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 (PCAOB Firm ID No. 23 ) 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, 2023 and 2022, 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, 2023 and 2022, 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 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 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 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 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 of the Company’s process for estimating the amount of accrued costs incurred by the contract research organizations and contract manufacturing organizations (the “R&D service providers”). • 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. • Obtaining external confirmations for select R&D service providers as to the completion status for billed and unbilled services and comparing responses to management’s accrual estimates. • Performing an analysis of the accuracy of the calculation of estimated accrual and R&D expenses by comparing totals at year end to the actual amounts that were invoiced by the third-party R&D service providers and paid by the Company for selected R&D service providers. • Comparing the Company’s estimate of costs incurred as of year-end to a selection of cash disbursements and third-party invoices received after year-end but prior to the issuance of the Company’s financial statements. /s/ BAKER TILLY US, LLP We have served as the Company’s auditor since 2020. Mountain View, California September 21, 2023 F-3 Table of Contents BENITEC BIOPHARMA INC. Consolidated Balance Sheets (in thousands, except par value and share amounts) June 30, 2023 June 30, 2022 Assets Current assets: Cash and cash equivalents $ 2,477 $ 4,062 Restricted c ash 13 14 Trade and other receivables 55 3 Prepaid and other assets 1,184 741 Total current assets 3,729 4,820 Property and equipment, net 87 222 Deposits 25 25 Prepaid and other assets 97 135 Right-of-use assets 526 771 Total assets $ 4,464 $ 5,973 Liabilities and Stockholders’ Equity Current liabilities: Trade and other payables $ 3,231 $ 1,880 Accrued employee benefits 472 400 Lease liabilities, current portion 275 252 Total current liabilities 3,978 2,532 Lease liabilities, less current portion 284 559 Total liabilities 4,262 3,091 Commitments and contingencies (Note 12) Stockholders’ equity: Common stock, $ 0.0001 par value— 160,000,000 shares authorized; 1,645,951 and 480,688 shares issued and outstanding at June 30, 2023 and 2022, respectively — — Additional paid-in capital 168,921 152,454 Accumulated deficit ( 167,889 ) ( 148,327 ) Accumulated other comprehensive loss ( 830 ) ( 1,245 ) Total stockholders’ equity 202 2,882 Total liabilities and stockholders’ equity $ 4,464 $ 5,973 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, 2023 2022 Revenue: Revenues from customers $ 75 $ 73 Operating expenses Royalties and license fees — 9 Research and development 12,774 11,272 General and administrative 6,382 6,646 Total operating expenses 19,156 17,927 Loss from operations ( 19,081 ) ( 17,854 ) Other loss: Foreign currency transaction loss ( 415 ) ( 232 ) Interest expense, net ( 33 ) ( 32 ) Other expense, net ( 30 ) ( 79 ) Unrealized loss on investment ( 3 ) ( 11 ) Total other loss, net ( 481 ) ( 354 ) Net loss $ ( 19,562 ) $ ( 18,208 ) Other comprehensive income (loss): Unrealized foreign currency translation gain 415 210 Total other comprehensive income 415 210 Total comprehensive loss $ ( 19,147 ) $ ( 17,998 ) Net loss $ ( 19,562 ) $ ( 18,208 ) Net loss per share: Basic and diluted $ ( 14.12 ) $ ( 37.88 ) Weighted-average shares outstanding: Basic and diluted 1,385,818 480,688 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, 2021 480,688 $ — $ 151,584 $ ( 130,119 ) $ ( 1,455 ) $ 20,010 Share-based compensation — — 870 — — 870 Foreign currency translation gain — — — — 210 210 Net loss — — — ( 18,208 ) — ( 18,208 ) Balance at June 30, 2022 480,688 $ — $ 152,454 $ ( 148,327 ) $ ( 1,245 ) $ 2,882 Issuance of common stock and pre-funded warrants sold for cash, net of offering costs of $ 1,869 1,037,520 — 16,015 16,015 Exercise of pre-funded warrants 127,743 — — — — — Share-based compensation — — 452 — — 452 Foreign currency translation gain — — — — 415 415 Net loss — — — ( 19,562 ) — ( 19,562 ) Balance at June 30, 2023 1,645,951 $ — $ 168,921 $ ( 167,889 ) $ ( 830 ) $ 202 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, 2023 2022 Cash flows from operating activities: Net loss $ ( 19,562 ) $ ( 18,208 ) Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization 136 167 Amortization of right-of-use assets 245 225 Unrealized loss on investment 3 10 Share-based compensation expense 452 870 Changes in operating assets and liabilities: Trade and other receivables ( 50 ) 1 Prepaid and other assets ( 414 ) 62 Trade and other payables 1,357 1,090 Accrued employee benefit payable 73 80 Lease liability ( 252 ) ( 196 ) Net cash used in operating activities ( 18,012 ) ( 15,899 ) Cash flows from investing activities: Purchases of property and equipment ( 1 ) ( 13 ) Net cash used in investing activities ( 1 ) ( 13 ) Cash flows from financing activities: Proceeds from issues of shares and pre-funded warrants 17,884 — Share issue transaction costs ( 1,869 ) — Net cash provided by financing activities 16,015 — Effect of exchange rate changes on cash, cash equivalents, and restricted cash 412 204 Net decrease in cash, cash equivalents, and restricted cash ( 1,586 ) ( 15,708 ) Cash, cash equivalents, and restricted cash at beginning of year 4,076 19,784 Cash, cash equivalents, and restricted cash at end of year $ 2,490 $ 4,076 Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets: Cash and cash equivalents $ 2,477 $ 4,062 Restricted cash 13 14 Total cash, cash equivalents, and restricted cash $ 2,490 $ 4,076 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. F-7 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 1. Business Benitec Biopharma Inc. (the “Company”) is a corporation incorporated in the state of Delaware 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. 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. 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). On August 14, 2020, BBL reorganized as a Proprietary Limited company and changed its name to Benitec Biopharma Proprietary Limited. 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” and the “year ended June 30” 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 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 F-8 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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. On July 26, 2023, the Company effected a 1-for-17 reverse stock split (the “Reverse Stock Split”) of its common stock. In accordance with the Reverse Stock Split, 17 pre-split shares of the Company’s common were automatically converted into one issued and outstanding post-split share. Proportional adjustments were also made to all outstanding stock options, pre-funded warrants, and common warrants in accordance with their respective terms. The Reverse Stock Split did not change the par value of the Company’s common stock or the authorized number of shares. No fractional shares were issued in connection with the Reverse Stock Split. All fractional shares were rounded up to the nearest whole share with respect to outstanding shares of common stock. All share and earnings per share amounts presented in this Form 10-K reflect the impact of this reverse split as if it had taken effect on June 30, 2021. 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, valuation of equity-based instruments issued for other than cash, the valuation allowance on deferred tax assets, 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. F-9 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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 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 COVID-19 pandemic and any similar events, poses risks 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 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, 2023 and 2022, 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, 2023 June 30, 2022 Exchange rate on balance sheet dates USD: AUD Exchange Rate 0.6639 0.6891 Average exchange rate for the period USD: AUD Exchange Rate 0.6730 0.7254 F-10 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 Fair Value Measurements The Company measures its financial assets and liabilities in accordance with ASC 820, Fair Value Measurements. For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, the carrying amounts approximate fair value due to their short maturities. ASC 820 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, which reflect those that a market participant would use. As of June 30, 2023 and 2022, 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. Restricted cash balances of $ 13 thousand and $ 14 thousand as of June 30, 2023 and June 30, 2022, respectively, secure the Company’s credit cards. 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 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. F-11 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 Depreciation and amortization of property and equipment is calculated using the straight-line basis over the following estimated useful lives: Software 3 years Lab equipment 4 years Computer hardware 3 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- 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 F-12 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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, 2023 and 2022, there were 2,456,032 and 49,716 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. 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. F-13 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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 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 recorded as an expense over the related requisite service 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. F-14 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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, 2023 and 2022, the Company had a net loss of $ 19.6 million and $ 18.2 million, respectively, and net cash used in operations of $ 18.0 million and $ 15.9 million, respectively. As of June 30, 2023, the Company had $ 2.5 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. On August 11, 2023 we closed an underwritten public offering. Net proceeds from the offering, including the impact of the underwriter’s partial exercise of its option and net of underwriting discounts, commissions, and other offering expenses, totaled $ 28.6 million. We estimate that our cash and cash equivalents will be sufficient to fund the Company’s operations for at least the next twelve months after the date that this Annual Report is filed. 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, 2023 Year ended June 30, 2022 Licensing revenue $ 75 $ 73 Total $ 75 $ 73 The Company recognized licensing revenue over time as the performance obligations were satisfied. F-15 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 5. Cash, cash equivalents, and restricted cash (US$’000) June 30, 2023 June 30, 2022 Cash at bank $ 2,477 $ 4,062 Restricted cash 13 14 Total $ 2,490 $ 4,076 6. Prepaid and other assets (US$’000) June 30, 2023 June 30, 2022 Prepaid expenses $ 1,280 $ 871 Market value of listed shares 1 5 Total other assets 1,281 876 Less: non-current portion ( 97 ) ( 135 ) Current portion $ 1,184 $ 741 7. Property and equipment, net (US$’000) June 30, 2023 June 30, 2022 Software $ 6 $ 6 Lab equipment 1,343 1,343 Computer hardware 32 31 Leasehold improvements 24 24 Total property and equipment, gross 1,405 1,404 Accumulated depreciation and amortization ( 1,318 ) ( 1,182 ) Total property and equipment, net $ 87 $ 222 Depreciation and amortization expense was $ 136 ,000 and $ 167 ,000 for the years ended June 30, 2023 and 2022, respectively. 8. Trade and other payables (US$’000) June 30, 2023 June 30, 2022 Trade payable $ 1,140 $ 422 Accrued license fees 109 120 Accrued professional fees 75 131 Accrued OPMD project costs 1,750 1,089 Accrued consultant fees 88 47 Other payables 69 71 Total $ 3,231 $ 1,880 F-16 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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. The Company has entered into an operating lease for office space under an agreement that expires in 2025. 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. The tables below show the changes during the years ended June 30, 2023 and 2022: (US$’000) Operating lease right-of- use assets Initial measurement at July 1, 2021 $ 202 Re-measurement during the period 794 Amortization of right of use asset ( 225 ) Balance at June 30, 2022 771 Amortization of right of use asset ( 245 ) Operating lease right-of-use asset at June 30, 2023 $ 526 (US$’000) Operating lease liabilities Initial measurement at July 1, 2021 $ 213 Re-measurement during the period 794 Principal payments on operating lease liabilities ( 196 ) Operating lease liabilities at June 30, 2022 811 Principal payments on operating lease liabilities ( 252 ) Operating lease liabilities at June 30, 2023 559 Less: non-current portion 284 Current portion at June 30, 2023 $ 275 As of June 30, 2023, the Company’s operating lease has a remaining lease term of 1.96 years and a discount rate of 4.67 %. The maturities of the operating lease liabilities are as follows: (US$’000) June 30, 2023 2024 $ 295 2025 291 Total operating lease payments 586 Less imputed interest ( 27 ) Present value of operating lease liabilities $ 559 F-17 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 For the fiscal years ended June 30, 2023 and 2022, total lease expense under operating leases was approximately $ 277,000 and $ 260,000 , respectively, and was recorded in general and administrative expenses. 10. Stockholders’ equity Common Stock Warrants On December 6, 2019, the Investors were issued 4 Purchase Warrants that were exercisable into 12,600 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$ 178.50 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 2,201 shares of common stock in connection with a cashless exercise of Purchase Warrants exercisable for 6,300 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 6,300 shares of common stock if they had exercised the Purchase Warrants for cash. Because of the cashless exercise, the holder received 2,201 shares. On September 15, 2022, we closed an underwritten public offering in which we issued and sold (i) 1,037,521 shares of the Company’s common stock, (ii) 715,978 pre-funded warrants, with each pre-funded warrant immediately exercisable for one share of common stock at an exercise price of $ 0.0017 per share until exercised in full and (iii) 29,809,471 outstanding Series 2 warrants (the “Series 2 Warrants”) which are currently exercisable into 1,753,503 shares of common stock after giving effect to the Reverse Stock Split at an exercise price of $ 11.22 per share. The Series 2 warrants sold in the offering became exercisable commencing December 9, 2022, the date on which the Company had both (a) received approval from its stockholders to increase the number of shares of common stock it is authorized to issue and (b) effected such stockholder approval by filing with the Secretary of State of the State of Delaware a certificate of amendment to its Amended and Restated Certificate of Incorporation, and will expire on the fifth anniversary of such initial exercise date. The combined purchase price for each share of common stock and accompanying common warrant was $ 10.20 , which was allocated as $ 10.03 per share of common stock and $ 0.17 per common warrant. The Series 2 Warrants contain an exercise price adjustment mechanism providing that certain issuances of common stock (or common stock equivalents), if made at a price lower than the then existing exercise price of such Series 2 Warrants, would reset the exercise price to such lower price. As a result of the August 11, 2023 public offering, the exercise price of the Series 2 Warrants has been automatically reset as of the closing time of such public offering to $ 1.9299 . On October 17, 2022 and October 27, 2022, investors exercised 117,939 and 9,804 pre-funded warrants, respectively, at an exercise price of $ 0.0017 per share. As of June 30, 2023, there were 2,348,039 warrants outstanding. F-18 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 The activity related to warrants during for the fiscal years ended June 30, 2023 and 2022, is summarized as follows: Common Stock from Warrants Weighted Average Exercise Price (per share) Outstanding at July 1, 2022 6,300 $ 178.50 Pre-funded warrants issued September 15, 2022 715,979 $ 0.0017 Series 2 warrants issued September 16, 2022 1,753,503 $ 11.22 Pre-funded warrants exercised 127,743 $ 0.0017 Outstanding at June 30, 2023 2,348,039 $ 8.86 Exercisable at June 30, 2023 2,348,039 $ 8.86 Effective as of the closing of the August 2023 underwritten public offering conducted by the Company, the exercise price of the Series 2 warrants issued September 16, 2022 was automatically adjusted to $ 1.9299 as required by the terms of such warrants. 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. The maximum contractual term of options granted under the 2020 Plan is ten years . 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. F-19 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 On December 8, 2021, the Company’s stockholders approved an amendment to the 2020 Plan, which increased the number of shares of the Company’s common stock reserved under the 2020 Plan to 1,850,000 . For the fiscal year ended June 30, 2023, our named executive officers (“NEO’s”) were each granted equity incentive awards under the 2020 Plan. Equity Awards The activity related equity awards, which are comprised of stock options, during the fiscal years ended June 30, 2023 and 2022, respectively, is summarized as follows: Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at July 1, 2021 41,298 $ 121.72 8.07 years Granted 2,118 50.83 9.45 years Outstanding at June 30, 2022 43,416 $ 118.15 7.18 years Granted 66,868 3.88 9.94 years Expired ( 2,291 ) 848.12 — Outstanding at June 30, 2023 107,993 $ 31.88 8.96 years $ 11,888 Exercisable at June 30, 2023 27,135 $ 88.79 7.22 years Equity-based Compensation Expense The weighted-average grant-date fair value of stock options granted during the years ended June 30, 2023 and June 30, 2022 was $ 3.34 and $ 44.20 , respectively. The Company estimated the fair value of each employee equity award on the grant date using the Black-Scholes option-pricing model with the following assumptions: Fiscal Year Ended June 30, 2023 2022 Expected volatility 115.6 % 122.1 % Expected term 6 years 6 years Risk-free interest rate 3.96 % 1.36 % Expected dividend yield — % — % Expected Volatility. Due to the lack of Company-specific historical or implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar public companies in the life sciences industry. The Company selected the peer group based on comparable characteristics, including development stage, product pipeline and enterprise value. The Company computed historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the equity-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own share price becomes available. Expected 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. F-20 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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, 2023 2022 Research and development $ 161 $ 257 General and administrative 291 613 Total share-based compensation expense $ 452 $ 870 As of June 30, 2023 and 2022, there was $ 350,000 and $ 522,000 , respectively, of unrecognized share-based compensation expense related to stock options granted under the Plan and 2020 Plan. Unrecognized expense as of June 30, 2023 is expected to be recognized over a weighted average period of 2.11 years. Employee option awards-related stock-based compensation expense for the years ended June 30, 2021 and 2022, and the nine months ended March 31, 2023 was understated by a total of $ 34 thousand. The Company determined that this understatement is immaterial to the previously issued consolidated financial statements for the years ended June 30, 2021 and 2022, and the nine months ended March 31, 2023, and corrected it as of June 30, 2023. 11. Income taxes Loss before provision for income taxes consisted of the following: (US$’000) Year Ended June 30, 2023 2022 United States $ ( 18,953 ) $ ( 17,369 ) International ( 609 ) ( 839 ) Total $ ( 19,562 ) $ ( 18,208 ) F-21 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 The tax effects of significant items comprising the Company’s deferred taxes are as follows: (US$’000) June 30, 2023 2022 Deferred tax assets: Net operating losses $ 18,388 $ 17,348 Other 221 348 Lease liability 117 170 Share-based compensation 263 205 Intangible assets 234 250 Section 174 Capitalization 3,070 — Gross deferred tax assets 22,293 18,321 Less valuation allowance ( 21,923 ) ( 17,965 ) Deferred tax liabilities: Right-of-use assets ( 111 ) ( 162 ) Fixed assets ( 15 ) ( 43 ) Prepaid expenses ( 244 ) ( 151 ) Total deferred tax liabilities ( 370 ) ( 356 ) Net deferred taxes $ — $ — ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the 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, 2023 and 2022, the Company established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. The valuation allowance increased $ 3.958 million during the year ended June 30, 2023. Net operating losses and tax credit carryforwards as of June 30, 2023 are as follows: (US$’000) Amount Expiration Years Net operating losses, federal (post-December 31, 2017) $ 30,496 Do not expire Net operating losses, state 4,632 2031 - 2042 Net operating losses, Australia 46,640 Do not expire F-22 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 The effective rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows: Year Ended June 30, 2023 2022 Statutory rate 21.00 % 21.00 % Permanent differences ( 0.01 %) ( 0.22 %) Share-based payments ( 0.19 % ) ( 0.36 %) Change in valuation allowance ( 20.92 %) ( 20.55 %) Foreign tax rate differential 0.12 % 0.13 % 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 , 2016 , and 2019 through 2022 are open and are subject to examination by federal taxing authorities and the Company’s tax returns for tax years 2011 through 2022 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 entire amount of the Company’s unrecognized tax benefits would not impact its effective tax rate if recognized. The Company has elected to include interest and penalties as a component of tax expense. During the year ended June 30, 2023, the Company did no t recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during 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 loss 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 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. F-23 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 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, 2023. 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. On February 9, 2022, Governor Gavin Newsom signed CA SB 113 (SB 113) into law. The legislation shortens the suspension period for deducting net operating losses (NOL) The suspension of deductions of California NOLs applied to California taxpayers with net business income of $ 1 million or more for tax years beginning on or after January 1, 2020, and before January 1, 2023. SB 113 decreases that suspension period by one year, making the suspension applicable for tax years beginning on or after January 1, 2020, and before January 1, 2022. The Company evaluated the impact of SB 113 and determined that the legislation did no t materially impact the Company’s income tax provision for the fiscal year ended June 30, 2023. 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, 2023 and 2022, respectively. See Note 9 above for lease commitments. 13. Related party transactions During the year ended June 30, 2023, the Company did not enter into any related party transactions. During the year ended June 30, 2022, the Company had entered into related party transactions 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. 14. Loss per share Year Ended June 30, 2022 2022 Net loss attributable to common stockholders (US$’000) ($ 19,562 ) ($ 18,208 ) Weighted average number of shares used in calculating basic and diluted earnings per share 1,385,818 480,688 Basic and diluted loss per share ($ 14.12 ) ($ 37.88 ) F-24 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2023 and 2022 Outstanding warrants and options amounting to 2,456,032 and 49,716 to acquire common stock are considered anti-dilutive for the fiscal years ended June 30, 2023 and June 30, 2022, respectively. 15. Subsequent events On July 26, 2023, the Company effected a 1-for-17 reverse stock split (the “Reverse Stock Split”) of its common stock. In accordance with the Reverse Stock Split, 17 pre-split shares of the Company’s common were automatically converted into one issued and outstanding post-split share. Proportional adjustments were also made to all outstanding stock options, pre-funded warrants, and common warrants in accordance with their respective terms. The Reverse Stock Split did not change the par value of the Company’s common stock or the authorized number of shares. No fractional shares were issued in connection with the Reverse Stock Split. All fractional shares were rounded up to the nearest whole share with respect to outstanding shares of common stock. All share and earnings per share amounts presented in this Form 10-K reflect the impact of the Reverse Stock Split. On August 11, 2023 we closed an underwritten public offering in which we sold 875,949 shares of common stock, 15,126,226 pre-funded warrants to purchase 15,126,226 shares of common stock, and 16,002,175 common warrants to purchase up to 16,002,175 shares of common stock. The combined purchase price for each share of common stock and accompanying common warrant was $ 1.93 , which was allocated as $ 1.9299 per share of common stock and $ 0.0001 per common warrant. Each pre-funded warrant was sold together with one common warrant at a combined price of $ 1.9299 , which was allocated as $ 1.9298 per pre-funded warrant and $ 0.0001 per common warrant. In addition, the Company granted the underwriter an option to purchase up to 2,331,606 additional shares of common stock and/or up to 2,331,606 additional common warrants. As of August 15, 2023 the underwriter had partially exercised this option and purchased 458,134 additional shares of common stock and 458,134 additional common warrants. Net proceeds from the offering, including the impact of the underwriter’s partial exercise of its option and net of underwriting discounts, commissions, and other offering expenses, totaled $ 28.6 million. The Company has 29,809,471 outstanding Series 2 warrants (the “Series 2 Warrants”) which are currently exercisable into 1,753,503 shares of common stock after giving effect to the Reverse Stock Split. The Series 2 Warrants contain an exercise price adjustment mechanism providing that certain issuances of common stock (or common stock equivalents) if made at a price lower than the existing exercise price of $ 11.22 of such Series 2 Warrants, would reset the exercise price to such lower price. As a result of the August 11, 2023 public offering, the exercise price of the Series 2 Warrants has been automatically reset as of the closing time of such public offering to $ 1.9299 . On September 13, 2023, the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors approved increases of the base salaries of Dr. Jerel Banks, the Company’s Executive Chairman and Chief Executive Officer, and Megan Boston, the Company’s Executive Director, to $ 655,200 and $ 350,784 (Ms. Boston’s salary as noted has been converted from AUD $ 1.00 to USD $ 0.64 , which was the conversion rate as of September 13, 2023) respectively, each adjustment being effective as of October 1, 2023. F-25 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.