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. (the “Company”) as of June 30, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows, for the years ended June 30, 2024 and 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, 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 consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated 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 critical audit matters 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 separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Accrued Research and Development Costs As discussed in Notes 2 and 8 to the consolidated financial statements, the Company records expenses for research and development activities based on management’s estimates of services received and efforts expended pursuant to contracts with vendors that conduct research and development on the Company’s behalf. The F-2 Table of Contents 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 to assess the completeness of the accruals. /s/ Baker Tilly US, LLP We have served as the Company’s auditor since 2020. San Jose, California September 26, 2024 F-3 Table of Contents BENITEC BIOPHARMA INC. Consolidated Balance Sheets (in thousands, except par value and share amounts) June 30, 2024 June 30, 2023 Assets Current assets: Cash at bank $ 50,866 $ 2,477 Restricted cash 63 13 Trade and other receivables 229 55 Prepaid and other assets 516 1,184 Total current assets 51,674 3,729 Property and equipment, net 179 87 Deposits 25 25 Prepaid and other assets 62 97 Right-of-use assets 270 526 Total assets $ 52,210 $ 4,464 Liabilities and Stockholders’ Equity Current liabilities: Trade and other payables $ 4,165 $ 3,231 Accrued employee benefits 475 472 Lease liabilities, current portion 284 275 Total current liabilities 4,924 3,978 Non-current accrued employee benefits 38 Lease liabilities, less current portion —   284 Total liabilities 4,962 4,262 Commitments and contingencies (Note 12) Stockholders’ equity: Common stock, $ 0.0001 par value— 160,000,000 shares authorized; 10,086,119 and 1,671,485 shares issued and outstanding at June 30, 2024 and 2023, respectively 1 —   Additional paid-in capital 238,398 168,921 Accumulated deficit ( 190,259 ) ( 167,889 ) Accumulated other comprehensive loss ( 892 ) ( 830 ) Total stockholders’ equity 47,248 202 Total liabilities and stockholders’ equity $ 52,210 $ 4,464 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, 2024 2023 Revenue: Revenues from customers $ —   $ 75 Operating expenses Royalties and license fees ( 108 ) —   Research and development 15,609 12,774 General and administrative 6,989 6,382 Total operating expenses 22,490 19,156 Loss from operations ( 22,490 ) ( 19,081 ) Other income (loss): Foreign currency transaction gain (loss) 40 ( 415 ) Interest income (expense), net 904 ( 33 ) Other expense, net ( 204 ) ( 30 ) Unrealized loss on investment ( 1 ) ( 3 ) Total other income (loss), net 739 ( 481 ) Net loss $ ( 21,751 ) $ ( 19,562 ) Other comprehensive income (loss): Unrealized foreign currency translation gain (loss) ( 62 ) 415 Total other comprehensive income (loss): ( 62 ) 415 Total comprehensive loss $ ( 21,813 ) $ ( 19,147 ) Net loss $ ( 21,751 ) $ ( 19,562 ) Deemed dividend $ ( 619 ) —   Net loss attributable to common stockholders $ ( 22,370 ) $ ( 19,562 ) Net loss per share: Basic and diluted $ ( 5.51 ) $ ( 14.12 ) Weighted-average shares outstanding: Basic and diluted 4,060,182 1,385,818 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, 2022 506,222 $ —   $ 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 1,671,485 $ —   $ 168,921 $ ( 167,889 ) $ ( 830 ) $ 202 Issuance of common stock, pre-funded warrants, and common warrants sold for cash, net of offering costs of $ 2,964 875,949 —   27,919 27,919 Issuance of common stock and pre-funded warrants sold for cash, net of offering costs of $ 2,928 5,749,152 1 37,071 —  —  37,072 Exercise of pre-funded warrants 953,307 —  —  —  —  —  Exercise of Series 2 warrants 98,039 —  190 —  —  190 Exercise of common warrants 738,187 —  2,848 —  —  2,848 Anti-dilution adjustment to warrants —  —  619 ( 619 ) —  —  Share-based compensation —  —  830 —  —  830 Foreign currency translation gain —  —  —  —  ( 62 ) ( 62 ) Net loss —  —  —  ( 21,751 ) —  ( 21,751 ) Balance at June 30, 2024 10,086,119 $ 1 $ 238,398 $ ( 190,259 ) $ ( 892 ) $ 47,248 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, 2024 2023 Cash flows from operating activities: Net loss $ ( 21,751 ) $ ( 19,562 ) Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization 87 136 Amortization of right-of-use assets 256 245 Unrealized loss on investment 1 3 Share-based compensation expense 830 452 Changes in operating assets and liabilities: Trade and other receivables ( 176 ) ( 50 ) Prepaid and other assets 645 ( 414 ) Trade and other payables 941 1,357 Accrued employee benefits 39 73 Lease liability ( 275 ) ( 252 ) Net cash used in operating activities ( 19,403 ) ( 18,012 ) Cash flows from investing activities: Purchases of property and equipment ( 179 ) ( 1 ) Net cash used in investing activities ( 179 ) ( 1 ) Cash flows from financing activities: Proceeds from issuance and exercise of common stock, pre-funded warrants, Series 2 warrants, and common warrants 73,921 17,884 Share issue transaction costs ( 5,892 ) ( 1,869 ) Net cash provided by financing activities 68,029 16,015 Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 8 ) 412 Net increase (decrease) in cash, cash equivalents, and restricted cash 48,439 ( 1,586 ) Cash, cash equivalents, and restricted cash at beginning of year 2,490 4,076 Cash, cash equivalents, and restricted cash at end of year $ 50,929 $ 2,490 Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets: Cash and cash equivalents $ 50,866 $ 2,477 Restricted cash 63 13 Total cash, cash equivalents, and restricted cash $ 50,929 $ 2,490 Supplemental disclosure of cash flow information Deemed dividend $ 619 —  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, 2024 and 2023 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). 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, 2024 and 2023 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, 2022. 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 relate to accrued research and development expense and valuation of equity-based instruments issued for other than cash. 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, 2024 and 2023 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, pose 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, 2024 and 2023, 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, 2024 June 30, 2023 Exchange rate on balance sheet dates USD: AUD Exchange Rate 0.6670 0.6639 Average exchange rate for the period USD: AUD Exchange Rate 0.6559 0.6730 F-10 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 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, 2024 and 2023, 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. There were no other forms of cash equivalents as of June 30, 2024 and 2023. Restricted cash balances of $ 63 thousand and $ 13 thousand as of June 30, 2024 and June 30, 2023, 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 The Company adopted ASC 326— Financial Instruments—Credit Losses (Topic 326) as of July 1, 2023. As such, the Company estimates current expected credit losses (CECL) on trade and other receivables on an ongoing basis, and will recognize those expected credit losses immediately. Estimates of current expected credit losses are based on analyses of individual customer circumstances and historical write-off experience. The Company’s analyses consider the aging of receivable accounts, customer creditworthiness, 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, 2024 and 2023 Depreciation and amortization of property and equipment is calculated using the straight-line basis over the following estimated useful lives: Software 3 - 4 years Lab equipment 3 - 7 years Computer hardware 3 - 5 years Leasehold improvements shorter of the lease term or estimated useful lives Impairment of Long-Lived Assets Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Trade and other payables These amounts represent liabilities for goods and services provided to the Company prior to the end of the period and which are unpaid. Due to their short-term nature, they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Leases At lease commencement, the Company records a lease liability based on the present value of lease payments over the expected lease term. The Company calculates the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily determined. In that case, the Company uses its incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments over the expected lease term. The Company records a corresponding right-of-use lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to the lessor prior to the lease commencement date. After lease commencement, the Company measures its leases as follows: (i) the lease liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement; and (ii) the right-of-use lease asset based on the remeasured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement. Any lease incentives received and any initial direct costs are amortized on a straight-line basis over the expected lease term. Rent expense is recorded on a straight-line basis over the expected lease term. Basic and Diluted Net Loss Per Share Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted- 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, 2024 and 2023 loss per share using the treasury stock method when their effect is dilutive. For the year ended June 30, 2024, the Company recorded a deemed dividend, for accounting purposes, of $ 618,987 as a result of an adjustment to the exercise price of its Series 2 Warrants due to an exercise price adjustment provision in such warrants. The deemed dividend is reflected as an increase in the net loss attributable to common stockholders in the basic and diluted earnings per share calculation. Potential common shares are excluded from the calculation of diluted net loss per share when their effect is anti-dilutive. As of June 30, 2024 and 2023, there were 35,453,286 and 2,456,032 potential common shares, respectively, that were excluded from the calculation of diluted net loss per share because their effect was anti-dilutive. Revenue Recognition The Company recognizes revenue by applying the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies judgement in determining whether contracts entered into fall within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). In doing so, management considers the commercial substance of the transaction and how risks and benefits of the contract accrue to the various parties to the contract. Management has also made the judgement that the grant of the license and transfer of associated know-how and materials are accounted for as one performance obligation as they are not considered to be distinct; they are highly interrelated and could not provide benefits to the customer independently from each other. Judgements were made in relation to the transfer of the license and know-how and whether this should be recognized over time or a point in time. The point in time has been determined with regard to the point at which the transfer of know-how has substantially been completed and the customer has control of the asset and the ability to direct the use of and receive substantially all of the remaining benefits. Licensing revenues Revenue from licensees of the Company’s intellectual property reflects the transfer of a right to use the intellectual property as it exists at the point in time in which the license is transferred to the customer. Consideration can be variable and is estimated using the most likely amount method. Subsequently, the estimate is constrained until it is probable that a significant revenue reversal will not occur when the uncertainty is resolved. Revenue is recognized as or when the performance obligations are satisfied. The Company recognizes contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the consolidated balance sheet. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognizes either a contract asset or a receivable in its consolidated balance sheet, depending on whether something other than the passage of time is required before the consideration is due. F-13 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 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 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 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, 2024 and 2023 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 adopted this ASU effective July 1, 2023 and determined that its impact on the accompanying consolidated financial statements is immaterial. Recently Issued Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income T axes (Topic 740) — Improvements to Income T ax Disclosures , which enhances the transparency, effectiveness, and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. This guidance is effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of the ASU on its income tax disclosures within the consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures , which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the ASU on its disclosures within the consolidated financial statements. 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, 2024 and 2023, the Company had a net loss of $ 21.8 million and $ 19.6 million, respectively, and net cash used in operations of $ 19.4 million and $ 18.0 million, respectively. The Company expects to continue to incur additional operating losses in the foreseeable future. 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 June 30, 2024, the Company had $ 50.9 million in cash and cash equivalents. On April 22, 2024 we closed a private investment in public equity (PIPE) financing in which we sold 5,749,152 shares of common stock at a price per share of $ 4.80 and, in lieu of shares of common stock, pre-funded warrants to purchase up to an aggregate of 2,584,239 shares of common stock at a price per pre-funded warrant of $ 4.7999 , to certain accredited institutional investors. The pre-funded warrants were immediately exercisable until exercised in full at an exercise price of $ 0.0001 per share F-15 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 of common stock. Gross proceeds from the financing totaled $ 40.0 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 from the date of this report. 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, 2024 Year ended June 30, 2023 Licensing revenue —   $ 75 Total —   $ 75 The Company recognized licensing revenue over time as the performance obligations were satisfied. 5. Cash, cash equivalents, and restricted cash (US$’000) June 30, 2024 June 30, 2023 Cash at bank $ 50,866 $ 2,477 Restricted cash 63 13 Total $ 50,929 $ 2,490 6. Prepaid and other assets (US$’000) June 30, 2024 June 30, 2023 Prepaid expenses $ 577 $ 1,280 Market value of listed shares 1 1 Total other assets 578 1,281 Less: non-current portion ( 62 ) ( 97 ) Current portion $ 516 $ 1,184 F-16 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 7. Property and equipment, net (US$’000) June 30, 2024 June 30, 2023 Software $ 6 $ 6 Lab equipment 1,521 1,343 Computer hardware 32 32 Leasehold improvements 24 24 Total property and equipment, gross 1,583 1,405 Accumulated depreciation and amortization ( 1,404 ) ( 1,318 ) Total property and equipment, net $ 179 $ 87 Depreciation and amortization expense was $ 87 ,000 and $ 136 ,000 for the years ended June 30, 2024 and 2023, respectively. 8. Trade and other payables (US$’000) June 30, 2024 June 30, 2023 Trade payable $ 1,351 $ 1,140 Accrued license fees —   109 Accrued professional fees 97 75 Accrued clinical development project costs 2,504 1,750 Accrued consultant fees 75 88 Other payables 138 69 Total $ 4,165 $ 3,231 9. Leases ASC 842, Leases (“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. F-17 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 The tables below show the changes during the years ended June 30, 2024 and 2023: (US$’000) Operating lease right-of- use assets Balance at July 1, 2022 $ 771 Amortization of right of use asset ( 245 ) Balance at June 30, 2023 526 Amortization of right of use asset ( 256 ) Operating lease right-of-use asset at June 30, 2024 $ 270 (US$’000) Operating lease liabilities Balance at July 1, 2022 $ 811 Principal payments on operating lease liabilities ( 252 ) Operating lease liabilities at June 30, 2023 559 Principal payments on operating lease liabilities ( 275 ) Operating lease liabilities at June 30, 2024 284 Less: non-current portion —   Current portion at June 30, 2024 $ 284 As of June 30, 2024, the Company’s operating lease has a remaining lease term of 0.96 years and a discount rate of 4.67 %. The maturities of the operating lease liabilities are as follows: (US$’000) June 30, 2024 2025 291 Total operating lease payments 291 Less imputed interest ( 7 ) Present value of operating lease liabilities $ 284 For the fiscal years ended June 30, 2024 and 2023, total lease expense under operating leases was approximately $ 277,000 and $ 277,000 , respectively, and was recorded in general and administrative expenses. 10. Stockholders’ equity Common Stock 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 , which became effective on December 17, 2021. On December 7, 2022, the stockholders of the Company approved another amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 40,000,000 to 160,000,000 . The Charter Amendment was filed with the Secretary of State F-18 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 of the State of Delaware and became effective December 9, 2022. On July 26, 2023, the Company effected a 1-for-17 reverse stock split (the “Reverse Stock Split”) (see Note 2. Basis of Presentation and Summary of Significant Accounting Policies — Basis of Presentation). 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) 1,037,520 shares of the Company’s common stock, (ii) 12,171,628 pre-funded warrants, which, after giving effect to the Reverse Stock Split, are currently exercisable into 715,979 shares 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 agreement contains 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 . We have recorded a deemed dividend, for accounting purposes, of $ 618,987 as a result of an adjustment to the exercise price of its Series 2 Warrants due to an exercise price adjustment provision in such warrants 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. 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. The pre-funded warrants were immediately exercisable until exercised in full at an exercise F-19 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 price of $ 0.0001 per share of common stock. The common warrants were immediately exercisable at an exercise price of $ 3.86 per share of common stock and will expire on the fifth anniversary of such initial exercisable date. In addition, the Company granted the underwriter a 30-day option to purchase up to 2,331,606 additional shares of common stock and/or up to 2,331,606 additional common warrants. The underwriter partially exercised this option and purchased 458,134 additional shares of common stock and 458,134 additional common warrants. These additional shares are included in the total sold on August 11, 2023. 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 $ 27.9 million. On October 17, 2023 an investor exercised 25,000 pre-funded warrants at an exercise price of $ 0.0001 per share. On November 24, 2023, an investor exercised 20,000 Series 2 warrants at an exercise price of $ 1.93 per share. On March 15, 2024 and March 18, 2024, investors exercised 105,888 and 26,472 pre-funded warrants, respectively, at an exercise price of $ 0.0001 per share. On April 10, 2024 and April 19, 2024, investors exercised 25,000 Series 2 warrants on each date, at an exercise price of $ 1.93 per share. On April 22, 2024, an investor exercised 28,039 Series 2 warrants at an exercise price of $ 1.93 per share. On April 23, 2024, May 8, 2024, and May 21, 2024, investors exercised 27,500 , 697,475 , and 13,212 common warrants, respectively, at an exercise price of $ 3.86 per share. On April 22, 2024 we closed a private investment in public equity (PIPE) financing in which we sold 5,749,152 shares of common stock at a price per share of $ 4.80 and, in lieu of shares of common stock, pre-funded warrants to purchase up to an aggregate of 2,584,239 shares of common stock at a price per pre-funded warrant of $ 4.7999 , to certain accredited institutional investors. The pre-funded warrants were immediately exercisable until exercised in full at an exercise price of $ 0.0001 per share of common stock. Gross proceeds from the financing totaled $ 40.0 million. Net proceeds, net of commissions and other offering expenses, totaled approximately $ 37.1 million. On April 26, 2024, April 28, 2024, and May 16, 2024, investors exercised 350,000 , 438,000 , and 7,947 pre-funded warrants, respectively, at an exercise price of $ 0.0001 per share. As of June 30, 2024, there were 34,271,146 warrants outstanding. F-20 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 The activity related to warrants during for the fiscal years ended June 30, 2024 and 2023, 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 Pre-funded warrants issued August 11, 2023 15,126,226 $ 0.0001 Common warrants issued August 11, 2023 16,002,175 $ 3.86 Pre-funded warrants issued April 22, 2024 2,584,239 $ 0.0001 Common warrants exercised ( 738,187 ) $ 3.86 Series 2 warrants exercised ( 98,039 ) $ 1.93 Pre-funded warrants exercised ( 953,307 ) $ 0.0001 Outstanding and exercisable at June 30, 2024 34,271,146 $ 1.8453 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 F-21 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 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. 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 108,823 (as adjusted for the Reverse Stock Split). For the fiscal year ended June 30, 2024, our named executive officers (“NEO’s”) were each granted equity incentive awards under the 2020 Plan. On December 6, 2023, 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 1,204,537 . On August 29, 2024, 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 8,204,537 . Equity Awards The activity related equity awards, which are comprised of stock options, during the fiscal years ended June 30, 2024 and 2023, respectively, is summarized as follows: Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at July 1, 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 Granted 1,076,538 $ 5.01 9.66 years Expired ( 2,038 ) $ 501.93 —  Forfeited ( 353 ) $ 74.18 —  Outstanding at June 30, 2024 1,182,140 $ 6.58 9.51 years $ 2,342,847 Exercisable at June 30, 2024 60,292 $ 36.23 7.43 years $ 69,372 Equity-based Compensation Expense The weighted-average grant-date fair value of stock options granted during the years ended June 30, 2024 and June 30, 2023 was $ 4.39 and $ 3.34 , respectively. F-22 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 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, 2024 2023 Expected volatility 120.8 % 115.6 % Expected term 6 years 6 years Risk-free interest rate 4.12 % 3.96 % Expected dividend yield —  % —  % Expected Volatility. The Company has based its estimate of expected volatility on the historical volatility of the price of its common stock. The Company computed historical volatility data using the daily closing prices for its shares during the equivalent period of the calculated expected term of the equity-based awards. 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. 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, 2024 2023 Research and development $ 239 $ 161 General and administrative 591 291 Total share-based compensation expense $ 830 $ 452 As of June 30, 2024 and 2023, there was $ 4,243,676 and $ 350,000 , respectively, of unrecognized share-based compensation expense related to stock options granted under the 2020 Plan. Unrecognized expense as of June 30, 2024 is expected to be recognized over a weighted average period of 2.65 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. F-23 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 11. Income taxes Loss before provision for income taxes consisted of the following: (US$’000) Year Ended June 30, 2024 2023 United States $ ( 21,036 ) $ ( 18,953 ) International ( 715 ) ( 609 ) Total $ ( 21,751 ) $ ( 19,562 ) The tax effects of significant items comprising the Company’s deferred taxes are as follows: (US$’000) June 30, 2024 2023 Deferred tax assets: Net operating losses $ 14,466 $ 18,388 Other 172 221 Lease liability 60 117 Share-based compensation 264 263 Intangible assets 218 234 Section 174 Capitalization 5,771 3,070 Gross deferred tax assets 20,951 22,293 Less valuation allowance ( 20,594 ) ( 21,923 ) Deferred tax liabilities: Right-of-use assets ( 57 ) ( 111 ) Fixed assets ( 5 ) ( 15 ) Prepaid expenses ( 99 ) ( 244 ) Unrealized FX ( 196 ) — Total deferred tax liabilities ( 357 ) ( 370 ) 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, 2024 and 2023, the Company established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. F-24 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 The valuation allowance decreased $ 1.329 million during the year ended June 30, 2024. Net operating losses and tax credit carryforwards as of June 30, 202 4 are as follows: (US$’000) Amount Expiration Years Net operating losses, federal (post-December 31, 2017) $ 11,956 Do not expire Net operating losses, state —   Net operating losses, Australia 47,823 Do not expire The effective rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows: Year Ended June 30, 2024 2023 Statutory rate 21.00 % 21.00 % Permanent differences ( 0.76 %) ( 0.01 %) Share-based payments ( 0.80 % ) ( 0.19 %) Change in valuation allowance 7.12 % ( 20.92 %) Foreign tax rate differential 0.03 % 0.12 % Section 382 Write-off ( 26.59 % ) —   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, 2024, the Company did not 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. F-25 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act includes changes to the tax provisions that benefits business entities, and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for businesses in the CARES Act include a five-year net operating loss carryback for certain net operating losses, suspension of the annual deduction limitation of 80 % of taxable income for certain net operating losses, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined that there is no material impact to the income tax provision for the fiscal year ended June 30, 2024. On August 16, 2022, the President signed into law H.R. 5376 (commonly called the “Inflation Reduction Act of 2022”). The primary tax provisions in the new law include an alternative minimum tax (AMT) on certain large corporations, a tax on stock buybacks and certain energy-related tax credits, each of which become effective after December 31, 2022. The provisions of the Inflation Reduction Act are not expected to have a material effect on the Company’s financial statements and related disclosures. On June 27, 2024, California’s Governor signed Senate Bill 167 (SB 167), which limits the use of net operating losses and business credits for tax years beginning on January 1, 2024, and before January 1, 2027. The legislation disallows a net operating loss deduction for medium and large businesses and limits the use of tax credits to offset tax due to no more than $ 5 million for each taxable year. The Company evaluated the impact of SB 167 and determined that the legislation did no t materially impact the Company’s income tax provision for the fiscal year ended June 30, 2024. 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, 2024 and 2023, respectively. See Note 9 above for lease commitments. F-26 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 13. Related party transactions During the years ended June 30, 2024 and 2023, the Company did not enter into any related party transactions. 14. Loss per share Year Ended June 30, 2024 2023 Net loss (US$’000) ($ 21,751 ) ($ 19.562 ) Deemed dividend ( 619 ) —   Net loss attributable to common stockholders ($ 22,370 ) ($ 19,562 ) Weighted average number of shares used in calculating basic and diluted earnings per share 4,060,182 1,385,818 Basic and diluted loss per share ($ 5.51 ) ($ 14.12 ) Outstanding warrants and options amounting to 35,453,286 and 2,456,032 to acquire common stock are considered anti-dilutive for the fiscal years ended June 30, 2024 and June 30, 2023, respectively. 15. Updated quarterly results (Unaudited) The exercise price adjustment feature in the Company’s Series 2 warrant agreement was triggered by the Company’s August 11, 2023 public offering. Specifically, the exercise price of the Series 2 Warrants was reset as of that date from $ 11.22 to $ 1.9299 . The adjustment to the exercise price of such warrants results, solely for accounting purposes, in a deemed dividend totaling $ 618,987 . This amount was not recognized in the Company’s reported results for the quarter ended September 30, 2023, the three- and six-month periods ending December 31, 2023, and the three- and nine-month periods ending March 31, 2024. The impact of this adjustment to the exercise price will be accounted for as an increase in the Company’s accumulated deficit with an offsetting increase in Additional Paid-In Capital. In addition, the deemed dividend will be added to the Company’s net loss, increasing loss attributable to common stockholders for purposes of computing earnings per share. As detailed in the tables below, the update resulted in an understatement of the Company’s accumulated deficit, APIC and net loss per share for the quarter ended September 30, 2023, the six-month period ended December 31, 2023, and the nine-month period ended March 31, 2024. There is no impact on the net loss per share for each of the three-month periods ended December 31, 2023 and March 31, 2024. Pursuant to ASC 250 “Accounting changes and error corrections” issued by the FASB and SAB 99” Materiality” issued by the Securities and Exchange Commission, the Company determined the impact of the error was immaterial, both quantitatively and qualitatively, to the previously issued interim financial statements as presented below. Quarter YTD As Adjusted % Change Net Loss per Share Net Loss ($000’s) W/A Shares O/S Net Loss per Share Net Loss ($000’s) W/A Shares O/S Net Loss per Share Q1’24 ( 5,954 ) 2,157,065 ( 2.76 ) ( 5,954 ) 2,157,065 ( 2.76 ) ( 3.05 ) - 10.4 % Q2’24 ( 6,798 ) 2,576,347 ( 2.64 ) ( 12,752 ) 2,366,706 ( 5.39 ) ( 5.65 ) - 4.9 % Q3’24 ( 4,279 ) 2,616,288 ( 1.64 ) ( 17,031 ) 2,449,295 ( 6.95 ) ( 7.21 ) - 3.6 % F-27 Table of Contents BENITEC BIOPHARMA INC. Notes to Consolidated Financial Statements June 30, 2024 and 2023 Quarter Accumulated Deficit As Reported ($000’s) As Restated % Change 9/30/2023 ( 173,843 ) ( 174,462 ) 0.4 % 12/31/2023 ( 180,641 ) ( 181,260 ) 0.3 % 3/31/2024 ( 184,920 ) ( 185,539 ) 0.3 % Quarter As Reported ($000’s) As Restated % Change APIC 9/30/2023 196,931 197,550 0.3 % 12/31/2023 197,063 197,682 0.3 % 3/31/2024 197,255 197,874 0.3 % 16. Subsequent events On July 22, 2024, an investor exercised 269,609 Series 2 warrants at an exercise price of $ 1.93 per share. On September 11, 2024, an investor exercised 200,000 pre-funded warrants at an exercise price of $ 0.0001 per share. On July 1, 2024, the Plan and all options granted thereunder expired by its and their terms. On August 29, 2024, 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 8,204,537 and approved the exercise of certain existing warrants issued in April 2024, September 15, 2022 and August 11, 2023 in accordance with the rules of the Nasdaq Stock Market which otherwise would be subject to the Beneficial Ownership Limitation. F-28 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.