NVET Nexvet Biopharma Plc - Ordinary Shares

N otes to CONDENSED Consolidated Financial Statements

( unaudited )

1. Organization and Description of Business

Nexvet Biopharma public limited company and its subsidiaries (“Nexvet” or the “Company”) is a clinical-stage biopharmaceutical company focused on transforming the field of companion animal therapeutics by developing and commercializing novel, species-specific biologics. Biologics are therapeutic proteins derived from biological sources. As a class, biologics have transformed human medicine in recent decades and represent many of the top-selling therapies on the market today, due to advantages including a long duration of action, attractive side effect profiles and injectability. The Company believes these advantages will translate into significant advantages for companion animal therapeutics. The Company’s platform technology, which it refers to as “PETization,” is an algorithmic approach that enables the rapid creation of monoclonal antibodies (“mAbs”), a type of biologic, that are designed to be recognized as “self” or “native” by an animal’s immune system, a property the Company refers to as “100% species-specificity.” PETization is designed to build upon the safety and efficacy data from clinically tested human therapies to create new therapies for companion animals, thereby reducing clinical risk and development cost.

mAbs are targeted antibodies produced by identical or clonal cells that are engineered to produce a specific mAb and they are a prominent class of therapeutic biologics in humans. Nexvet’s most advanced product candidates are mAbs that target and inhibit the function of nerve growth factor (“NGF”) for the control of pain associated with osteoarthritis in dogs and cats.  NGF is a protein that directs nerve growth and is involved in nerve signaling, including pain signals, and NGF inhibitors (“anti-NGFs”) seek to interrupt those signals to reduce pain.  The Company’s anti-NGF portfolio consists of ranevetmab (formerly “NV-01”) for dogs, frunevetmab (formerly “NV-02”) for cats, both in late-stage clinical development as monthly subcutaneous injectables, as well as NV-03 for horses which has completed initial proof-of-concept studies.

Nexvet’s most clinically advanced product candidate is ranevetmab. The Company’s pivotal efficacy and field safety study of ranevetmab met its primary efficacy endpoint, demonstrating a statistically significant improvement over placebo in the assessed level of pain (p=0.041) as measured using changes in Client-Specific Outcome Measures (“CSOM”) score between enrollment and day 28.  This study’s design was agreed under protocol concurrence with the Center for Veterinary Medicine (“CVM”) at the United States Food and Drug Administration (“FDA”).  Ranevetmab was found to be safe and well tolerated with no significant adverse safety signals observed in the study.  Clinically meaningful magnitudes of benefit and statistically significant differences over placebo were also achieved for the majority of the secondary endpoints measured in the study, which used a monthly subcutaneous injection for three months.  Collectively, the results of this study constitute a substantial body of efficacy data that the Company has filed with the CVM and intends to use as the basis of its planned submissions for marketing authorizations in both the United States (“U.S.”) and Europe. The Company has a master collaboration, supply and distribution agreement, and a specific distribution agreement for ranevetmab, with Virbac S.A. (“Virbac”), one of the larger animal health companies in the world.  

Nexvet’s next most advanced product candidate is frunevetmab.  Following positive proof-of-concept studies, in May 2016 the Company also obtained positive results from a pilot field safety and efficacy study, which enrolled 126 cats with naturally occurring osteoarthritis. The successful completion of these studies have informed preparations for a pivotal field efficacy and safety study and a pivotal target animal safety study, both of which commenced during this quarter. The pivotal field efficacy and safety study is a placebo-controlled, randomized, double-blinded study targeting enrolment of 250 cats with osteoarthritis, and will utilize a comparison of owner-assessed responses, before and after treatment, as its primary endpoint.  The pivotal target animal safety study will examine the safety of frunevetmab in cats according to standard International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products (VICH) guidance. The Company has obtained protocol concurrence from CVM for both pivotal studies of frunevetmab.

In addition, the Company conducts drug discovery in the areas of immuno-oncology, inflammation and allergy.  In collaboration with Zenoaq, a leading animal health company based in Japan, the Company has used PETization to create fully canine mAbs that bind to the immuno-oncology target known as programmed cell death protein 1 (‘PD-1”) and successfully completed preliminary pharmacokinetic, immunogenicity and safety studies for its anti-PD-1 program.  The Company’s most advanced anti-inflammatory programs consist of mAb candidates targeting tumor necrosis factor (“TNF”).  The Company has used PETization to create fully canine and fully feline mAbs that demonstrate high potency in neutralizing canine and feline TNF.

In September 2015, the Company secured a biopharmaceutical manufacturing facility in Tullamore, Ireland.  The facility has been reconfigured to be a dedicated veterinary biopharmaceutical facility with the capability to meet anticipated future clinical and commercial production needs for therapeutic drug substance. The facility is operated by a wholly-owned subsidiary of Nexvet, BioNua Limited (“BioNua”).

In November 2016, the Company entered into a research collaboration with Genentech, involving use of the Company’s PETization platform.  The parties will conduct a proof-of-concept study, which will be funded by Genentech.

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I n February 2017, the Company entered into a license agreement with Pfizer Inc. (“Pfizer”), pursuant to which the Company received a non - exclusive license to certain patents in the Pfizer portfolio for anti-NGF antibodies .

Since the Company’s initial public offering, it has focused on clinical development of its most advanced candidates and securing infrastructure to become a vertically integrated veterinary biopharmaceutical company.  The Company is building a pipeline of development candidates derived from PETization in therapeutic areas where human mAbs have had significant impact.

The Company has incurred losses since its inception and had an accumulated deficit of $53.5 million and $43.0 million as of December 31, 2016, and June 30, 2016, respectively.  For the foreseeable future, the Company expects to continue to incur losses and negative cash flows.  To date, the Company has been funded primarily through sales of capital shares.  Management has processes in place to forecast cash usage and is prioritizing ranevetmab, frunevetmab and partnered programs. This is expected to result in reduced expenditures on earlier stage research programs and general and administrative activities.  Management believes the Company’s unrestricted cash of $20.5 million as of December 31, 2016, will be sufficient to fund operations for at least the next 12 months.    

The Company will require additional capital until it can generate revenue in excess of operating expenses. The Company may seek funding through public or private equity or debt financing or other sources, such as corporate collaborations and licensing arrangements.  The Company may not be able to obtain financing on acceptable terms, or at all.  The sale of additional equity would result in additional dilution to the Company’s shareholders, and the terms of any financing may adversely affect the rights of these shareholders.  The incurrence of any debt financing could result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict operations.  If the Company is unable to obtain funding, it could be forced to delay, reduce or eliminate research and development programs or commercialization efforts, which could adversely affect the Company’s business prospects.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements of the Company are reported in U.S. dollars, include the operations of all its wholly‑owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).  Such operations include the Company and its subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.  The Company’s fiscal year ends on June 30, and references to any fiscal year are to the Company’s year ended June 30 in that year.  

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements and related disclosures as of December 31, 2016, and for the three and six months ended December 31, 2016 and 2015 are unaudited and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of December 31, 2016, and the results of its operations, comprehensive loss and cash flows for the three and six months ended December 31, 2016 and 2015. The financial data and other information disclosed in these notes related to the three and six months ended December 31, 2016 and 2015 are unaudited. The results for the three and six months ended December 31, 2016 and 2015 are not necessarily indicative of results to be expected for a full year, any other interim periods or any future year or period.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as of, and for the year ended June 30, 2016 included in the Company’s annual report on Form 10‑K filed with the SEC on September 2, 2016. The condensed consolidated balance sheet data as of June 30, 2016, was derived from audited consolidated financial statements.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period.  Significant items subject to such estimates and assumptions include research and development income, research and development accruals, government grant income, share-based payments, valuation of ordinary share options and restricted share units and deferred income taxes.  Actual results could differ from those estimates.

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Net Loss Per Share

Net loss per share applicable to ordinary shareholders is computed by dividing the net loss applicable to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the reporting period.

Diluted net loss per share gives effect to all potentially dilutive securities, including shares issuable upon the exercise or conversion, as applicable, of outstanding warrants, ordinary share options and restricted share units, using the treasury shares method.  The Company has excluded the effects of all potentially dilutive shares, which include warrants to purchase ordinary shares, ordinary share options and restricted share units from the weighted-average number of ordinary shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses.

Cash

As of December 31, 2016 and June 30, 2016, the Company’s unrestricted cash consisted of cash deposited in a business operating account or in short-term deposit accounts of less than 90 days’ original duration.

Concentration of Credit Risk and Other Risks and Uncertainties

The Company receives research and development income and grants from two sources, the Australian government and the Irish government.

The Company’s cash is deposited with several large commercial banks located in the U.S., Australia and Ireland, limiting the amount of credit exposure to any one financial institution.  The deposits with the financial institutions are federally insured or guaranteed, however, the Company’s cash balances with these financial institutions often exceed the amount insured or guaranteed.

The Company is subject to risks common to companies in the biotechnology industry.  The Company’s research and development may not be successfully completed, adequate protection for the Company’s technology may not be obtained, any products developed may not obtain necessary government regulatory approval and any approved products may not be commercially viable.  The Company operates in an environment of competition from other animal health companies, some of which have substantially more resources at their disposal.  In addition, the Company is dependent upon the services of its employees and consultants, as well as third‑party contract research organizations and manufacturers.

Fair Value Measurements

The Company records certain assets and liabilities at fair value in accordance with the provisions of ASC Topic 820, Fair Value Measurements .  As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants.  As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability.  As a basis for considering these assumptions, the guidance defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s material financial instruments comprise cash and short-term deposits.  

Other Income Receivable

Other income receivable is recorded at the invoiced amount where available.

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Research and Development Income

Australia

Nexvet Australia is eligible under the AusIndustry research and development incentive program to obtain a cash amount from the Australian Taxation Office (“ATO”).  The incentive is available to Nexvet Australia on the basis of specific criteria with which Nexvet Australia must comply.  Specifically, Nexvet Australia must have revenue of less than A$20 million and cannot be controlled by income tax exempt entities.

Ireland

Nexvet Ireland and BioNua are both eligible under the Research and Development Tax Credit (“R&D Tax Credit”) Guidelines of Ireland to claim a tax credit, up to 25% of eligible research and development expenditure less expenditure already covered by the Industrial Development Agency (Ireland) (“IDA”) grant assistance.  The tax credit is normally offset against corporation tax payable in Ireland.  For companies at the same stage of development as Nexvet Ireland and BioNua, there is the ability to elect to receive the tax credit as a cash payment in three equal amounts, approximately 9, 21 and 33 months after the relevant fiscal year end, subject to meeting certain qualifying criteria.  In this later situation, the relevant company will recognize the cash receivable as other income.

Government Grant Income

BioNua is eligible under an agreement with the IDA to receive cash as grant income based on a fixed percentage of eligible research and development expenditure in Ireland on a defined project, which includes the achievement of pre-agreed performance targets.  Government grants are recognized at their fair value when there is reasonable assurance that the grant will be received and it is probable that all attaching conditions will be complied with.

Property, Plant and Equipment

Property, plant and equipment are recorded at acquisition cost, net of accumulated depreciation and impairment.  Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets.  The estimated useful life of machinery and equipment is three to 10 years.  Leasehold improvements are amortized on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset.  Upon retirement or sale of an asset, its cost and related accumulated depreciation or accumulated amortization are removed from the property accounts and any gain or loss is included in the results of operations.  Maintenance and repairs are expensed as incurred.

Intangible Assets

The Company accounts for intangible assets under ASC 350, Intangibles—Goodwill and Other , which consists of internal use computer software costs. Costs which include acquiring off the shelf software and licenses that are expected to provide future period financial benefits are capitalized to computer software intangibles. No material internal or external costs are incurred in making the software ready for use. Amortization is calculated on a straight-line basis over periods ranging from one to three years.

Impairment of Long-Lived Assets

The Company reviews its tangible and intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to the estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge will be recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no impairments of long-lived assets during the three and six months ended December 31, 2016 or 2015.

Consumable Stores

Consumable stores represent items that are used in the manufacturing process of clinical or commercial batches of our product candidates.  As these items have alternative future uses in other development projects, consumables are recorded in prepaid and other assets and are subsequently expensed as consumed. Consumable stores are recorded at the lower of cost and net realizable value.

Foreign Currency

The Company’s functional currency is U.S. dollars, and the functional currency for most subsidiaries is their local currency.  Foreign currency transactions are translated into the functional currency using the current exchange rate as of the date of the transaction.  At period end, monetary items denominated in a foreign currency are translated into the functional currency of the relevant entity using the period-end spot rate.  

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In preparing the Company’s consolidated financial statements, the financial statements of the subsidiaries are translat ed at period ‑ end exchange rates as to assets and liabilities and weighted-average rates as to revenue and expenses.  The resulting translation adjustments are recognized in other comprehensive income (loss) (“OCI”).  

Income Taxes

The Company has historically filed income tax returns in the U.S., Australia and Ireland.

The Company applies ASC Topic 740, Income Taxes , which establishes financial accounting and reporting requirements for the effects of income taxes that result from the Company’s activities during the current and preceding years.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities on their respective tax bases, and operating losses and tax loss carry forwards.  Deferred tax assets and liabilities are measured using enacted statutory tax rates expected to apply to taxable income in the jurisdictions and years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

When the Company determines that it is more likely than not that some portion or all of the deferred tax assets will not be realized in the future, the deferred tax assets are reduced by a valuation allowance.  The valuation allowance is sufficient to reduce the deferred tax assets to the amount that the Company determines is more likely than not to be realized.

The income tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on technical merits of the position.  The Company evaluates and adjusts these accruals based on changing facts and circumstances.  The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

License and Collaboration Agreement Revenue Recognition

Future revenue under a license and collaboration agreement is expected to consist of fees for services, royalties for product sales or payments when specific milestones are met and match underlying activities occurring during the term of the arrangement.

In fiscal year 2013, the Company entered into a license and collaboration agreement with a third party for the research and development of animal health products in Japan. The terms of the agreement include non-refundable signing and license fees, development milestone payments, the potential for manufacturing and supply services and royalties on any product sales derived from the collaboration. The Company analyzed this arrangement to determine whether the deliverables, which included license and performance obligations such as research and steering committee services, can be separated or whether these must be accounted for as a single unit of accounting. The Company recognizes license payments as revenue upon delivery of the license only if the license has stand-alone value and there are no undelivered performance obligations related to the license.

If the license is considered not to have stand-alone value, the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations would be recognized as revenue over the estimated period of when the performance obligations are performed. When the Company determines that an arrangement should be accounted for as a single unit of accounting, it determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a proportional performance or straight-line method. The Company recognizes revenue using the proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated, and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measurement of performance. If the Company cannot reasonably estimate the level of effort to complete its performance obligations under an arrangement, then revenue under the arrangement would be recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

The Company’s license and collaboration agreement entitles it to additional payments upon the achievement of performance-based milestones. Milestones that involve substantial effort on the Company’s part are considered “substantive milestones.” A substantive milestone is included in the Company’s revenue model when the milestone is achieved. To date, no milestone payments have been received.

Royalty revenue is recognized upon the sale of the related products, provided the Company has no remaining performance obligations under the arrangement.

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Research and Development Expense

Research and development costs are expensed as incurred and consist primarily of (i) payroll and related expense for all employees engaged in scientific research and development functions, including wages, related benefits and share-based compensation, (ii) fees for regulatory, professional and other consultants and (iii) development costs, including costs of drug discovery, safety, proof‑of‑concept, pilot and pivotal safety and efficacy studies, development of biological materials, patent license costs and service providers.  The Company uses its employee and infrastructure resources across multiple development programs.  The Company allocates outsourced development costs by lead product candidates but does not allocate personnel or other internal costs related to development to specific product candidates.  For cost-sharing arrangements for joint research and development activities with third parties, the Company recognizes cost reimbursements as an offset within research and development expense in accordance with the underlying agreements.

General and Administrative Expense

General and administrative expense consists primarily of non-research and development-related payroll and related expense for employees, consultants and directors, including wages, related benefits and share-based compensation.  General and administrative expense also includes professional and consulting fees for legal, accounting, tax services and other general business services, as well as other expenses such as travel, rent and facilities costs.

Other Income (Expense)

Research and Development Income

Australia

Nexvet Australia is eligible under the AusIndustry research and development incentive program to obtain a cash amount from the ATO.  The incentive is available to Nexvet Australia on the basis of specific criteria with which Nexvet Australia must comply.  Although the incentive is administered through the ATO, the Company has accounted for the incentive outside the scope of ASC Topic 740, Income Taxes , as an income tax benefit since Nexvet Australia meets the applicable requirements to participate in the program and the incentive is not linked to Nexvet Australia’s income tax liability and can be realized regardless of whether Nexvet Australia has generated taxable income.  Research and development income is recognized when eligible research and development activities have been undertaken and the Company has completed its assessment of whether such activities meet the relevant qualifying criteria.

Ireland

Nexvet Ireland and BioNua are both eligible under the R&D Tax Credit (“R&D Tax Credit”) Guidelines of Ireland to claim a tax credit, up to 25% of eligible research and development expenditure less expenditure already covered by the IDA grant assistance.  The tax credit is normally offset against corporation tax payable in Ireland.  For companies, such as Nexvet Ireland and BioNua, there may be the ability to elect to receive the tax credit as a cash payment in three equal amounts, approximately 9, 21 and 33 months after the relevant fiscal year end, subject to meeting certain qualifying criteria.  In this later situation, the relevant company will recognize the cash receivable as other income.

Government Grant Income

BioNua is eligible, under an agreement with the IDA, to receive cash as grant income based on a fixed percentage of eligible research and development expenditure in Ireland on a defined project, which includes the achievement of pre-agreed performance targets.  Any expenditure eligible under this agreement cannot be claimed under the R&D Tax Credit program.  The maximum grant available to the Company is €2.4 million over the life of the agreement.

The Company recognizes government grant income at fair value when there is reasonable assurance that the grant will be received and it is probable that all attaching conditions will be complied with.  When the grant relates to an asset, the fair value is included in the balance sheet as deferred grant income, which is released to income over the expected useful life in a manner consistent with the depreciation method for the relevant asset and subject to meeting other relevant conditions, and it is recorded on the balance sheet as other income receivable until cash is received.  When the grant relates to an expense item, it is recognized as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate, and it is recorded on the balance sheet as other income receivable until cash is received.  

Exchange (Loss) Gain

Exchange (loss) gain consists primarily of losses or gains due to foreign exchange translation, primarily reflecting changes in Australian, Irish and U.S. foreign exchange rates.  

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Interest I ncome

The Company earns interest on the cash balances held with financial institutions and recognizes interest when earned on an accrual basis over time.

Comprehensive Loss

Comprehensive loss represents the total change in shareholders’ equity during the period other than from transactions with shareholders, which for the Company includes net change in foreign currency translation adjustments.

Share-Based Compensation

The Company’s share-based compensation plan (see Note 10) provides for the grant of ordinary share options, restricted share units and other share-based awards.  The fair value of share options is determined as of the date of grant using the binomial option-pricing model.  This method incorporates the fair value of the Company’s ordinary shares on the date of each grant and various assumptions such as the risk-free interest rate, actual volatility or expected volatility based on the historic volatility of peer companies, expected dividend yield, and expected term of the share option.  Restricted share units are valued at the fair value of the underlying ordinary shares as of the date of grant. The Company classifies share-based compensation expense in the statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified.

The Company recognizes share-based compensation expense based on the grant date fair value of the entire award over the total period during which an employee is required to provide service in exchange for the award.   In accordance with ASC 718, the amount of compensation expense recognized at each balance date is at least equal to the grant date fair value of the vested portion of the award on that date.  Where performance conditions are attached to the awards, compensation expense is recognized in the period in which it becomes probable that the performance target will be achieved, net of estimated pre-vesting forfeitures over the requisite service period.  The probability of vesting is reassessed at each reporting period for awards with performance conditions and compensation expense is adjusted based on this probability assessment.  

Equity instruments issued to non-employees, including consultants, are accounted for in accordance with Financial Accounting Standards Board (“FASB”) guidance.  All transactions in which services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance will occur.

For transactions where the fair value of the equity instrument issued to non-employees is the more reliable measurement and a measurement date has not been reached, the fair value is re-measured at each balance sheet date using the binomial option-pricing model.  Compensation expense for these share-based awards is recognized over the term of the consulting agreement or until the award is approved and settled.

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Segment Data

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.  The Company is a clinical-stage biopharmaceutical company focusing on developing therapies for companion animals.

Total assets, property and equipment, net and total property and equipment additions by geography, reconciled to the consolidated amounts, were as follows as of the dates indicated:

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606).   This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about:

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing . The guidance clarifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers that reflects the consideration and revenue to which the entity expects to be entitled in exchange for those goods, services or performance obligations.

This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40) .  This guidance defines management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.  Under the guidance, management is required to evaluate, for each annual and interim reporting period, whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued or are available to be issued.  When management identifies substantial doubt about the entity’s ability to continue as a going concern, additional disclosures are required.  This guidance will be effective for annual reporting periods beginning after December 15, 2016.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

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In November   2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes .  This guidance simplifies the presentation of deferred income taxes, in that it requires deferred tax liabilities and assets be classi fied as noncurrent in a classified statement of financial position.  This amendment applies to all entities that present a classified statement of financial position.  The current requirement that deferred tax liabilities and assets of a tax–paying compone nt of an entity be offset and presented as a single amount is not affected by the amendments in this update.  This guidance will be effective for annual reporting periods beginning after December 15, 2016 ; however, early adoption is permitted for all entit ies as of the beginning of an interim or annual reporting period .  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities .  This guidance requires equity investments to be measured at fair value with changes in fair value recognized in net income, simplifies the impairment assessment of equity investments, eliminates certain disclosure requirements, requires public companies to use the exit price notion when measuring fair value, and requires certain changes to the presentation of financial assets and financial liabilities.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption for public entities is allowable only for the provisions related to elimination of fair value disclosure requirements and related presentation of fair value changes resulting from instrument-specific credit risk in other comprehensive income. Early adoption is not allowed for any other provisions. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In February 2016, the FASB issued ASU 2016-02 , Leases (Topic 842) .  This guidance increases transparency and comparability by recognizing the assets and liabilities arising from leases on the balance sheet and disclosing key information about leasing arrangements.  The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entity, not-for-profit and employee benefit plans and for all other entities this update is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.  Early adoption is permitted for all entities. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing . The guidance clarifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers that reflects the consideration and revenue to which the entity expects to be entitled in exchange for those goods or services or performance obligations satisfied.  In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606 ), Narrow-Scope Improvements and Practical Expedients. The core principal of this guidance is the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) . This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The statement of operations reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. This guidance will become effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

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In August  2016, the FASB issued ASU 2016-15, Statem ent of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments.   This guidance relates to eight specific cash flow issues and their appropriate disclosure and clas sifications.  The eight specific cash flow issues are: d ebt prepayme nt or debt extinguishment costs; s ettlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective i nterest rate of the borrowing; c ontingent consideration payments made afte r a business combination; p roceeds from the s ettlement of insurance claims; p roceeds from the settlement of corporate-owned life insurance policies, including bank- owned life insurance policies; d istributions received from equity method investees; b enefici al interests in s ecuritization transactions and separately identifiable cash flows and application of the predominance principle .   This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim per iods within those fiscal years.  Early adoption is permitted.   The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows .

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740) Intra-Entity Transfer of Assets Other Than Inventory.   This guidance requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.  This guidance aligns the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards (IFRS).  This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810) Interest Held through Related Parties That Are under Common Control.   This guidance affects reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control.  This guidance changes the evaluation of whether a reporting entity is the primary beneficiary.  This guidance will become effective for the Company for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash.   This guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amount generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The Company does not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business . This guidance assists entities with evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business.  It provides a robust framework to use in determining when a set of assets and activities constitutes a business.  This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The Company does not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

3. Other Income Receivable

Other income receivable consisted of the following as of the dates indicated:

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4. Prepaid Expenses and Other

Prepaid expenses and other consisted of the following as of the dates indicated:

At December 31 and June 30, 2016, restricted cash was $0.1 million and $0.1 million, respectively, and is included in prepaid expenses.  The restricted cash balance relates to a collateral arrangement with a financial institution that requires the Company to maintain a minimum collateral balance of $50,000 in order to access credit card facilities.

5. Property, Plant and Equipment

Property, plant and equipment, consisted of the following as of the dates indicated:

In September 2015, the Company acquired certain manufacturing assets in Ireland as set out below. The Company determined that the transaction did not constitute the acquisition of a business under ASC Topic 805.

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6 . Accrued Expenses and Other L iabilities

Accrued expenses and other liabilities consisted of the following as of the dates indicated:

7. Ordinary Shares

As of December 31, and June 30, 2016, there were 11,752,302 and 11,565,133 ordinary shares outstanding, respectively.

8. Fair Value Measurement

Assets and liabilities carried at fair value on a recurring basis as of December 31, and June 30, 2016, including financial instruments, which the Company accounts for under the fair value option, are summarized in the following tables.

There were no transfers between the levels within the reporting periods.

9. Net Loss Per Share

The calculation of net loss per ordinary share, basic and diluted, for the three and six months ended December 31, 2016 and 2015 is presented below.  

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The following ordinary share equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have an anti-dilutive effect:

10. Share-Based Awards

As permitted by Australian law, the Company’s board of directors has historically granted share options and restricted share units with an exercise or conversion price, as applicable, of zero to recipients in Australia.  Contemporaneously with these awards and based upon information available at the time of grant, the Company’s board of directors, with the assistance of management, also determined the fair value of the shares underlying these share options for financial reporting purposes.  To determine the best estimate of the fair value of the Company’s ordinary shares at each grant date, the Company’s board of directors considered numerous factors, including contemporaneous third-party valuations, current business conditions and projections, risks inherent to the development of the Company’s research and development programs, including the status of pivotal safety and efficacy studies for its lead product candidates, the Company’s financial condition, the Company’s need for future financing to fund its research and development efforts and the commercialization of its lead product candidates, and other relevant factors.

Option Terms of Issue

The Company previously issued to its employees, consultants and directors under the Company’s Employee Share Option Plan (the “2012 Plan”) ordinary shares subject to an interest-free, limited recourse loan payable to the Company for the purchase price of the ordinary shares.  The 2012 Plan is no longer in use, and all of the limited recourse loans were either repaid in cash or satisfied by the repurchase by the Company of certain ordinary shares subject to such loan.  The Company issued to each former holder of such repurchased ordinary shares an option to purchase a number of ordinary shares equal to the number of ordinary shares repurchased with an exercise price of $6.35 per ordinary share and subject to the Option Terms of Issue.  The options expire in February 2018, consistent with the original repayment date of the loan.

2013 Long Term Incentive Plan

In September 2013, the Company’s board of directors approved a long-term incentive plan for its employees (including executive officers), directors and consultants pursuant to which in November 2013 the Company issued share options to purchase 215,799 ordinary shares and restricted share units to acquire 29,214 ordinary shares to employees, directors and consultants.  The underlying ordinary shares had a fair value of $5.15 per share, but the awards had an exercise or conversion price, as applicable, of zero, as permitted under Australian law. Because Irish law requires the payment to an issuer of at least the nominal value of shares in order to acquire such shares from the issuer, any options or restricted share units with a zero exercise or conversion price became exercisable or convertible, as applicable, at the nominal value per ordinary share in August 2014.  This nominal value became $0.10 per ordinary share in September 2014 and was revised to $0.125 per ordinary share in connection with the four-for-five share consolidation in November 2014.  In September 2014, the Company also issued share options to purchase 16,800 ordinary shares and restricted share units to acquire 21,240 ordinary shares to employees, directors and consultants.  The underlying ordinary shares had a fair value of $6.35 per ordinary share, but the awards had an exercise or conversion price of the nominal value of $0.10 per ordinary share, which nominal value became $0.125 per ordinary share in connection with the four-for-five share consolidation in November 2014. Except for share options and restricted share units held by directors (which vested either beginning in September 2014 and quarterly thereafter or in November 2014), share options and restricted share units held by employees and consultants vest in three equal tranches in November 2014, November 2015 and November 2016.  The Company revised this plan in September 2014 and refers to this plan as its “2013 Plan.”

In November 2014, the Company awarded employees share options to purchase 141,792 ordinary shares and restricted share units to acquire 16,427 ordinary shares.  The underlying ordinary shares had a grant date fair value of $9.37.  The share options and restricted share units have an exercise price or conversion price, as applicable, of $0.125 per ordinary share.  The awards are subject to a specified performance condition and service period and they vest in tranches over one to three years.

The 2013 Plan was terminated in connection with the Company’s initial public offering.  The 2013 Plan will continue to govern outstanding awards granted thereunder.  Appropriate adjustments will be made in the number of authorized ordinary shares and other numerical limits in the 2013 Plan and in outstanding awards to prevent dilution or enlargement of participants’ rights in the event of a share split or other change in the Company’s capital structure.

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Prior to its termination, the 2013   Plan was administered by the Company’s board of directors. Sub ject to the provisions of the 2013   Plan, the board of directors determined, in its discretion, the persons to whom, and the times at which, awards were granted, as well as the size, terms and conditions of each award, under the 201 3   Plan.  All awards are e videnced by a written agreement between the Company and the holder of the award.  The compensation committee has the authority to construe and interpret the terms of the 2013   Plan and awards granted under the 2013   Plan.

In the event of a change of control as described in the 2013 Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2013 Plan or substitute substantially equivalent awards.  Any awards which are not assumed or continued in connection with a change of control or are not exercised or settled prior to the change of control will terminate effective as of the time of the change of control unless specified otherwise in an employment contract.  The compensation committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines, except that the vesting of all awards held by members of the board of directors who are not employees will automatically be accelerated in full.  The compensation committee, in its discretion and without the consent of any participant, may also cancel each or any outstanding award denominated in ordinary shares upon a change of control in exchange for a payment to the participant with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration to be paid per ordinary share in the change of control transaction over the exercise price per ordinary share, if any, under the award.

2015 Equity Incentive Plan

In September 2014, the Company’s board of directors adopted, and in November 2014 the Company’s shareholders approved, the 2015 Equity Incentive Plan (“2015 Plan”).  The 2015 Plan was amended by the board of directors in January 2015, became effective on the date immediately prior to the date of the prospectus for initial public offering and was further amended by the compensation committee in September 2015.  The 2015 Plan is intended to provide incentives that will assist the Company to attract, retain and motivate employees, including officers, consultants and directors.  The Company may provide these incentives through the grant of share options, restricted share units, performance shares and units and other cash-based or share-based awards.

A total of 1,280,000 of the Company’s ordinary shares were initially authorized and reserved for issuance under the 2015 Plan.  This reserve has or will automatically increase on July 1 of each year through 2024 by an amount equal to the lesser of:

The ordinary shares available under the 2015 Plan will not be reduced by awards settled in cash, but will be reduced by ordinary shares withheld to satisfy tax withholding obligations with respect to ordinary share options (but not other types of awards).  The gross number of ordinary shares issued upon the exercise of options exercised by means of a net exercise or by tender of previously-owned ordinary shares will be deducted from the ordinary shares available under the 2015 Plan.  Notwithstanding the foregoing, and subject to adjustment as described below, the maximum aggregate number of ordinary shares that may be subject to issuance at any given time in connection with outstanding awards under the 2015 Plan may not exceed a number equal to ten percent of the Company’s total issued and outstanding ordinary shares (calculated on a non-diluted basis).  

Appropriate adjustments will be made in the number of authorized ordinary shares and other numerical limits in the 2015 Plan and in outstanding awards to prevent dilution or enlargement of participants’ rights in the event of a share split or other change in the Company’s capital structure.  Ordinary shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2015 Plan.

In May 2015, the Company awarded employees and directors share options to purchase 360,000 ordinary shares and restricted share units to acquire 20,280 ordinary shares with a grant date fair value of $5.93 and $6.99 per share, respectively.  The share options and restricted share units have an exercise price of $15.00 and a conversion price of $0.125 per ordinary share, respectively.  Except for restricted share units to acquire 2,280 ordinary shares held by directors (which vest immediately), the awards vest in tranches over one to five years.

In June 2015, the Company awarded employees bonus share awards to purchase 42,691 ordinary shares subject to the payment of $0.125 per ordinary share.  The underlying ordinary shares had a grant date fair value of $7.12 per ordinary share.

In August 2015, the Company awarded employees share options to purchase 60,000 ordinary shares and restricted share units to acquire 8,500 ordinary shares with a grant date fair value of $2.71 and $4.97 per share, respectively.  The share option and restricted share units have an exercise price of $5.10 and a conversion price of $0.125 per ordinary share, respectively.  The awards vest in tranches over one to five years.

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In September 2015, the Company offered employees and directors restricted share units to acquire 298,83 4   ordinary shares , of which 296,059 were accepted , with grant date fair value s of $ 4.26 ‑ $4.2 7 .  The restricted share units have a conversion price of $0.125   per ordinary share . The restricted shares units granted to employees vest annually over four years commencing on July 1, 2016 .  The restricted share units granted to directors vest ed on July 1, 2016 .

In November 2015, the Company awarded a new employee restricted share units to acquire 2,000 ordinary shares with a grant date fair value of $4.76 .   The restricted share units have a conversion price of $0.125 per ordinary share.  The restricted share units vested on September 21, 2016.

In September 2016, the Company awarded a director bonus share award to purchase 20,000 ordinary shares subject to the payment of $0.125 per ordinary share.  The underlying ordinary shares had a grant date fair value of $3.60 per ordinary share.

In September 2016, the Company awarded employees and directors restricted share units to acquire 547,842 ordinary shares, with a grant date fair value of $3.48.  The restricted share units have a conversion price of $0.125 per ordinary share.  The restricted share units granted to employees vest annually over four years commencing on July 1, 2017 for Australian and U.S. based employees and September 1, 2017 for Irish based employees.  The restricted share units granted to directors vest on July 1, 2017.

11. Valuation of Share Awards

Prior to February 2015

The fair value of each share option is estimated on the date of grant using the binomial option-pricing model. The Company was a private company until February 2015 and lacked company-specific historical and implied volatility information. Therefore, the Company estimated its expected share volatility based on the historical volatility of its publicly traded peer companies until such time as it had adequate historical data regarding the volatility of its own traded share price. The expected term of the Company’s share options was determined utilizing the “simplified” method as the Company had insufficient historical experience for share options overall, rendering existing historical experience irrelevant to expectations for current grants. The risk-free interest rate was determined by reference to the appropriate reserve bank yield in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield was based on the fact that the Company had never paid cash dividends and did not expect to pay any cash dividends in the foreseeable future. The fair value of the underlying ordinary shares was determined by the Company’s board of directors in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .  The board of directors exercised reasonable judgement and considered numerous objective and subjective factors to determine the best estimate of the fair value of our ordinary shares at each grant date, including:

Post February 2015

Since completion of the Company’s initial public offering, the fair value of the ordinary shares underlying share-based awards has been based on the price per share quoted on the NASDAQ Global Market on the date of grant.

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The following table summarizes share option activity for fiscal year 2016 and the six months ended December 31, 2016:

In addition to the share options described above, the Company has granted restricted share units to its directors, employees and consultants. Restricted share units are valued at the fair value of the underlying ordinary shares as of the date of grant. The ordinary shares subject to the restricted share units are generally issued when they vest.  The table below presents the Company’s restricted share unit activity for fiscal year 2016 and the six months ended December 31, 2016:

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Share-Based Compensation

The Company recognizes share-based compensation expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-vesting forfeitures for service-based awards. The impact of a forfeiture rate adjustment will be recognized in full in the period of adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate, the Company may be required to record adjustments to share-based compensation expense in future periods.  The weighted-average remaining contract life on all outstanding share options and restricted share units as of December 31, 2016, was 4.24 years and 2.93 years, respectively.

The Company recorded share-based compensation expense related to share options and restricted share units for the three and six months ended December 31, 2016 and 2015 as follows:

The Company had an aggregate of $3.8 million and $2.9 million of unrecognized share-based compensation expense for share awards outstanding as of December 31, 2016, and June 30, 2016, respectively, which is expected to be recognized over an estimated period of 4.17 years and 4.0 years, respectively.

12. Commitments and Contingencies

Indemnities and Guarantees

The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions. The Company indemnifies its directors and officers to the extent permitted under the Company’s Constitution and the Irish Companies Act 2014 and provides expense advancement for its directors and executive officers for certain expenses, including attorneys’ fees, judgements, fines, and settlements amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s directors or executive officers.  The duration of these indemnities and guarantees varies and, in certain cases, is indefinite. These indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets.

  Operating Leases

The Company entered into a lease for its office in Melbourne, Australia commencing December 2013 for a period of five years. As of December 31, and June 30, 2016 commitments totaled $0.2 million and $0.2 million, respectively.  Rent expense was $0.1 million and $0.2 million for the six months ended December 31, 2016 and fiscal year 2016, respectively. Included in rent expense is a build-out incentive of $12,000 and $26,000 for the six months ended December 31, 2016 and fiscal year 2016, respectively. A portion of the incentive paid by the landlord is to be repaid by the Company if the lease is terminated early, determined by the unexpired term of the lease over the original 60‑month lease term.

The Company entered into a lease for a facility in Tullamore, Ireland commencing September 2015 for a period of 10 years, with an option to purchase the building at an arm’s length price to be determined at the time the option is exercised. As of December 31, 2016, commitments on this lease totaled $0.9 million.  

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The Company entered into a lease in December 2016, for its research facilities in Australia effective January 1, 2016 for a period of three years.  As of December 31, 2016, commitments totaled $0.2 million. 

Purchase Obligations

In connection with the development of biologics, the Company had open contracts with suppliers for goods and services of $0.6 million as of December, 31 2016.

Other

BioNua is eligible under an agreement with the IDA to receive cash as grant income.  BioNua may not, without the prior written consent of the IDA, assign, dispose, mortgage or change any assets which have been funded by the IDA.  The IDA may revoke or reduce the grant if there is a serious breach of the agreement or if the Company enters a form of administration, transfers any intellectual property developed under the grant outside Ireland or disposes of BioNua. The IDA may require the Company to repay grant income paid previously to the Company if the Company commits a serious breach of the agreement.  

13. Related Party Transaction

Dr. Andrew Gearing is a former director, a co-founder of the Company and a brother of David Gearing, a co-founder of the Company and its Chief Scientific Officer.  Dr. Andrew Gearing serves on the board of directors of Biocomm Square Pty Ltd. In August 2010 and August 2013, the Company entered into consulting agreements with Biocomm Square Pty Ltd for research and development support services.  These agreements were superseded by a new consulting agreement in December 2013, which was amended in April 2014 and in August 2015. In addition, the Company entered into an agreement with Biocomm Square Pty Ltd in November 2011 for assistance in obtaining partnering arrangements with Japanese entities.  This agreement was amended and terminated in August 2015. The Company recorded expenses of $33,000, $32,000, $48,000 and $90,000 for the three and six months ended December 31, 2016 and 2015, respectively, related to these agreements. As of December 31, 2016, and June 30, 2016, there was $8,000 and $12,000 payable to Biocomm Square Pty Ltd, respectively.

14. Subsequent Events

In February 2017, the Company entered into a license agreement with Pfizer, pursuant to which the Company received a non-exclusive license to certain patents in the Pfizer portfolio for anti-NGF antibodies. Pursuant to this agreement, the Company has agreed to pay Pfizer a $1.0 million upfront license fee, and may pay Pfizer (i) additional amounts based on regulatory and sales milestones and (ii) a low, single-digit royalty based on net sales of the Company’s anti-NGF product candidates for the life of the relevant patents. The upfront license fee will be recognized as research and development expenditure in the third quarter of fiscal year 2017.

Apart from the foregoing, there were no material subsequent events occurring after December 31, 2016 requiring disclosure.

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