockholders’ equity 7,520 20,010 Total liabilities and stockholders’ equity $ 10,064 $ 21,379 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents BENITEC BIOPHARMA INC. Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (in thousands, except share and per share amounts) Three Months Ended Nine Months Ended March 31, March 31, 2022 2021 2022 2021 Revenue: Licensing revenues from customers $ 48 $ 1 $ 73 $ 57 Total revenues 48 1 73 57 Operating expenses Royalties and license fees — 7 — 122 Research and development 2,171 2,758 8,096 4,700 General and administrative 1,337 1,029 5,093 4,976 Total operating expenses 3,508 3,794 13,189 9,798 Loss from operations ( 3,460 ) ( 3,793 ) ( 13,116 ) ( 9,741 ) Other income (loss): Foreign currency transaction gain (loss) 229 ( 112 ) 36 ( 167 ) Interest expense, net ( 10 ) ( 2 ) ( 22 ) ( 5 ) Other income (expense), net ( 29 ) — ( 29 ) 37 Unrealized loss on investment ( 5 ) ( 2 ) ( 10 ) ( 3 ) Total other income (loss), net 185 ( 116 ) ( 25 ) ( 138 ) Net loss $ ( 3,275 ) $ ( 3,909 ) $ ( 13,141 ) $ ( 9,879 ) Other comprehensive income: Unrealized foreign currency translation (loss) gain ( 233 ) ( 24 ) ( 51 ) 362 Total other comprehensive (loss) income ( 233 ) ( 24 ) ( 51 ) 362 Total comprehensive loss $ ( 3,508 ) $ ( 3,933 ) $ ( 13,192 ) $ ( 9,517 ) Net loss $ ( 3,275 ) $ ( 3,909 ) $ ( 13,141 ) $ ( 9,879 ) Net loss per share: Basic and diluted $ ( 0.40 ) $ ( 0.82 ) $ ( 1.61 ) $ ( 2.93 ) Weighted average number of shares outstanding: basic and diluted 8,171,690 4,747,059 8,171,690 3,375,228 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents BENITEC BIOPHARMA INC. Consolidated Statements of Stockholders’ Equity (Unaudited) (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, 2020 1,108,374 $ 1 $ 128,826 $ ( 116,636 ) $ ( 1,953 ) $ 10,238 Share-based compensation — — 38 — — 38 Forfeiture of share-based payments — — ( 14 ) 14 — — Foreign currency translation gain — — — — 178 178 Net loss — — — ( 2,718 ) ( 2,718 ) Balance at September 30, 2020 1,108,374 1 128,850 ( 119,340 ) ( 1,775 ) 7,736 Issuance of common stock and pre-funded warrants sold for cash, net of issuance costs of $ 1,643 3,150,514 3 9,848 — — 9,851 Exercise of pre-funded warrants 281,581 — — — — — Share-based compensation — — 82 — — 82 Forfeiture of share-based payments — — ( 385 ) 385 — — Foreign currency translation gain — — — — 208 208 Net loss — — — ( 3,252 ) — ( 3,252 ) Balance at December 31, 2020 4,540,469 4 138,395 ( 122,207 ) ( 1,567 ) 14,625 Exercise of pre-funded warrants 277,581 1 2 — — 3 Share-based compensation — — 235 — — 235 Foreign currency translation loss — — — — ( 24 ) ( 24 ) Net loss — — — ( 3,909 ) — ( 3,909 ) Balance at March 31, 2021 4,818,050 $ 5 $ 138,632 $ ( 126,116 ) $ ( 1,591 ) $ 10,930 The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents BENITEC BIOPHARMA INC. Consolidated Statements of Stockholders’ Equity (Unaudited) (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, 2021 8,171,690 $ 1 $ 151,583 $ ( 130,119 ) $ ( 1,455 ) $ 20,010 Share-based compensation — — 271 — — 271 Foreign currency translation gain — — — — 239 239 Net loss — — — ( 5,045 ) — ( 5,045 ) Balance at September 30, 2021 8,171,690 1 151,854 ( 135,164 ) ( 1,216 ) 15,475 Share-based compensation — — 239 — — 239 Foreign currency translation loss — — — — ( 57 ) ( 57 ) Net loss — — — ( 4,821 ) — ( 4,821 ) Balance at December 31, 2021 8,171,690 1 152,093 ( 139,985 ) ( 1,273 ) 10,836 Share-based compensation — — 192 — 192 Foreign currency translation loss — — — — ( 233 ) ( 233 ) Net loss — — — ( 3,275 ) ( 3,275 ) Balance at March 31, 2022 8,171,690 $ 1 $ 152,285 $ ( 143,260 ) $ ( 1,506 ) $ 7,520 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents BENITEC BIOPHARMA INC. Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine Months Ended March 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 13,141 ) $ ( 9,879 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 161 179 Amortization of right-of-use assets 168 143 Unrealized loss on investment 10 3 Share-based compensation expense 702 355 Changes in operating assets and liabilities: Trade and other receivables 47 21 Other assets 609 377 Trade and other payables 512 1,214 Accrued employee benefits 28 55 Lease liabilities ( 140 ) ( 143 ) Net cash used in operating activities ( 11,044 ) ( 7,675 ) Cash flows from investing activities: Purchases of property and equipment — ( 362 ) Net cash used in investing activities — ( 362 ) Cash flows from financing activities: Proceeds from issues of shares and pre-funded warrants — 11,497 Shares and pre-funded warrant issuance costs — ( 1,643 ) Net cash provided by financing activities — 9,854 Effects of exchange rate changes on cash and cash equivalents ( 95 ) 370 Net increase (decrease) in cash and cash equivalents ( 11,139 ) 2,187 Cash and cash equivalents, beginning of period 19,769 9,801 Cash and cash equivalents, end of period $ 8,630 $ 11,988 Supplemental disclosure of cash flow information: Re-measurement of operating lease right-of-use assets and liabilities $ 794 $ — The accompanying notes are an integral part of these consolidated financial statements. 7 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements (Unaudited) 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 interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease-causing genes. During the year ended June 30, 2021, the Company completed an organization restructuring as part of the commercial desire to provide a more efficient structure for the future as the Company transitioned its operations to the United State s. 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 its 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 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The Company’s consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of U.S. Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly , certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Interim financial results are not necessarily indicative of results anticipated for the full year. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021. Reference is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”). This is the source of authoritative 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. Use of Estimates The preparation of the Company’s consolidated 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 8 Table of Contents 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, foreign currency translation due to certain average exchange rates applied in lieu of spot rates on transaction dates, and accrued research and development expenses. 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 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 significant 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 impacting worldwide economic activity, poses risks that the Company or its employees, contractors, suppliers, and other partners may be prevented or inhibited 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. 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. 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 for all periods presented includes both foreign currency translation gains and losses. 9 Table of Contents Fair Value Measurements The Company measures its financial assets and liabilities in accordance with GAAP using ASC 820, Fair Value Measurements. For certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, 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. 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. 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. There were no cash equivalents as of March 31, 2022 and June 30, 2021. Concentrations of Risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. 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 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. 10 Table of Contents 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-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 income (loss) per share when their effect is anti-dilutive. As of March 31, 2022, and June 30, 2021, there were 845,159 and 809,159 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 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— 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 and is constrained to the extent that it is probable that a significant reversal will not occur. Revenue is recognized as or when the performance obligations are satisfied. 11 Table of Contents 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 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 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. Research and Development Expense Research and development costs are expensed when incurred. 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. 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 since 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. Share-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 compensation awarded to employees and non-employees to be recorded as an expense over the shorter of the service period or the vesting period. The Company determines employee and non-employee share-based compensation based on the grant-date fair value using the Black-Scholes Option Pricing Model. Income Taxes The Company is subject to 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. 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 effective July 1, 2023. 3. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the nine months ended March 31, 2022, and 2021, the Company incurred a net loss of $ 13.1 million and $ 9.9 million and used net cash of $ 11.0 million and $ 7.7 million in operations, respectively. The Company expects to continue to incur additional operating losses in the foreseeable future. 12 Table of Contents The Company’s business focuses on the development of novel genetic medicines and, at this stage in the Company’s development, the Company has not established a source of revenue to cover its full operating costs, and as such, is dependent on funding operations through capital financing activities . As of March 31, 2022, the Company had $ 8.6 million in cash and cash equivalents. The Company does not have adequate liquidity to fund its operations for the next 12 months without raising additional funds and the success of raising such additional capital is not solely within the control of the Company. These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this condition. If the Company is unable to raise additional funds, or the Company’s anticipated operating results are not achieved, management believes planned expenditures may need to be reduced or delayed in order to extend the time period that existing resources can fund the Company’s operations. The Company intends to fund ongoing activities by utilizing its current cash on hand and by raising additional capital. If the Company is unable to obtain the necessary capital, it may have a material adverse effect on the operations of the Company and the development of its technology (including delaying certain development milestones), or the Company may have to cease operations altogether . 4. Prepaid and other assets (US$’000) March 31, 2022 June 30, 2021 Prepaid expenses $ 340 $ 967 Security deposit 15 15 Market value of listed shares 7 17 Total other assets 362 999 Less: non-current portion ( 156 ) ( 185 ) Current portion $ 206 $ 814 5. Property and equipment, net (US$’000) March 31, 2022 June 30, 2021 Software $ 14 $ 14 Lab equipment 1,330 1,329 Computer hardware 25 26 Leasehold improvements 24 24 Total property and equipment, gross 1,393 1,393 Accumulated depreciation and amortization ( 1,179 ) ( 1,018 ) Total property and equipment, net $ 214 $ 375 Depreciation expense was $ 54 thousand and $ 161 thousand for the three and nine months ended March 31, 2022, and $ 67 thousand and $ 179 thousand, respectively, for the same periods in 2021. 6. Trade and other payables (US$’000) March 31, 2022 June 30, 2021 Trade payable $ 100 $ 274 Accrued license fees 140 140 Accrued professional fees 86 13 Accrued research and development 938 279 Other payables 56 174 Total $ 1,320 $ 880 13 Table of Contents 7. Leases 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. During August 2021, the Company extended the lease through June 2025 . The tables below show the changes during the nine months ended March 31, 2022 : (US$’000) Operating lease right-of- use assets Balance at July 1, 2021 $ 202 Re-measurement during the period 794 Amortization of right of use asset ( 168 ) Operating lease right-of-use asset at March 31, 2022 $ 828 (US$’000) Operating lease liabilities Balance at July 1, 2021 $ 213 Re-measurement during the period 794 Principal payments on operating lease liabilities ( 140 ) Operating lease liabilities at March 31, 2022 867 Less: non-current portion ( 635 ) Current portion at March 31, 2022 $ 232 As of March 31, 2022, the Company’s operating lease has a remaining lease term of 3.21 years and a discount rate of 4.67 %. The maturities of the operating lease liabilities are as follows: (US$’000) March 31, 202 2 2022 $ 268 2023 292 2024 302 2025 76 Total operating lease payments 938 Less imputed interest ( 71 ) Present value of operating lease liabilities $ 867 The Company recorded lease liabilities and right-of-use lease assets for the lease based on the present value of lease payments over the expected lease term, discounted using the Company’s incremental borrowing rate. Rent expense was $ 0.1 million and $ 0.2 million for the three and nine months ended March 31, 2022, respectively, and $ 0.1 million and $ 0.2 million, respectively, for the same periods in 2021. 8. Stockholders’ equity Common Stock On October 6, 2020, the Company announced the closing of an underwritten public offering of 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. The gross and net proceeds were $ 11.5 million and $ 9.9 million, respectively. 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. The gross and net proceeds were $ 14.3 million and $ 12.7 million, respectively. 14 Table of Contents On December 8, 2021, the stockholders of the Company approved an amendment (the “Charter Amendment”) to the Company’s Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of common stock of the Company from 10,000,000 to 40,000,000 . The Charter Amendment was filed with the Secretary of State of the State of Delaware and became effective on December 17, 2021. Warrants 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. As of March 31, 2022, there were 107,095 of the warrants still outstanding. 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 nine months ended March 31, 2022, is summarized as follows: Common Stock from Warrants Weighted- average Exercise Price (per share) Outstanding at July 1, 2021 107,095 $ 10.50 Outstanding and exercisable at March 31, 2022 107,095 $ 10.50 Equity Incentive Plan Employee Share Option Plan In connection with its re-domiciliation to the United States, 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 “Share Option Plan”). This includes the Company’s assumption of the Share Option 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 Company and certain exercise conditions have been satisfied, generally, the employee has 12 months to exercise their options or the options are cancelled. Since the re-domiciliation, no new options have been or will be issued under the Share Option Plan. Equity and Incentive Compensation Plan On December 9, 2020, the Company’s stockholders approved the Company’s 2020 Equity and Incentive Compensation Plan and, on December 8, 2021, the Company’s stockholders approved an amendment to increase the maximum number of shares that may be issued under such plan to 1,850,000 (as amended, the “2020 Plan”). The 2020 Plan provides for the grant of various equity awards. Currently, only stock options are issued 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 for 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) and certain exercise conditions have been satisfied, generally, the option holder has 12 months to exercise their options or the options are cancelled. If an option holder 15 Table of Contents otherwise leaves the Company, other than for a termination by the Company for Cause (as defined in the 2020 Plan) and certain exercise conditions have been satisfied, generally, the option holder has 90 days to exercise their options or the options are cancelled. Future equity grants will be made under the 2020 Plan. Equity Awards The activity related to equity awards, which are comprised of stock options during the nine months ended March 31, 2022 is summarized as follows: Stock Options Weighted- average Exercise Price Weighted- average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at July 1, 2021 702,064 $ 7.16 8.07 years $ — Outstanding at September 30, 2021 702,064 7.16 7.82 years $ — Granted 36,000 2.99 9.93 years $ — Outstanding at March 31, 2022 738,064 6.95 7.39 years $ — Exercisable at March 31, 2022 247,560 $ 13.81 6.91 years $ — Share-Based Compensation Expense The classification of share-based compensation expense is summarized as follows: Three Months Ended March 31, Nine Months Ended March 31, (US$’000) 2022 2021 2022 2021 Research and development $ 63 $ 18 $ 224 $ 33 General and administrative 129 217 478 322 Total share-based compensation expense $ 192 $ 235 $ 702 $ 355 As of March 31, 2022, there was $ 0.6 million of unrecognized share-based compensation expense related to stock options issued under the Share Option Plan and the 2020 Plan. 9. Income taxes For the three and nine months ended March 31, 2022, and 2021, the Company did not recognize a provision or benefit for income taxes as it has incurred net losses. In addition, the net deferred tax assets generated from net operating losses are fully offset by a valuation allowance as the Company believes it is more likely than not that the benefit will not be realized. 10. 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. 11. Related party transactions During the nine months ended March 31, 2022, the Company had entered into a related party transaction with Francis Abourizk Lightowlers for legal fees totaling $ 1 thousand. Peter Francis, a non-executive director of the Company is a partner at Francis Abourizk Lightowlers. As of March 31, 2022 and June 30, 2021 there were amounts due to this related party of $ 0 and $ 2 thousand, respectively, included in trade and other payables on the accompanying consolidated balance sheet. 16 Table of Contents 12. Subsequent events The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments or disclosures in the consolidated financial statements.