Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of financial condition and operating results together with our consolidated financial statements and the related notes and other financial information included in Item 8 in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section of the Annual Report captioned “Risk Factors” and elsewhere in this Annual Report, our actual results may differ materially from those anticipated in these forward- looking statements.
Overview
We endeavor to become the leader in discovery, development, and commercialization of therapeutic agents capable of addressing significant unmet medical need via the application of the silence and replace approach to the treatment of genetic disorders.
Benitec Biopharma Inc. (“Benitec” or the “Company” or in the third person, “we” or “our”) is a clinical-stage biotechnology company focused on the advancement of novel genetic medicines with headquarters in Hayward, California. The proprietary platform, called DNA-directed RNA interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease-causing genes following a single administration. The unique therapeutic constructs also enable the simultaneous delivery of wildtype replacement genes, facilitating the proprietary “silence and replace” approach to the treatment of genetically defined diseases. The Company is developing a silence and replace-based therapeutic (BB-301) for the treatment of Oculopharyngeal Muscular Dystrophy (OPMD), a chronic, life-threatening genetic disorder.
BB-301 is a silence and replace-based genetic medicine currently under development by Benitec. BB-301 is an AAV-based gene therapy designed to permanently silence the expression of the disease-causing gene (to slow, or halt, the biological mechanisms underlying disease progression in OPMD) and to simultaneously replace the mutant gene with a wildtype gene (to drive restoration of function in diseased cells). This fundamental therapeutic approach to disease management is called “silence and replace.” The silence and replace mechanism offers the potential to restore the normative physiology of diseased cells and tissues and to improve treatment outcomes for patients suffering from the chronic, and potentially fatal, effects of OPMD. BB-301 has been granted Orphan Drug Designation in the United States and the European Union.
The targeted gene silencing effects of RNAi, in conjunction with the durable transgene expression achievable via the use of modified viral vectors, imbues the silence and replace approach with the potential to produce permanent silencing of disease-causing genes along with simultaneous replacement of the wild type gene function following a single administration of the proprietary genetic medicine. We believe that this novel mechanistic profile of the current and future investigational agents developed by Benitec could facilitate the achievement of robust and durable clinical activity while greatly reducing the frequency of drug administration traditionally expected for medicines employed for the management of chronic diseases. Additionally, the achievement of permanent gene silencing and gene replacement may significantly reduce the risk of patient non-compliance during the course of medical management of potentially fatal clinical disorders.
Available Information
Our telephone number is (510) 780-0819, and our Internet website is www.benitec.com. The information on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K and is not incorporated by reference herein.
Royalties, milestone payments and other license fees
We are required to pay royalties, milestone payments and other license fees in connection with our licensing of intellectual property from third parties, including as discussed below.
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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 income (loss).” Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive income (loss) as other comprehensive income (loss).
April 2021 Capital Raise
On April 30, 2021, the Company announced the closing of an underwritten public offering of common stock and common stock equivalents (the “April 2021 Capital Raise”). The Company received gross proceeds of approximately $14.3 million and net proceeds of approximately $12.7 million from the offering.
September 2022 Capital Raise
On September 15, 2022, the Company announced the closing of an underwritten public offering of common stock and common stock equivalents (the “September 2022 Capital Raise”). The Company received gross proceeds of approximately $17.9 million and net proceeds of approximately $16.0 million from the offering.
August 2023 Capital Raise
On August 11, 2023, the Company announced the closing of an underwritten public offering of common stock and common stock equivalents (the “August 2023 Capital Raise”). The Company received gross proceeds of approximately $30.9 million and net proceeds of approximately $27.9 million from the offering.
April 2024 Capital Raise
On April 22, 2024 we closed a private investment in public equity (PIPE) financing of common stock and common stock equivalents (the “April 2024 Capital Raise”). The Company received gross proceeds of approximately $40.0 million and net proceeds of approximately $37.1 million from the financing.
Results of Operations
Revenues from customers
In the fiscal year ended June 30, 2024, the Company generated funds primarily from capital raising activities. The Company has not generated any revenues from the sales of products. Revenues from licensing fees and interest income are included in the revenue from customers line item on our statements of operations and comprehensive income (loss). Our licensing fees have been generated through the licensing of our ddRNAi technology to biopharmaceutical companies.
The following table sets forth a summary of our revenues for each of the periods set forth below:
Year Ended June 30,
Revenues from customers $ — $ 75
Total revenues $ — $ 75
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During the year ended June 30, 2024, the Company did not recognize any customer revenues, as compared to $75 thousand for the comparable year ended June 30, 2023. The decrease in revenues from customers is due to the decrease in licensing revenue in the current year.
Royalties and license fees
Royalties and license fees consist primarily of payments we are required to remit for royalties and other payments related to in-licensed intellectual property. Under our in-license agreements, we may pay up-front fees and milestone payments and be subject to future royalties. We cannot precisely predict the amount, if any, of royalties we will owe in the future, and if our calculations of royalty payments are incorrect, we may owe additional royalties, which could negatively affect our results of operations. As our product sales increase, we may, from time to time, disagree with our third-party collaborators as to the appropriate royalties owed, and the resolution of such disputes may be costly, may consume management’s time, and may damage our relationship with our collaborators. Furthermore, we may enter into additional license agreements in the future, which may also include royalty, milestone and other payments.
Research and Development Expenses
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.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, travel, and equity-based compensation expense. General and administrative expenses also include facility expenses, professional fees for legal, consulting, accounting and audit services and other related costs.
We anticipate that our general and administrative expenses may increase as the Company focuses on the continued development of the clinical OPMD program. The Company also anticipates an increase in expenses relating to accounting, legal and regulatory-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and other costs associated with being a domestic public company.
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Expenses
The following table sets forth a summary of our expenses for each of the periods set forth below:
Year Ended June 30,
Expenses:
Royalties and license fees $ (108 ) $ —
During the years ended June 30, 2024 and June 30, 2023, we incurred royalties and license fees expenses of $(108) thousand and zero, respectively. The credit to expense during the year ended June 30, 2024 relates to the reversal of accruals for license fees no longer due.
During the year ended June 30, 2024, we incurred $15.6 million in research and development expenses, as compared to $12.8 million for the comparable year ended June 30, 2023. The increase in research and development expenses relates to the ongoing clinical development of BB-301 for the treatment of OPMD.
General and administrative expense totaled $7.0 million and $6.4 million for the years ended June 30, 2024 and 2023, respectively. The year-over-year increase relates primarily to higher stock-based compensation, bonuses paid during the second quarter, and travel expenses ($300 thousand, $25 thousand, and $157 thousand, respectively).
Other Income (Loss)
The following table sets forth a summary of our other income (loss) for each of the periods set forth below:
Year Ended June 30,
Other 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 )
The other income, net during the year ended June 30, 2024 totaled $739 thousand, which consists of foreign currency transaction gain, interest income, other expense, net, and unrealized loss on investment. During the year ended June 30, 2023, other loss, net, totaled $481 thousand. The foreign currency transaction gain for the year ended June 30, 2024, as compared to the loss for the year ended June 30, 2023, reflects a change in foreign exchange rates. Net interest income for the year ended June 30, 2024, in comparison to the loss reported for the year ended June 30, 2023, reflects the increase in the Company’s cash and cash equivalent balances. The increase in other expense relates to higher Delaware report filing fees ($160 thousand) and franchise taxes ($32 thousand), which are based on the Company’s stockholders’ equity. Unrealized loss on investment was due to lower fair market values of the Company’s investments.
Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the years ended June 30, 2024, and 2023, the Company incurred net losses of
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$21.8 million and $19.6 million, and used net cash of $19.4 million and $18.0 million in operations, respectively. The Company expects to continue to incur additional operating losses in the foreseeable future.
The Company has incurred cumulative losses and negative cash flows from operations since our predecessor’s inception in 1995, except for the year ended June 30, 2019 where we had net income of $2.6 million and generated positive cash flows of $4.8 million from operating activities. The Company had accumulated losses of $190.3 million as of June 30, 2024. We expect that our research and development expenses may increase due to the continued development of the OPMD program.
We had no borrowings for the years ended June 30, 2024 and 2023 and do not currently have a credit facility.
As of June 30, 2024, we had cash and cash equivalents of $50.9 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our cash and cash equivalents are held in bank accounts.
The following table sets forth a summary of the net cash flow activity for each of the periods set forth below:
Year Ended June 30,
Net cash provided by (used in):
Investing activities (179 ) (1 )
Operating activities
Net cash used in operating activities for the year ended June 30, 2024 was $19.4 million. Net cash used in operating activities for the year ended June 30, 2023 was $18.0 million. Net cash used in operating activities was primarily the result of our net loss, partially offset by share-based compensation expense, changes in working capital, and depreciation and amortization.
Investing activities
Net cash used in investing activities for the years ended June 30, 2024 and 2023 was $179 thousand and $1 thousand, respectively, and relates to purchases of laboratory equipment.
Financing activities
Net cash provided by financing activities was $68.0 million and $16.0 million for the years ended June 30, 2024 and 2023, respectively. For the year ended June 30, 2024, cash from financing activities related primarily to the issuance of common shares, pre-funded warrants, and common warrants; including $30.9 million and $40.0 million in gross proceeds from the August 2023 and April 2024 Capital Raises, respectively; partially offset by $3.0 million and $2.9 million, respectively, of related issuance costs.
The future of the Company as an operating business will depend on its ability to keep operating costs and budgeted amounts and obtain adequate financing. While we continue to progress discussions and advance opportunities to engage with pharmaceutical companies and continue to seek licensing partners for ddRNAi in disease areas that are not our focus, there can be no assurance as to whether we will enter into such arrangements or what the terms of any such arrangement could be. On April 22, 2024, the Company closed a private
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investment in public equity (PIPE) financing resulting in $37.1 million in net proceeds to the Company. 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.
While we have established some licensing arrangements, we do not have any products approved for sale and have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates.
Unless and until we establish significant revenues from licensing programs, strategic alliances or collaboration arrangements with pharmaceutical companies, or from product sales, we anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of product candidates and begin to prepare to commercialize any product that receives regulatory approval. We are subject to the risks inherent in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. On April 22, 2024, the Company announced the closing of a private investment in public equity (PIPE) financing. The Company received gross proceeds of approximately $40.0 million and net proceeds of approximately $37.1 million from the offering.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
• the number and characteristics of product candidates that we pursue;
• the outcome, timing and costs of seeking regulatory approvals;
Contractual Obligations and Commercial Commitments
On October 1, 2016, the Company entered into an operating lease for office space in Hayward, California that originally expired in April 2018. The Company has entered into lease amendments that extend the lease commitment through June 2025.
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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.
Critical Accounting Policies and Significant Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 2 of Notes to the consolidated financial statements included in Item 8 in this Annual Report describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies.
A critical accounting policy is defined as one that is both material to the presentation of the Company’s consolidated financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on the Company’s financial condition or results of operations. Specifically, these policies have the following attributes: (1) the Company is required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates the Company could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on the Company’s financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. The Company bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as the Company’s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. These uncertainties are discussed in the section above entitled “Risk Factors.” Based on a critical assessment of its accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that the Company’s consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the United States of America, and provide a meaningful presentation of the Company’s financial condition and results of operations.
Management believes that the following are critical accounting policies:
Research and Development Expenses
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.
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Share-Based Compensation
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.
Recent Accounting Pronouncements
Accounting Standards recently adopted
ASU 2016-13—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 Taxes (Topic 740)—Improvements to Income Tax 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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company and not required to provide this information.
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Item 8. Financial Statements and Supplementary Data.
BENITEC BIOPHARMA INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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
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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
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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:
/s/ Baker Tilly US, LLP
We have served as the Company’s auditor since 2020.
San Jose, California
September 26, 2024
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BENITEC BIOPHARMA INC.
Consolidated Balance Sheets
(in thousands, except par value and share amounts)
Assets
Current assets:
Restricted cash 63 13
Trade and other receivables 229 55
Property and equipment, net 179 87
Prepaid and other assets 62 97
Liabilities and Stockholders’ Equity
Current liabilities:
Accrued employee benefits 475 472
Lease liabilities, current portion 284 275
Non-current accrued employee benefits 38
Lease liabilities, less current portion — 284
Commitments and contingencies (Note 12)
Stockholders’ equity:
Accumulated other comprehensive loss (892 ) (830 )
Total liabilities and stockholders’ equity $ 52,210 $ 4,464
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
Year Ended June 30,
Revenue:
Revenues from customers $ — $ 75
Operating expenses
Royalties and license fees (108 ) —
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 )
Other comprehensive income (loss):
Unrealized foreign currency translation gain (loss) (62 ) 415
Total other comprehensive income (loss): (62 ) 415
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:
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
Shares Amount
Exercise of pre-funded warrants 127,743 — — — — —
Share-based compensation — — 452 — — 452
Foreign currency translation gain — — — — 415 415
Exercise of pre-funded warrants 953,307 — — — — —
Anti-dilution adjustment to warrants — — 619 (619 ) — —
Share-based compensation — — 830 — — 830
Foreign currency translation gain — — — — (62 ) (62 )
The accompanying notes are an integral part of these consolidated financial statements.
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BENITEC BIOPHARMA INC.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended June 30,
Cash flows from operating activities:
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 )
Accrued employee benefits 39 73
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:
Share issue transaction costs (5,892 ) (1,869 )
Net cash provided by financing activities 68,029 16,015
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
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.
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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
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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.
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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:
Exchange rate on balance sheet dates
Average exchange rate for the period
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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:
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.
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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
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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.
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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.
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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
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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
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
Restricted cash 63 13
6. Prepaid and other assets
Market value of listed shares 1 1
Less: non-current portion (62 ) (97 )
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
June 30, 2024 and 2023
7. Property and equipment, net
Software $ 6 $ 6
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 $136,000 for the years ended June 30, 2024 and 2023, respectively.
8. Trade and other payables
Accrued license fees — 109
Accrued professional fees 97 75
Accrued clinical development project costs 2,504 1,750
Accrued consultant fees 75 88
9. Leases
ASC 842,
Leases
(“ASC 842”) requires lessees to recognize at the lease commencement date a lease liability, which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a
right-of-use
asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
The Company has entered into an operating lease for office space under an agreement that expires in 2025. The lease requires the Company to pay utilities, insurance, taxes, and other operating expenses. The Company’s lease does not contain any residual value guarantees or material restrictive covenants.
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BENITEC BIOPHARMA INC.
Notes to Consolidated Financial Statements
June 30, 2024 and 2023
The tables below show the changes during the years ended June 30, 2024 and 2023:
(US$’000) Operating lease right-of- use assets
Amortization of right of use asset (245 )
Amortization of right of use asset (256 )
Operating lease right-of-use asset at June 30, 2024 $ 270
(US$’000) Operating lease liabilities
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 —
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:
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
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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
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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.
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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)
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
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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