PART
I
|
ITEM
1.
|
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|
Not
applicable.
|
ITEM 2.
|
OFFER
STATISTICS AND EXPECTED TIMETABLE
|
Not
applicable.
|
A.
|
Selected
Consolidated Financial Data
|
We
prepare our consolidated financial statements in accordance with IFRS, as issued by IASB and our consolidated financial statements
appearing herein comply with IFRS as issued by IASB.
The
following table presents our selected consolidated financial data as of the dates and for each of the periods indicated. The following
selected consolidated financial data as of June 30, 2020 and 2019 and for the years ended June 30, 2020, 2019 and 2018 have been
derived from our audited consolidated financial statements and notes thereto included elsewhere in this annual report. The selected
consolidated financial data as of June 30, 2018, 2017 and 2016 and for the years ended June 30, 2017 and 2016 have been derived
from our audited consolidated financial statements and notes thereto which are not included in this annual report.
The
selected consolidated financial data set forth below should be read in conjunction with and are qualified entirely by reference
to Item 5. “Operating and Financial Review and Prospects” and our consolidated financial statements and notes
thereto included elsewhere in this annual report.
Statement of Comprehensive Income Data:
|
|
Year Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
(in A$, except loss per share and number of shares)
|
|
Interest income
|
|
|
17,117
|
|
|
|
108,538
|
|
|
|
201,174
|
|
|
|
132,396
|
|
|
|
142,657
|
|
Other income
|
|
|
122,729
|
|
|
|
4,951,167
|
|
|
|
3,125,775
|
|
|
|
3,022,673
|
|
|
|
4,753,697
|
|
Research and development expenses
|
|
|
(10,098,439
|
)
|
|
|
(12,983,185
|
)
|
|
|
(6,698,016
|
)
|
|
|
(5,700,339
|
)
|
|
|
(9,585,371
|
)
|
General and administration expenses
|
|
|
(3,446,139
|
)
|
|
|
(4,308,352
|
)
|
|
|
(4,341,058
|
)
|
|
|
(3,968,630
|
)
|
|
|
(3,610,551
|
)
|
Intellectual property expenses
|
|
|
(352,922
|
)
|
|
|
(322,097
|
)
|
|
|
(224,580
|
)
|
|
|
(241,892
|
)
|
|
|
(241,954
|
)
|
Other operating expenses
|
|
|
(44,217
|
)
|
|
|
(132,965
|
)
|
|
|
(58,172
|
)
|
|
|
(126,071
|
)
|
|
|
(45,276
|
)
|
Other gains and losses
|
|
|
333,055
|
|
|
|
349,064
|
|
|
|
(270,860
|
)
|
|
|
(660,213
|
)
|
|
|
857,247
|
|
Forfeited options from reserves
|
|
|
12,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(13,456,800
|
)
|
|
|
(12,337,830
|
)
|
|
|
(8,265,737
|
)
|
|
|
(7,542,076
|
)
|
|
|
(7,729,551
|
)
|
Loss per share in cents – basic and diluted
|
|
|
(1.50
|
)
|
|
|
(2.00
|
)
|
|
|
(1.55
|
)
|
|
|
(1.41
|
)
|
|
|
(1.45
|
)
|
Weighted average number of ordinary shares outstanding - basic and diluted
|
|
|
894,872,224
|
|
|
|
615,772,236
|
|
|
|
533,891,470
|
|
|
|
533,891,470
|
|
|
|
533,891,470
|
|
Balance
Sheet Data
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
(in A$)
|
|
Cash and cash equivalents
|
|
|
9,196,892
|
|
|
|
14,399,904
|
|
|
|
15,235,556
|
|
|
|
21,884,957
|
|
|
|
28,593,538
|
|
Working capital
|
|
|
7,121,827
|
|
|
|
16,541,001
|
|
|
|
16,010,651
|
|
|
|
23,659,659
|
|
|
|
31,299,470
|
|
Total assets
|
|
|
9,907,718
|
|
|
|
19,909,918
|
|
|
|
18,726,013
|
|
|
|
25,280,946
|
|
|
|
33,725,020
|
|
Net assets
|
|
|
7,150,814
|
|
|
|
16,554,773
|
|
|
|
16,081,157
|
|
|
|
23,690,034
|
|
|
|
31,367,213
|
|
Issued capital
|
|
|
160,703,754
|
|
|
|
156,632,636
|
|
|
|
143,910,328
|
|
|
|
144,018,006
|
|
|
|
146,879,214
|
|
Share based payment reserves
|
|
|
866,121
|
|
|
|
1,158,975
|
|
|
|
1,753,954
|
|
|
|
2,320,480
|
|
|
|
9,363,181
|
|
Accumulated deficit during development stage
|
|
|
(154,418,671
|
)
|
|
|
(141,236,838
|
)
|
|
|
(129,583,125
|
)
|
|
|
(122,648,452
|
)
|
|
|
(124,875,182
|
)
|
Total equity
|
|
|
7,150,814
|
|
|
|
16,554,773
|
|
|
|
16,081,157
|
|
|
|
23,690,034
|
|
|
|
31,367,213
|
|
|
B.
|
Capitalization
and Indebtedness
|
Not
applicable.
|
C.
|
Reasons
for the Offer and Use of Proceeds
|
Not
applicable.
Investing
in our American Depositary Shares involves a high degree of risk and uncertainty. You should carefully consider the risks and
uncertainties described below before investing in our American Depositary Shares. Additional risks and uncertainties not presently
known to us or that we believe to be immaterial may also adversely affect our business. If any of the following risks actually
occurs, our business, prospects, financial condition and results of operations could be harmed. In that case, the daily price
of our depositary shares could decline, and you could lose all or part of your investment.
Risks
Related to Our Financial Condition
We
have a history of operating losses and our management has concluded that factors raise substantial
doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability
to continue as a going concern in its audit report for the fiscal years ended June 30, 2020 and 2019.
We
have not sufficiently advanced the development of any of our product candidates to market or generate revenues from their commercial
application and have incurred losses in every period since we began operations in 1997 and reported net losses of A$13,456,800,
A$12,337,830 and A$8,265,737 during the fiscal years ended June 30, 2020, 2019 and 2018 respectively. As of June 30, 2020, our
accumulated deficit was A$154,419,061. We expect to continue to incur additional operating losses over at least the next several
years as we expand our research and development and pre-clinical activities and commence clinical trials of our product candidates
that includes ATH434 for Parkinsonian diseases, prospectively PBT2 for alternative indications and the development of other compounds.
Our management has concluded that our historical recurring losses from operations
and negative cash flows from operations as well as our dependence on financings raise substantial
doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to
our ability to continue as a going concern in its audit report for the fiscal years ended June 30, 2020 and 2019.
Our consolidated financial statements do
not include any adjustments that might result from the outcome of this uncertainty. These adjustments would likely include substantial
impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill
various operational commitments. In addition, the value of our securities would be greatly impaired. Our ability to continue as
a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing.
If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other
sources, we may be unable to continue in business. For further discussion about our ability to continue as a going concern
and our plan for future liquidity, see “Operating And Financial Review —Critical Accounting Estimates - Going concern
basis.”
We
will need substantial additional funding to complete our clinical trials and to operate our business; such funding may not be
available or, if it is available, such financing is likely to substantially dilute our existing shareholders.
We
have raised US$2,886,865 from the sale of our ordinary shares pursuant to our at-the-market offering facility in the year ended
June 30, 2020. We will need to secure additional financing in order to continue to meet our longer-term business objectives, including
advancement of our research and development programs and we may also require additional funds to pursue regulatory clearances,
defend our intellectual property rights, establish commercial scale manufacturing facilities, develop marketing and sales capabilities
and fund operating expenses. We intend to seek such additional funding through public or private financings and/or through licensing
of our assets or strategic alliances or other arrangements with corporate partners.
Our
actual cash requirements may vary materially from those now planned and will depend upon numerous factors, including:
|
●
|
the
continued progress of our research and development programs;
|
|
●
|
the
timing, scope, results and costs of nonclinical studies and clinical trials;
|
|
●
|
the
cost, timing and outcome of regulatory submissions and approvals;
|
|
●
|
determinations
as to the commercial potential of our product candidates;
|
|
●
|
our
ability to successfully expand our contract manufacturing services;
|
|
●
|
our
ability to establish and maintain collaborative arrangements; and
|
|
●
|
the
status and timing of competitive developments.
|
If
we fail to generate revenue and eventually become and remain profitable, or if we are unable to fund our continuing losses, our
shareholders could lose all or part of their investments.
Until
we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never achieve, we expect
to finance our cash needs primarily through public or private equity offerings, debt financings or through strategic alliances.
We
cannot be certain that additional funding will be available on acceptable terms or at all. If we are not able to secure additional
funding when needed, we may have to delay, reduce the scope of, or eliminate one or more of our clinical trials, collaborative
research or development programs or future commercialization initiatives. In addition, any additional funding that we do obtain
will dilute the ownership held by our existing security holders. The amount of this dilution may be substantially increased if
the trading price of our shares are lower at the time of any financing. Regardless, the economic dilution to shareholders will
be significant if our stock price does not increase significantly, or if the effective price of any sale is below the price paid
by a particular shareholder. Any debt financing could involve substantial restrictions on activities and creditors could seek
a pledge of some or all of our assets. We have not identified potential sources for the additional financing that we will require,
and we do not have commitments from any third parties to provide any future financing. If we fail to obtain additional funding
as needed, we may be forced to cease or scale back operations, and our results, financial condition and stock price would be adversely
affected.
We
expect that the COVID-19 pandemic will have general economic consequences that will impact our company
The
response of the governments imposing a lock down, the high unemployment, certain industries being especially hard hit and the
public response as the economy opens up will undoubtedly have wide reaching effects on the economy. It is possible that the ultimate
effect could be a recession or even greater economic dislocation. A reduced economy may result in a limitation on companies such
as ours in raising capital when necessary, in the amounts of capital needed and available, and the terms that are offered that
will be acceptable to the Company. Also, there may be a decline in the overall value of the securities market that could reduce
the value of the Company or limit the ability of our investors to sell their ordinary shares. Investors should consider general
economic trends and issues resulting or may result from the pandemic when they decide to transact in our securities.
Risks
Related to Our Business
We
are a development stage company engaged in the development of pharmaceutical products and our success is uncertain.
We
are a development stage company whose pharmaceutical products are designed to treat neurodegenerative diseases. We have not sufficiently
advanced the development of any of our candidate products, to market or generate revenues from their commercial application. Our
current or any future product candidates, if successfully developed, may not generate sufficient or sustainable revenues to enable
us to be profitable.
Government
efforts to control the effect and spread of the COVID-19 virus have had and will have a disruptive effect on different aspects
of our business.
The
jurisdictions in which we conduct our business have imposed mandates and regulations or suggested measures to counter the spread
of the COVID-19 virus and control the level of the pandemic within its population and the economic activities of their respective
economies. These collectively have changed over the course of the pandemic and are expected to continue to evolve in response
to the changing nature of the pandemic and the population and economic response to the virus and the many different measures prompted
by the pandemic. We have been affected in a number of ways, such as the way in which we operate our headquarters operations, interact
with our scientists and their activities, and planning for and carrying out clinical trials, all of which have experienced some
short-term disruption and may suffer long-term changes in the way we will do business. Actions such as government lock downs have
slowed or, in some cases, temporarily stopped research and development activities and clinical trials. Various safety protocols
for personal interactions may hamper research and development activities. Since we are mostly focused on the activities related
to research and development we have not experienced the larger adverse economics of a slowed economy; however, we do expect that
time lines for our research and development, clinical trials, regulatory approvals and bringing our products to market will cause
our operational costs to be greater than anticipated in this current fiscal year and going forward. The financial effect will
be that our development expenses will increase and we will have to obtain additional capital funding. Any required additional
equity funding will be dilutive to the equity of our investors and debt financing will have restrictive covenants that could adversely
affect our business plans and operational objectives. Any further funding that we may need may not be available or even if available
it may not be on terms that are acceptable to our company.
In
addition to government efforts relating to the COVID-19 pandemic, the institutions that we work with have their own limits and
procedures that will influence or limit our ability to conduct research and development and the conduct of clinical trials.
In
addition to the government mandates for controlling the many different health and economic effects of the COVID-19 virus and pandemic,
individual institutions with which we work, such as hospitals, laboratories and educational institutions have taken actions that
will disrupt the progress of our business plans for the Company and our individual subsidiaries. Most educational institutions
and many laboratories curtailed or limited access to their facilities in the first half of the 2020 year and are still working
out how they will operate going forward; we are expecting that going forward there will be strict limitations on access to these
institutions and facilities for our researchers and research partners. Overall, changes in the way our development activities
can be conducted will result in delays in our conducting research activities, carrying out clinical trials and making regulatory
submissions. As a consequence, we anticipate our costs will increase. In many respects, there is great uncertainty in the general
effects resulting from the governmental and private response to the pandemic, and only the passage of time will reveal its full
effects.
We
are faced with uncertainties related to our research.
Our
research programs are based on scientific hypotheses and experimental approaches that may not lead to desired results. In addition,
the timeframe for obtaining proof of principle and other results may be considerably longer than originally anticipated, or may
not be possible given time, resource, financial, strategic and collaborator scientific constraints. Success in one stage of testing
is not necessarily an indication that the particular program will succeed in later stages of testing and development. It is not
possible to predict whether any of the candidate products designed for these programs will prove to be safe, effective, and suitable
for human use. Each candidate product will require additional research and development, scale-up, formulation and extensive clinical
testing in humans. Unsatisfactory results obtained from a particular study relating to a program may cause us to abandon our commitment
to that program or product candidate being tested. The discovery of toxicities, lack of sufficient efficacy, unacceptable pharmacology,
inability to increase scale of manufacture, market attractiveness, regulatory hurdles, competition, as well as other factors,
may make our targets, lead therapies or product candidates unattractive for further development or unsuitable for human use, and
we may abandon our commitment to that program, target, or product candidate.
Clinical
trials as they relate to our business are expensive and time consuming and their outcome is uncertain.
In
order to obtain approvals to market a new drug product, we or our potential partners must demonstrate proof of safety and efficacy
in humans. To meet these requirements, we or our potential partners will have to conduct extensive non-clinical testing and “adequate
and well-controlled” clinical trials. Conducting clinical trials is a lengthy, time-consuming and expensive process. The
length of time may vary substantially according to the type, complexity, novelty and intended use of the product candidate, and
often can be several years or more per trial. Even if we obtain positive results from such non-clinical or initial clinical trials,
we may not achieve the same success in future trials. Clinical trials may not demonstrate adequate safety or sufficient effectiveness
to obtain the requisite regulatory approvals for product candidates employing our technology. The failure of clinical trials to
demonstrate safety and efficacy for a particular desired indication could harm development of that product candidate for other
indications as well as other product candidates.
We
expect to commence new clinical trials from time to time as our product development work continues. Any change in, or termination
of, our clinical trials could materially harm our business, financial condition and results of operations.
We
may experience delays in our clinical trials that could adversely affect our business and operations.
We
do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials on schedule
or at all. Our ability to commence and complete clinical trials may be delayed by many factors, including:
|
●
|
government
or regulatory delays, including delays in obtaining approvals from applicable hospital ethics committees and internal review boards;
|
|
●
|
delays
due to the measures for COVID-19 pandemic containment and conduct of business;
|
|
●
|
slower
than expected patient enrollment;
|
|
●
|
our
inability to manufacture sufficient quantities of our new proprietary compound or our other product candidates or matching controls;
|
|
●
|
unforeseen
safety issues; or
|
|
●
|
lack
of efficacy or unacceptable toxicity during the clinical trials or non-clinical studies.
|
Patient
enrollment is a function of, among other things, the nature of the clinical trial protocol, the existence of competing protocols,
the size and longevity of the target patient population, and the availability of patients who comply with the eligibility criteria
for the clinical trial. Delays in planned patient enrollment may result in increased costs, delays or termination of the clinical
trials. Moreover, we rely on third parties such as clinical research organizations to assist us in clinical trial management functions
including; clinical trial database management, statistical analyses, site management and monitoring. Any failure by these third
parties to perform under their agreements with us may cause the trials to be delayed or result in a failure to complete the trials.
If
we experience delays in testing or approvals or if we need to perform more, larger or more complex clinical trials than planned,
our product development costs may increase. Significant delays could adversely affect the commercial prospects of our product
candidates and our business, financial condition and results of operations.
We
rely on research institutions to conduct our clinical trials and we may not be able to secure and maintain research institutions
to conduct our future trials.
We
rely on research institutions to conduct our clinical trials. Our reliance upon research institutions, including public and private
hospitals and clinics, provides us with less control over the timing and cost of clinical trials, clinical study management personnel
and the ability to recruit subjects. If we are unable to reach agreements with suitable research institutions on acceptable terms,
or if any resulting agreement is terminated, we may be unable to secure, maintain or quickly replace the research institution
with another qualified institution on acceptable terms.
We
may not be able to complete the development of our products candidates or develop other pharmaceutical products.
We
may not be able to progress with the development of our current or any future pharmaceutical product candidates to a stage that
will attract a suitable collaborative partner for the development of any current or future pharmaceutical product candidates.
The projects initially specified in connection with any such collaboration and any associated funding may change or be discontinued
as a result of changing interests of either the collaborator or us, and any such change may change the budget for the projects
under the collaboration. Additionally, our research may not lead to the discovery of additional product candidates, and any of
our current and future product candidates may not be successfully developed, prove to be safe and efficacious in clinical trials,
meet applicable regulatory standards and receive regulatory approval, be capable of being produced in commercial quantities at
reasonable costs, or be successfully or profitably marketed, either by us or a collaborative partner. The products we develop
may not be able to penetrate the potential market for a particular therapy or indication or gain market acceptance among health
care providers, patients and third-party payers. We cannot predict if or when the development of our current product candidates
or any future product candidates will be completed or commercialized, whether funded by us, as part of a collaboration or through
a grant.
We
may need to prioritize the development of our most promising candidates at the expense of the development of other products.
We
may need to prioritize the allocation of development resources and/or funds towards what we believe to be our most promising candidate
product or products. The nature of the drug development process is such that there is a constant availability of new information
and data which could positively or adversely affect a product in development. We cannot predict how such new information and data
may impact in the future the prioritization of the development of our current or future product candidates or that any of our
products, regardless of its development stage or the investment of time and funds in its development, will continue to be funded
or developed.
Our
research and development efforts will be seriously jeopardized if we are unable to retain key personnel and cultivate key academic
and scientific collaborations.
Our
future success depends to a large extent on the continued services of our senior management and key scientific personnel. We have
entered into employment or consultancy agreements with these individuals. The loss of their services could negatively affect our
business. Competition among biotechnology and pharmaceutical companies for qualified employees is intense, including competition
from larger companies with greater resources, and we may not be able to continue to attract and retain qualified management, technical
and scientific personnel critical to our success. Our success is highly dependent on our ability to develop and maintain important
relationships with leading academic institutions and scientists who conduct research at our request or assist us in formulating
our research and development strategies. These academic and scientific collaborators are not our employees and may have commitments
to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, these collaborators
may have arrangements with other companies to assist such companies in developing technologies that may prove competitive to ours.
If
we are unable to successfully keep pace with technological change or with the advances of our competitors, our technology and
products may become obsolete or non-competitive.
The
biotechnology and pharmaceutical industries are subject to rapid and significant technological change. Our competitors are numerous
and include major pharmaceutical companies, biotechnology firms, universities and other research institutions. These competitors
may develop technologies and products that are more effective than any that we are developing, or which would render our technology
and products obsolete or non-competitive. Many of these competitors have greater financial and technical resources and manufacturing
and marketing capabilities than we do. In addition, many of our competitors have much more experience than we do in pre-clinical
testing and human clinical trials of new or improved drugs, as well as in obtaining regulatory approvals.
We
know that competitors are developing or manufacturing various technologies or products for the treatment of diseases that we have
targeted for product development. Some of these competitive products use therapeutic approaches that compete directly with our
product candidates. Our ability to further develop our products may be adversely affected if any of our competitors were to succeed
in obtaining regulatory approval for their competitive products sooner than us.
Acceptance
of our products in the marketplace is uncertain, and failure to achieve market acceptance will negatively impact our business
and operations.
Our
current or future candidate products may not achieve market acceptance even if they are approved by regulatory authorities. The
degree of market acceptance of such products will depend on a number of factors, including:
|
●
|
the
receipt and timing of regulatory approvals for the uses that we are studying;
|
|
●
|
the
establishment and demonstration to the medical community of the safety, clinical efficacy or cost-effectiveness of our product
candidates and their potential advantages over existing therapeutics and technologies; and
|
|
●
|
the
pricing and reimbursement policies of governments and third-party payors.
|
Physicians,
patients, payors or the medical community in general may be unwilling to accept, use or recommend any of our products.
We
have limited large scale manufacturing experience with our product candidates. Delays in manufacturing sufficient quantities
of such materials to the required standards for pre-clinical and clinical trials may negatively impact our business and operations.
We
lack the resources to manufacture any of our product candidates on a clinical or commercial scale and do not currently have, nor
do we plan to acquire the infrastructure or capability internally to manufacture our clinical drug supplies for use in the conduct
of our clinical trials. We rely on collaborators and/or third parties for development, scale-up, formulation, optimization, management
of clinical trial and commercial scale manufacturing and commercialization. There are no assurances we can scale-up, formulate
or manufacture any product candidate in sufficient quantities with acceptable specifications for the conduct of our clinical trials
or for the regulatory agencies to grant approval of such product candidate. We have not yet commercialized any products and have
no commercial manufacturing experience. To be successful, our products must be properly formulated, scalable, stable and safely
manufactured in clinical trial and commercial quantities in compliance with good manufacturing practices (GMP) and other regulatory
requirements and at acceptable costs. Should any of our suppliers or our collaborators be unable to supply or be delayed in supplying
us with sufficient supplies due to the COVID-19 pandemic or other causes, no assurance can be given that we will be able to find
alternative means of supply in a short period of time. Should such parties’ operations suffer a material adverse event,
the manufacturing of our products would also be adversely affected. Furthermore, key raw materials could become scarce or unavailable.
We may not be able to meet specifications previously established for product candidates during scale-up and manufacturing.
There
may be a limited number of third parties who can manufacture our products. Our reliance on third parties to manufacture our product
candidates will expose us and our partners to risks including the following, any of which could delay or prevent the commercialization
of our products, result in higher costs, or deprive us of potential product revenue:
|
●
|
Contract
manufacturers can encounter difficulties in achieving the scale-up, optimization, formulation,
or volume production of a compound as well as maintaining quality control with appropriate
quality assurance. They may also experience shortages of qualified personnel. Contract
manufacturers are required to undergo a satisfactory GMP inspection prior to regulatory
approval and are obliged to operate in accordance with FDA, International Conference
on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human
Use ("ICH"), European and other nationally mandated GMP regulations and/or
guidelines governing manufacturing processes, stability testing, record keeping and quality
standards. A failure of these contract manufacturers to follow GMP and to document their
adherence to such practices or failure of an inspection by a regulatory agency may lead
to significant delays in the availability of our product candidate materials for clinical
study, leading to delays in our trials.
|
|
●
|
For
each of our current product candidates we will initially rely on a limited number of
contract manufacturers. Changing these or identifying future manufacturers may be difficult.
Changing manufacturers requires re-validation of the manufacturing processes and procedures
in accordance with FDA, ICH, European and other mandated GMP regulations and/or guidelines.
Such re-validation may be costly and time-consuming. It may be difficult or impossible
for us to quickly find replacement manufacturers on acceptable terms, if at all.
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Our
contract manufacturers may not perform as agreed or may not remain in the contract manufacturing
business for the time required to produce, store and distribute our products successfully.
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The
failure to establish sales, marketing and distribution capability would materially impair our ability to successfully market and
sell our pharmaceutical products.
We
currently have no experience in marketing, sales or distribution of pharmaceutical products. If we develop any commercially marketable
pharmaceutical products and decide to perform our own sales and marketing activities, we will require additional management, will
need to hire sales and marketing personnel and will require additional capital. Qualified personnel may not be available in adequate
numbers or at a reasonable cost. Further, our sales staff may not achieve success in their marketing efforts. Alternatively, we
may be required to enter into marketing arrangements with other parties who have established appropriate marketing, sales and
distribution capabilities. We may not be able to enter into marketing arrangements with any marketing partner, or if such arrangements
are established, our marketing partners may not be able to commercialize our products successfully. Other companies offering similar
or substitute products may have well-established and well-funded marketing and sales operations in place that will allow them
to market their products more successfully. Failure to establish sufficient marketing capabilities would materially impair our
ability to successfully market and sell our pharmaceutical products.
If
healthcare insurers and other organizations do not pay for our products, or impose limits on reimbursement, our future business
may suffer.
The
drugs we hope to develop may be rejected by the marketplace due to many factors, including cost. The continuing efforts of governments,
insurance companies, health maintenance organizations and other payors of healthcare costs to contain or reduce healthcare costs
may affect our future revenues and profitability and those of our potential customers, suppliers and collaborative partners, as
well as the availability of capital. In Australia and certain foreign markets, the pricing or profitability of prescription pharmaceuticals
is already subject to government control. We expect initiatives for similar government control at both the state and federal level
to continue in the United States and elsewhere. The adoption of any such legislative or regulatory proposals could adversely affect
our business and prospects.
Our
ability to commercially exploit our products successfully will depend in part on the extent to which reimbursement for the cost
of our products and related treatment will be available from government health administration authorities, private health coverage
insurers and other organizations. Third-party payors, such as government and private health insurers, are increasingly challenging
the price of medical products and services. Uncertainty exists as to the reimbursement status of newly approved health care products
and in foreign markets, including the United States. If third-party coverage is not available to patients for any of the products
we develop, alone or with collaborators, the market acceptance of these products may be reduced, which may adversely affect our
future revenues and profitability. In addition, cost containment legislation and reductions in government insurance programs may
result in lower prices for our products and could materially adversely affect our ability to operate profitably.
We
may be exposed to product liability claims, which could harm our business.
The
testing, marketing and sale of human health care products also entails an inherent risk of product liability. We may incur substantial
liabilities or be required to limit development or commercialization of our candidate products if we cannot successfully defend
ourselves against product liability claims. We have historically obtained no fault compensation insurance for our clinical trials
and intend to obtain similar coverage for future clinical trials. Such coverage may not be available in the future on acceptable
terms, or at all. This may result in our inability to pursue further clinical trials or to obtain adequate protection in the event
of a successful claim. We may not be able to obtain product liability insurance in the event of the commercialization of a candidate
product or such insurance may not be available on commercially reasonable terms. Even if we have adequate insurance coverage,
product liability claims or recalls could result in negative publicity or force us to devote significant time, attention and financial
resources to those matters.
Breaches
of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business.
Cyber-attacks
or other breaches of network or information technology (IT) security, natural disasters, terrorist acts or acts of war may cause
equipment failures or disrupt our research and development operations. In particular, both unsuccessful and successful cyber-attacks
on companies have increased in frequency, scope and potential harm in recent years. Such an event may result in our inability,
or the inability of our partners, to operate the research and development facilities, which even if the event is for a limited
period of time, may result in significant expenses and/or significant damage to our experiments and trials. While we maintain
insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance
coverage we maintain. In addition, a failure to protect employee confidential data against breaches of network or IT security
could result in damage to our reputation. Any of these occurrences could adversely affect our results of operations and financial
condition.
We
have been subject, and will likely continue to be subject, to attempts to breach the security of our networks and IT infrastructure
through cyber-attack, malware, computer viruses and other means of unauthorized access. However, to date, we have not been subject
to cyber-attacks or other cyber incidents which, individually or in the aggregate, resulted in a material impact to our operations
or financial condition.
We
expect to expand our drug development, regulatory and business development capabilities, and as a result, we may encounter difficulties
in managing our growth, which could disrupt our operations.
We
expect to experience significant growth in the number of our employees and consultants and the scope of our operations, particularly
in the areas of drug development, regulatory affairs and business development. To manage our anticipated future growth, we must
continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit
and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management
team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations
or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert
our management and business development resources. Any inability to manage growth could delay the execution of our business plans
or disrupt our operations, and have a materially adverse effect on our business.
Risks
Related to Government Regulation
If
we do not obtain the necessary governmental approvals, we will be unable to commercialize our pharmaceutical products.
Our
ongoing research and development activities are, and the production and marketing of our pharmaceutical product candidates derived
from such activities will be, subject to regulation by numerous international regulatory authorities. Prior to marketing, any
therapeutic product developed must undergo rigorous pre-clinical testing and clinical trials and, to the extent that any of our
pharmaceutical products under development are marketed abroad, by the relevant international regulatory authorities. For example,
in Australia, principally the Therapeutics Goods Administration, or TGA; the Food and Drug Administration, or FDA, in the United
States; the Medicines and Healthcare products Regulatory Agency, or MHRA, in the United Kingdom; the Medical Products Agency,
or MPA, in Sweden; and the European Medicines Agency, or EMA. These processes can take many years and require the expenditure
of substantial resources. Governmental authorities may not grant regulatory approval due to matters arising from pre-clinical
animal toxicology, safety pharmacology, drug formulation and purity, insufficient efficacy, clinical side effects or patient risk
profiles, or medical contraindications.
Failure
or delay in obtaining regulatory approvals would adversely affect the development and commercialization of our pharmaceutical
product candidates. We may not be able to obtain the clearances and approvals necessary for clinical testing or for manufacturing
and marketing our pharmaceutical product candidates.
Even
if regulatory authorities approve any of our product candidates, the manufacture, labeling, storage, recordkeeping, reporting,
distribution, advertising, promotion, marketing, sale, import and export of these drugs will be subject to strict and ongoing
regulation. If we, our partners, our product candidates or the manufacturing facilities for our product candidates fail to comply
with applicable regulatory requirements, a regulatory agency may suspend any ongoing clinical trials; issue warning letters or
untitled letters; suspend or withdraw regulatory approval; refuse to approve pending applications or supplements to applications;
suspend or impose restrictions on operations; seize or detain products, prohibit the export or import of products, or require
us to initiate a product recall; seek other monetary or injunctive remedies; or impose civil or criminal penalties.
We
will not be able to commercialize any current or future product candidates if we fail to adequately demonstrate their safety,
efficacy and superiority over existing therapies.
Before
obtaining regulatory approvals for the commercial sale of any of our pharmaceutical products, we must demonstrate through pre-clinical
testing and clinical studies that our product candidates are safe and effective for use in humans for each target indication.
Results from early clinical trials may not be predictive of results obtained in large-scale, later-stage clinical testing. Even
though a candidate product shows promising results in clinical trials, regulatory authorities may not grant the necessary approvals
without sufficient safety and efficacy data.
We
may not be able to undertake further clinical trials of our current and future product candidates as therapies for Parkinsonian
disorders or other indications or to demonstrate the safety and efficacy or superiority of any of these product candidates over
existing therapies or other therapies under development, or enter into any collaborative arrangement to commercialize our current
or future product candidates on terms acceptable to us, or at all. Clinical trial results that show insufficient safety and efficacy
could adversely affect our business, financial condition and results of operations.
Positive
results in previous clinical trials of product candidates may not be replicated in future clinical trials, which could result
in development delays or a failure to obtain marketing approval.
Positive
results in previous clinical trials of a product candidate may not be predictive of similar results in future clinical trials.
A number of companies in the biopharmaceutical industry have suffered significant setbacks in late-stage clinical trials even
after achieving promising results in early-stage development. Accordingly, the results from the completed pre-clinical studies
and clinical trials for our product candidates may not be predictive of the results we may obtain in later stage trials. Our clinical
trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical
trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed
their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain
FDA or EMA approval for their products.
Even
if approved, any product candidates that we or our subsidiaries may develop and market may be later withdrawn from the market
or subject to promotional limitations.
We
may not be able to obtain the labeling claims necessary or desirable for the promotion of our product candidates if approved.
We may also be required to undertake post-marketing clinical trials. If the results of such post-marketing studies are not satisfactory
or if adverse events or other safety issues arise after approval, the FDA or a comparable regulatory agency in another country
may withdraw marketing authorization or may condition continued marketing on commitments from us or our subsidiaries that may
be expensive or time consuming to complete. In addition, if we or others identify adverse side effects after any of our products
are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our or our subsidiaries’
products, additional clinical trials, changes in labeling of our or our subsidiaries’ products and additional marketing
applications may be required. Any reformulation or labeling changes may limit the marketability of such products if approved.
Healthcare
reform measures and other statutory or regulatory changes could adversely affect our business.
In
both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to
change the healthcare system in ways that could impact our business. For example, the Patient Protection and Affordable Care Act
and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the “ACA”), enacted in March
2010, substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts
the pharmaceutical industry. With regard to pharmaceutical products, among other things, the ACA is expected to expand and increase
industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements under the Medicare D
program. Legislative and regulatory proposals impacting upon the healthcare system are submitted regularly and the existing framework
in force in various jurisdictions may not apply in the short to long term.
We
still cannot fully predict the impact of the ACA on our company as many of the ACA reforms require the promulgation of detailed
regulations implementing the statutory provisions which has not yet been completed, and the Centers for Medicare & Medicaid
Services has publicly announced that it is analyzing the ACA regulations and policies that have been issued to determine if changes
should be made. In addition, although the U.S. Supreme Court has upheld the constitutionality of most of the ACA, some states
have stated their intentions to not implement certain sections of the ACA and some members of Congress are still working to repeal
the ACA. These challenges add to the uncertainty of the changes enacted as part of the ACA. In addition, the current legal challenges
to the ACA, as well as Congressional efforts to repeal the ACA, add to the uncertainty of the legislative changes enacted as part
of the ACA.
If
we fail to comply with our reporting and payment obligations under the Medicaid program or other governmental pricing programs,
we could be subject to additional reimbursement requirements, penalties, sanctions and fines which could have a material adverse
effect on our business, financial condition, results of operations and growth prospects.
Pricing
and rebate calculations vary among products and programs. The calculations are complex and will often be subject to interpretation
by us, governmental or regulatory agencies and the courts. If we become aware that our reporting of pricing data for a prior quarter
was incorrect, we will be obligated to resubmit the corrected data. For the Medicaid drug rebate program, corrected data must
be submitted for a period not to exceed twelve quarters from the quarter in which the data originally were due. Such restatements
and recalculations increase our costs for complying with the laws and regulations governing the Medicaid drug rebate program and
other governmental pricing programs.
We
may be liable for errors associated with our submission of pricing data. If we are found to have knowingly submitted false pricing
data to the Medicaid program, we may be liable for civil monetary penalties in the amount of up to $100,000 per item of false
information. Our failure to submit pricing data to the Medicaid program on a timely basis could result in a civil monetary penalty
of $10,000 per day for each day the information is late. Such failure also could be grounds to terminate our Medicaid drug rebate
agreement, which is the agreement under which we might participate in the Medicaid drug rebate program. In the event that our
rebate agreement is terminated, federal payments may not be available under Medicaid for our covered outpatient drugs. We cannot
assure you that our submissions will not be found to be incomplete or incorrect.
If
we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations
may be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations.
The
pharmaceutical and biotechnology industries are subject to extensive regulation, and from time to time legislative bodies and
governmental agencies consider changes to such regulations that could have significant impact on industry participants. For example,
in light of certain highly-publicized safety issues regarding certain drugs that had received marketing approval, the U.S. Congress
has considered various proposals regarding drug safety, including some which would require additional safety studies and monitoring
and could make drug development more costly. The implementation of cost containment measures or other healthcare system reforms
may prevent us from being able to generate revenue, attain profitability, or commercialize our products. Such reforms could have
an adverse effect on anticipated revenues from product candidates that impact we may successfully develop and for which we may
obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates. In addition,
it is possible that there will be further legislation or regulation that could harm our business, financial condition and several
results of operations.
We
could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act.
Our
business operations may be subject to anti-corruption laws and regulations, including restrictions imposed by the U.S. Foreign
Corrupt Practices Act (the “FCPA”). The FCPA and similar anti-corruption laws in other jurisdictions such as the U.K.
Bribery Act generally prohibit companies and their intermediaries from making improper payments to government officials for the
purpose of obtaining or retaining business. We cannot provide assurance that our internal controls and procedures will always
protect us from criminal acts committed by our employees or third parties with whom we work. If we are found to be liable for
violations of the FCPA or similar anti-corruption laws in international jurisdictions, either due to our own acts or out of inadvertence,
or due to the acts or inadvertence of others, we could suffer from criminal or civil penalties which could have a material and
adverse effect on our results of operations, financial condition and cash flows.
Risks
Related to Intellectual Property
Our
success depends upon our ability to protect our intellectual property and our proprietary technology, to operate without infringing
the proprietary rights of third parties and to obtain marketing exclusivity for our products and technologies.
Any
future success will depend in large part on whether we can:
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obtain
and maintain patents to protect our own product candidates and technologies;
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obtain
orphan designation for our product candidates and technologies;
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obtain
licenses to the patented technologies of third parties;
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operate
without infringing on the proprietary rights of third parties; and
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protect
our trade secrets, know-how and other confidential information.
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Patent
matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and
breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Any of the pending or future patent
applications filed by us or on our behalf may not be approved, we may not develop additional proprietary products or processes
that are patentable, or we may not be able to license any other patentable products or processes.
Our
products may be eligible for orphan designation for particular therapeutic indications that are of relatively low prevalence and
for which there is no effective treatment. Orphan drug designation affords market exclusivity post marketing authorization for
a product for a specified therapeutic utility. The period of orphan protection is dependent on jurisdiction, for example, seven
years in the United States and ten years in Europe. The opportunity to gain orphan drug designation depends on a variety of requirements
specific to each marketing jurisdiction and can include; a showing of improved benefit relative to marketed products, that the
mechanism of action of the product would provide plausible benefit and the nature of the unmet medical need within a therapeutic
indication. It is uncertain if our products will be able to obtain orphan drug designation for the appropriate indications and
in the jurisdictions sought.
There
is a risk that the U.S. Congress, for example, could amend laws to significantly shorten the exclusivity period. Once any regulatory
period of exclusivity expires, depending on the status of our patent coverage and the nature of the product, we may not be able
to prevent others from marketing products that are biosimilar to or interchangeable with our products, which would materially
adversely affect us.
Our
commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court determines
that we were infringing any third-party patents, we could be required to pay damages, alter our products or processes, obtain
licenses or cease certain activities. Licenses required under patents held by third parties may not be made available on terms
acceptable to us or at all. To the extent that we are unable to obtain such licenses, we could be foreclosed from the development,
export, manufacture or commercialization of the product requiring such license or encounter delays in product introductions while
we attempt to design around such patents, and any of these circumstances could adversely affect our business, financial condition
and results of operations.
We
may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third-party
proprietary rights. We may have to defend the validity of our patents in order to protect or enforce our rights against a third
party. Third parties may in the future assert against us infringement claims or claims that we have infringed a patent, copyright,
trademark or other proprietary right belonging to them. Any infringement claim, even if not meritorious, could result in the expenditure
of significant financial and managerial resources and could negatively affect our profitability. While defending our patents,
the scope of the claim may be reduced in breadth and inventorship of the claimed subject matter, and proprietary interests in
the claimed subject matter may be altered or reduced. Some of our competitors may be able to sustain the costs of such litigation
or proceedings more effectively than we can because of their substantially greater financial resources. Any such litigation, regardless
of outcome, could be expensive and time consuming, and adverse determinations in any such proceedings could prevent us from developing,
manufacturing or commercializing our products and could adversely affect our business, financial condition and results of operations.
The
patents for our product candidates have varying expiration dates and, if these patents expire, we may be subject to increased
competition and we may not be able to recover our development costs or market any of our approved products profitably. In some
of the larger potential market territories, such as the United States and Europe, patent term extension or restoration may be
available to compensate for time taken during aspects of the product’s development and regulatory review or by procedural
delays before the relevant patent office. However, such an extension may not be granted, or if granted, the applicable time period
or the scope of patent protection afforded during any extension period may not be sufficient. In addition, even though some regulatory
authorities may provide some other exclusivity for a product under their own laws and regulations, we may not be able to qualify
the product or obtain the exclusive time period. If we are unable to obtain patent term extension/restoration or some other exclusivity,
we could be subject to increased competition and our opportunity to establish or maintain product revenue could be substantially
reduced or eliminated. Furthermore, we may not have sufficient time to recover our development costs prior to the expiration of
our U.S. and non-U.S. patents.
We
may face difficulties in certain jurisdictions in protecting our intellectual property rights, which may diminish the value of
our intellectual property rights in those jurisdictions.
The
laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States and
the European Union, and many companies have encountered significant difficulties in protecting and defending such rights in such
jurisdictions. If we or our collaboration partners encounter difficulties in protecting, or are otherwise precluded from effectively
protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be
diminished and we may face additional competition from others in those jurisdictions.
Many
countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition,
many countries limit the enforceability of patents against government agencies or government contractors. In these countries,
the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors
is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may
be impaired and our business, financial condition and results of operations may be adversely affected.
Intellectual
property rights do not address all potential threats to our competitive advantage.
The
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples
are illustrative:
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Others
may be able to make products that are similar to ours but that are not covered by the
claims of the patents that we own.
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Others
may independently develop similar or alternative technologies or otherwise circumvent
any of our technologies without infringing our intellectual property rights.
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We
or any of our collaboration partners might not have been the first to conceive and reduce
to practice the inventions covered by the patents or patent applications that we own,
license or will own or license.
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We
or any of our collaboration partners might not have been the first to file patent applications
covering certain of the patents or patent applications that we or they own or have obtained
a license, or will own or will have obtained a license.
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It
is possible that our pending patent applications will not lead to issued patents.
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Issued
patents that we own may not provide us with any competitive advantage, or may be held
invalid or unenforceable, as a result of legal challenges by our competitors.
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Our
competitors might conduct research and development activities in countries where we do
not have patent rights, or in countries where research and development safe harbor laws
exist, and then use the information learned from such activities to develop competitive
products for sale in our major commercial markets.
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The
patents of third parties or pending or future applications of third parties, if issued,
may have an adverse effect on our business.
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Compulsory
licensing provisions of certain governments to patented technologies that are deemed
necessary for the government to access.
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Changes
in patent laws or patent jurisprudence could diminish the value of our patents, thereby impairing our ability to protect our products
or product candidates.
As
is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents.
Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity. Therefore, obtaining
and enforcing pharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, the America Invents Act
was recently enacted in the United States, resulting in significant changes to the U.S. patent system. The U.S. Supreme Court
has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances
or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability
to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once
obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, or USPTO,
the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents
or to enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and uncertainty of
European patent laws has also increased in recent years. In addition, the European patent system is relatively stringent with
regard to the type of amendments that are allowed during prosecution. These changes could limit our ability to obtain new patents
in the future that may be important for our business.
Confidentiality
agreements with employees and others may not adequately prevent disclosure of our trade secrets and protect our other proprietary
information.
We
consider proprietary trade secrets and/or confidential know-how and unpatented know-how to be important to our business. We may
rely on trade secrets and/or confidential know-how to protect our technology, especially where patent protection is believed by
us to be of limited value. However, trade secrets and/or confidential know-how can be difficult to maintain as confidential.
To
protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants,
contractors and advisors to enter into confidentiality agreements with us. However, current or former employees, consultants,
contractors and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality
agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a
claim that a third-party obtained illegally and is using trade secrets and/or confidential know-how is expensive, time consuming
and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.
Failure
to obtain or maintain trade secrets and/or confidential know-how trade protection could adversely affect our competitive position.
Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent
protection in respect of the same. If successful in obtaining such patent protection, our competitors could limit our use of our
trade secrets and/or confidential know-how.
Risks
Related to Our Compliance with Sarbanes-Oxley
We
may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002, which could adversely affect our operating results, investor confidence in our reported financial information, and
the market price of our ordinary shares and ADSs.
The
Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and directors. To comply with this statute, we are
required to document and test our internal control over financial reporting. Our efforts to comply with the requirements of Section
404 of the Sarbanes-Oxley Act of 2002, governing internal control and procedures for financial reporting, have resulted in increased
general and administrative expenses and a diversion of management time and attention, and we expect these efforts to require the
continued commitment of significant resources. We may identify material weaknesses or significant deficiencies in our assessments
of our internal control over financial reporting. Failure to maintain effective internal control over financial reporting could
result in investigations or sanctions by regulatory authorities and could adversely affect our operating results, investor confidence
in our reported financial information, and the market price of our ordinary shares and ADSs.
Material
weaknesses in our disclosure controls and procedures could negatively affect shareholder and customer confidence.
Under
Sarbanes-Oxley, we are required to assess the effectiveness of our disclosure controls and procedures (as defined in Sarbanes-Oxley)
on an annual basis. If we were to conclude that our disclosure controls and procedures were ineffective, shareholder and customer
confidence could be negatively affected, which could have a material adverse impact on the market price of our ADSs.
Risks
Related to Ownership of Our Securities
Our
stock price may be volatile and the U.S. trading market for our American Depository Shares (ADSs) is limited.
The market price for our securities, like that
of the securities of other pharmaceutical and biotechnology companies, has fluctuated substantially and may continue to be highly
volatile in the future. During the last two fiscal years ended June 30, 2020 and subsequently until 11 September 2020, the market
price for our ordinary shares on the ASX has ranged from as low as A$0.012 to a high of A$0.165 and the market price of our ADSs
on the NASDAQ Capital Market has ranged from as low as U.S.$0.36 to a high of U.S.$3.43. The market price for our securities has
been affected by both broad market developments and announcements relating to actual or potential developments concerning products
under development. We believe that the following factors, in addition to other risk factors described above and elsewhere in this
annual report, will continue to significantly affect the market price of our ordinary shares:
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the
results of pre-clinical testing and clinical trials by us and our competitors;
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developments
concerning research and development, manufacturing, and marketing alliances or collaborations
by us and our competitors;
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announcements
of technological innovations or new commercial products by us and our competitors;
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determinations
regarding our patent applications, patents and those of others;
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publicity
regarding actual or potential results relating to medicinal products under development
by us and our competitors;
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proposed
governmental regulations and developments in Australia, the U.S. and elsewhere;
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economic
and other external factors; and
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period-to-period
fluctuations in our operating results.
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In
addition, stock markets have experienced extreme price and volume fluctuations. These fluctuations have especially affected the
stock market price of many high technology and healthcare related companies, including pharmaceutical and biotechnology companies,
and, in many cases, are unrelated to the operating performance of the particular companies. Market fluctuations, as well as general
political and economic conditions, such as a recession, interest rate or currency rate fluctuations, could adversely affect the
market price of our securities.
Ownership
interest in our company may be further diluted as a result of additional financings.
We
may seek to raise funds from time to time in public or private issuances of equity, and such financings may take place in the
near future or over the longer term. In May 2011, we registered U.S.$50,000,000 of securities for public sale pursuant to our
registration statement on Form F-3. In July 2011, we issued a prospectus under such registration statement providing for the sale
of up to 50 million ordinary shares represented by 5 million ADSs pursuant to an “At-The-Market” facility. In August
2013 we issued a prospectus providing for the sale of up to U.S.$47,184,000 of our ordinary shares under an amended “At-The-Market”
facility. On November 26, 2014, we entered into Amendment No. 2 to our At-The-Market Issuance Sales Agreement, to continue the
at-the-market equity program under which we may from time to time sell up to an additional aggregate of $50,000,000 of our ordinary
shares represented by ADSs. From November 26, 2014 until June 30, 2015 we sold A$7.1 million of additional ordinary shares under
this program. On October 13, 2016, we entered into an At-Market Issuance Sales Agreement, for an at-market offering program under
which we may from time to time sell up to an aggregate of U.S.$44,460,787 of our ordinary shares represented by ADSs. On November
8, 2017 we entered into Amendment No. 1 to our At-Market Issuance Sales Agreement to continue the at-market offering program which
we may from time to time sell up to an aggregate of $50,000,000 of our ordinary shares represented by ADSs. Since July 1, 2018
and to date, we sold U.S.$5,124,764 of additional ordinary shares under this program. Since the inception of our At-The-Market”
facility in 2011 and to date we sold an aggregate of 424,889,350 ordinary shares under this facility and raised a total of A$54.1million
(U.S.$47.7 million) in gross proceeds.
Without
shareholder approval, we may not issue more than 25% of our outstanding ordinary shares in any twelve month period other than
by a pro rata rights offering or a share purchase plan offer (of shares with a value at the issue price of up to A$15,000 per
shareholder to a maximum of 30% of our outstanding shares) in each case to the then existing shareholders in accordance with the
listing rules of the ASX. Sales of our ADSs offered through our “At-The-Market” facility and future equity offerings
may result in substantial dilution to the interests of our current shareholders. The sale of a substantial number of securities
to investors, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in
the future at a time and at a price that we might otherwise wish to effect sales.
There
is a substantial risk that we are a passive foreign investment company, or PFIC, to some U.S. investors which will subject those
investors to adverse tax rules
Holders
of our ADSs who are U.S. residents face income tax risks. There is a substantial risk that we are a passive foreign investment
company, commonly referred to as a PFIC to some U.S. investors, and a controlled foreign corporation, or CFC to other U.S. investors.
Our treatment as a PFIC could result in a reduction in the after-tax return to the holders of our ADSs and would likely cause
a reduction in the value of such ADSs. For U.S. federal income tax purposes, we will be classified as a PFIC for any taxable year
in which either (i) 75% or more of our gross income is passive income, or (ii) at least 50% of the average value of all of our
assets for the taxable year produce or are held for the production of passive income. For this purpose, cash is considered to
be an asset that produces passive income. As a result of our substantial cash position and the decline in the value of our stock,
we believe that we became a PFIC during the taxable year ended June 30, 2005, and were classified as a PFIC during each of the
following fiscal years. We believe that we once again will be classified as a PFIC for the taxable year ended June 30, 2020 for
some U.S. investors. Highly complex rules will apply to U.S. holders owning ADSs. Accordingly, you are urged to consult your tax
advisors regarding the application of such rules.
We
do not anticipate paying dividends on our ordinary shares.
We
have never declared or paid cash dividends on our ordinary shares and do not expect to do so in the foreseeable future. The declaration
of dividends is subject to the discretion of our Board of Directors and will depend on various factors, including our operating
results, financial condition, future prospects and any other factors deemed relevant by our board of directors. You should not
rely on an investment in our company if you require dividend income from your investment in our company. The success of your investment
will likely depend entirely upon any future appreciation of the market price of our ordinary shares, which is uncertain and unpredictable.
There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which you purchased your
ordinary shares.
Currency
fluctuations may adversely affect the price of our ordinary shares.
Our
ordinary shares are quoted in Australian dollars on the ASX and our ADSs trade on the NASDAQ Capital Market in U.S. dollars. Movements
in the Australian dollar/U.S. dollar exchange rate may adversely affect the U.S. dollar price of our ordinary shares. In the past
year the Australian dollar has generally remained stable against the U.S. dollar. If the Australian dollar weakens against the
U.S. dollar, this may negatively affect the U.S. dollar price of our ordinary shares, even if the price of our ordinary shares
in Australian dollars decreases or remains unchanged. If the Australian dollar strengthens against the U.S. dollar, the U.S. dollar
price of the ordinary shares could increase, even if the price of our ordinary shares in Australian dollars decreases or remains
unchanged.
If
we fail to maintain compliance with NASDAQ’s continued listing requirements, our shares may be delisted from the NASDAQ
Capital Market.
Our
ordinary shares are quoted on the ASX and our ADSs trade on the NASDAQ Capital Market. To continue to be listed on the NASDAQ
Capital Market, we need to satisfy a number of conditions, including a minimum closing bid price per ADS of $1.00 for 30 consecutive
business days and shareholders’ equity of at least $2.5 million.
On
February 7, 2020, we received notification from the Listing Qualifications Department of NASDAQ advising the company that it is
was non-compliant with NASDAQ’s requirement that listed securities maintain a minimum bid price of $US1.00 per share on
NASDAQ as outlined in the NASDAQ Listing Rules.
The
NASDAQ notification had no effect on the listing of the Company’s ADSs and the ADSs continued to trade uninterrupted on
NASDAQ. In the event we did not regain compliance within the prescribed period and the NASDAQ staff would have concluded that
we were not able to cure the deficiency, our ADSs could have been subject to delisting by NASDAQ. On July 15, 2020, NASDAQ notified
us that we have regained compliance with the minimum bid price requirement of Listing Rule 5550(a)(2).
If
our closing bid price per ADS will fall under $1.00 again and remain below $1.00 for 30 consecutive trading days, we may receive
another notice of noncompliance and should be provided at least 180 days to regain compliance. We could fail to meet this, or
other NASDAQ continued listing requirements and fail to cure such noncompliance, resulting in the delisting of our ADSs from NASDAQ.
If we are delisted from NASDAQ, trading in our ADSs may be conducted on a market (in the United States) where an investor would
likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of, our ordinary shares.
Risks
Related to Our Location in Australia
It
may be difficult to enforce a judgment in the United States against us and our officers and directors or to assert U.S. securities
laws claims in Australia or serve process on our officers and directors.
We
are incorporated in Australia. At least half of our executive officers and directors are non-residents of the United States. Therefore,
it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability
provisions of the U.S. federal securities laws in an Australian court against us or any of those persons or to effect service
of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or
entity, to enforce civil liabilities under U.S. federal securities laws in original actions instituted in Australia.
As
a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we may follow certain home country corporate governance
practices instead of certain NASDAQ requirements.
As
a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we are permitted to follow certain home country
corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules, with regard to, among other things,
the composition of the board of directors and its committees, director nomination process, compensation of officers and quorum
at shareholders’ meetings. In addition, we may choose to follow Australian law instead of The NASDAQ Stock Market Rules
that require that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain
equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions involving
issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company. A foreign
private issuer that elects to follow a home country practice instead of NASDAQ requirements must submit to NASDAQ in advance a
written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices
are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports
each such requirement that it does not follow and describe the home country practice followed by the issuer instead of any such
requirement. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate
governance rules. As of the date of this report, we have elected to follow home country practices instead of the following NASDAQ
requirements:
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the
Rule related to Audit Committee Composition rule 5605(c)(2)(A)): we may have an audit
committee composed of two members instead of “at least three members”. We
may not follow NASDAQ rules regarding independence of such members (as long as comply
Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, subject to the exemptions
provided in rule 10A-3(c)), and we may not have a financially sophisticated member as
defined.
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the
Rule requiring maintaining a majority of independent directors (Rule 5605(b)(1))
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the
Rule requiring that our independent directors have regularly scheduled meetings at which
only independent directors are present (Rule 56505(b)(2)
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the
Rule regarding independent director oversight of director nominations process for directors
(Rule 5605(e)
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the
Rule regarding independent director oversight of executive officer compensation (Rule
5605(d)
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the
requirement to obtain shareholder approval for the establishment or amendment of certain
equity based compensation plans (Rule 5635(c), an issuance that will result in a change
of control of the company (Rule 5635(b), certain transactions other than a public offering
involving issuances of a 20% or more interest in the company (Rule 5635(d) and certain
acquisitions of the stock or assets of another company (Rule 5635(a)).
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We
currently do not have a majority of independent directors serving on our Board of Directors, which may afford less protection
to our shareholders than if our Board of Directors had a majority of independent directors,
As
of the date of this annual report, a majority of our directors did not satisfy the standards for independence as specified by
the SEC and the listing standards of The Nasdaq Stock Market pursuant to which we evaluate director independence. If our Board
of Directors is not made up of a majority of independent directors, there may be a lower level of oversight on executive management,
and our Board of Directors may be influenced by the concerns, issues or objectives of management, including compensation and governance
issues, to a greater extent than would occur with a majority of independent directors. As a result, the composition of our Board
of Directors may afford less protection to our shareholders than if our Board of Directors were composed of a majority of independent
directors.
A
lack of independent directors may also make it difficult to create board committees meeting the requirements of our board committee
charters and the NASDAQ Rules pursuant to which we evaluate director independence. Historically, we have strived to have an audit
committee comprised of at least three independent directors and other board committees comprised solely of independent directors.
Currently, our audit committee has only two members, both of who are independent under the NASDAQ Rules and applicable SEC requirements.
Due to the lack of independent directors, it may be difficult to establish effective operating board committees comprised of independent
members to oversee committee functions. This structure gives our executive officers additional control over certain corporate
governance issues, including compensation matters and audit issues for internal control and reporting purposes, with more limited
oversight of our executive officers' decisions and activities.
Australian
takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary
shares.
We
are incorporated in Australia and are subject to the takeovers laws of Australia. Among other things, we are subject to the Australian
Corporations Act 2001, or the Corporations Act. Subject to a range of exceptions, the Corporations Act prohibits the acquisition
of a direct or indirect interest in our issued voting shares if the acquisition of that interest will lead to a person’s
voting power in us increasing from 20% or below to more than 20%, or increasing from a starting point that is above 20% and below
90%. Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers
of our ordinary shares. This may have the ancillary effect of entrenching our board of directors and may deprive or limit our
shareholders’ strategic opportunities to sell their ordinary shares and may restrict the ability of our shareholders to
obtain a premium from such transactions.
Our
Constitution and other Australian laws and regulations applicable to us may adversely affect our ability to take actions that
could be beneficial to our shareholders.
As
an Australian company we are subject to different corporate requirements than a corporation organized under the laws of the United
States. Our Constitution, as well as the Corporations Act, set forth various rights and obligations that are unique to us as an
Australian company. These requirements operate differently than from many U.S. companies and may limit or otherwise adversely
affect our ability to take actions that could be beneficial to our shareholders. For more information, you should carefully review
the summary of these matters set forth under the section entitled, “Item 10.B - Additional Information - Memorandum and
Articles of Association” as well as our Constitution.
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ITEM
4.
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Information
on the Company
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A.
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History
and Development of the Company
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Our
legal and commercial name is Alterity Therapeutics Limited (formerly Prana Biotechnology Limited). We were incorporated under
the laws of the Commonwealth of Australia on November 11, 1997 and began limited operations shortly thereafter. Our registered
office is located at Level 3, 62 Lygon Street, Carlton, Victoria, 3053, Australia and our telephone number is 011-61-3-9824-5254.
Our principal executive office is located at Level 3, 460 Bourke Street, Melbourne, VIC 3000, Australia and our telephone number
is 011-61-3-9349-4906. Our website address is www.alteritytherapeutics.com. The information in our website is not incorporated
by reference into this annual report.
Alterity
is developing first-in-class therapies to treat neurodegenerative diseases. Our lead drug candidate, ATH434 (formerly PBT434),
is the first of a new generation of small molecules designed to block the accumulation and aggregation of α-synuclein. Alpha-synuclein,
when aggregated in the brain, is a pathological hallmark of Parkinsonian conditions and is considered an important biologic target
for treating these neurodegenerative diseases.
ATH434
has demonstrated pre-clinical evidence as a potential treatment of MSA and produced encouraging results in its Phase 1 clinical
program, which was completed last year. The company is in the preparatory phase of planning for Phase 2 clinical trial.
Other
potential applications for our proprietary compounds include the treatment or amelioration of neurodegenerative disorders such
as tauopathies, Motor Neuron disease, Creutzfeldt-Jakob disease (the human variant of Mad Cow disease), certain cancers, age-related
macular degeneration, or antibiotic resistance.
Our
technology is the outcome of many years of intense research from leading scientists in the area of neurodegenerative disorders
and other diseases. In July 2009, a patent claiming ‘8-Hydroxyquinoline derivatives’ which claims our principal clinical
drug asset, PBT2, as well as other 8-Hydroxyquinoline compounds, was granted by the European Patent Office (EPO). Since the date
of that grant, similar patents were granted in other jurisdictions including in the United States, Japan, China, South Korea and
Russia. These patents claim the composition of matter and the uses of such compounds for the treatment of neurological diseases,
including Alzheimer’s disease and Huntington disease. The patents are due to expire in July 2023, except in the United States
where the patent is due to expire in December 2025. In December 2011, claims for our key patent protecting our product candidate
for Parkinson’s disease, PBT434 were granted in the United States. The patent is entitled ‘Neurologically Active Compounds’
and covers the composition of matter and pharmaceutical compositions of selected families of 8-hydroxyquinazolinone compounds,
including PBT434. It had also been granted in other jurisdictions including in Europe, China and Japan.
Our
technology has progressed to yield a diversified library of chemical compounds, which may yield future product candidates across
various neurodegenerative and other indications.
Future
clinical studies with PBT2 may depend on the either lifting the Partial Clinical Hold (PCH) which currently restricts drug exposure
levels and/or the possible development of PBT2 for new therapeutic indications. See “Item 4.B. – Information on the
Company – Business Overview – Clinical Trials for Our Product Candidates”).
Since
inception, we have not been required to invest material amounts for capital expenditures since our development efforts have taken
place at research facilities operated by institutions with which we have relationships. In the three fiscal years ended June 30,
2020, our capital expenditures have totaled A$86,171.
Alterity’s
Background
Medical
science has made a significant number of breakthroughs over the past century. The average life span in western cultures has substantially
increased. The diseases associated with aging have, however, yet to be fully understood or effectively treated. It is now believed
that a number of age-related diseases may be capable of being treated.
The
protein believed to be involved in the toxicity associated with Alzheimer’s disease is beta amyloid. Very little was known
about beta-amyloid protein until 1984 when Professors Colin Masters, Konrad Beyreuther and the late Dr. George Glenner sequenced
the chemistry of the protein which has since become the dominant focus of Alzheimer’s disease research world-wide. In 1987,
Professors Masters, Beyreuther and Rudi Tanzi of Harvard Medical School discovered how beta-amyloid was produced and in 1994,
Professor Ashley Bush of the Melbourne Dementia Research Centre and formerly of Harvard Medical School discovered that
the interaction between metals and beta-amyloid is associated with the toxicity seen in Alzheimer’s disease, hopefully paving
the way for the development of therapeutic drugs to treat the disease.
Our
intellectual property has been developed over an extended period and continues to develop through the collaborative efforts of
highly regarded scientists, both company employees as well as representatives of research institutions in this field. These institutions
include:
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The
University of Melbourne, Department of Pathology
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The
Florey Institute of Neuroscience and Mental Health in Melbourne
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University
of California, San Francisco and
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The
University of Pavia
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Work
conducted at the University of Melbourne and MGH demonstrated that clioquinol, codenamed PBT1, had potential efficacy for the
treatment of Alzheimer’s disease. Since completing our initial public offering and listing process of our ordinary shares
on the ASX on March 28, 2000, we historically concentrated our resources toward the pursuit of our disease targets and creation
of a chemical library of proprietary molecules. Our research efforts led to the discovery of a novel compound, PBT2, a low molecular
weight chemical entity that has demonstrated significant pre-clinical activity, and we currently have over 800 validated compounds
from different chemical scaffolds in our chemical library. More recently, our research efforts have focused on identifying
novel compounds that bind and redistribute labile iron that is increased in Parkinsonian diseases and thought to be implicated
in their pathogenesis.
Our
chemistry program is undertaken within laboratories leased from The University of Melbourne’s Bio21 Molecular Science and
Biotechnology Institute, which is a multidisciplinary research center that specializes in medical, agricultural and environmental
biotechnology. Accommodating more than 500 research scientists, students and industry participants, the Bio21 Institute is one
of the largest biotechnology research centers in Australia.
Candidate
product discovery and translational Biology Programs
We
regard our intellectual property as a “platform technology” since we believe that it addresses the causes of a broad
spectrum of neurodegenerative and age-related diseases based on the interrelationship of metals and proteins. Historically, the
majority of our research efforts have been directed at research into potential therapeutics for the treatment of Alzheimer’s
disease, Huntington disease and Parkinsonian movement disorders. Published data together with our initial findings have provided
strong indications that the pathology for other certain age-related and degenerative disorders may also be based on the inter-relationship
between certain metals and proteins, and we believe that the platform technology may also be applicable for certain cancers, age-related
macular degeneration, Motor Neuron disease, Creutzfeldt-Jakob disease and other neurodegenerative diseases. To date, we have performed
in vivo evaluations of our product candidates in a range of mouse animal models including models of Alzheimer’s disease,
Huntington disease, Parkinsonian diseases, brain cancer and traumatic brain injury.
Product
candidates are selected from our chemical library on the basis of rational drug design. Product candidates are designed to fulfill
very specific criteria such as oral bioavailability and ability to cross the blood-brain barrier, and demonstrate significant
effectiveness in both nonclinical in vitro and in vivo testing.
To
increase depth and breadth of our pipeline into new neurodegenerative indications, we have continued to develop our ‘two
tier’ Translational Research program structure during the past year. The first tier encompasses core new chemical entity
design, synthesis and characterization, the ‘discovery phase’ of the new entities as potential novel agents of interest
based on their mechanism of action profile. Our discovery research has established Structure Activity Relationships (“SAR”)
within chemical moieties that guide our chemists towards the design of novel therapeutics. The discovery phase also includes preliminary
bioavailability and metabolic characterization. The second tier comprises ‘translational’ animal modeling programs
to test and validate new candidates as potential development product candidates. To date, our chemical library includes more than
800 novel compounds. Using SAR that has been developed over years of testing and validation by Alterity scientists, new compounds
are being generated that retain functionality across diverse and novel chemical scaffolds.
Over
the last year, new compounds from several scaffolds were synthesized and began mechanistic profiling. The compounds are initially
screened for activity in biological systems relevant to the candidate diseases we are targeting. New screens are being investigated
that will assess the ability of a compound intercede in the pathogenic steps thought to underly the disease processes for target
diseases. Such steps include pathologic protein aggregation and downstream activities such as oxidative stress and cell death.
Promising candidates arising from the Translational Research program may be progressed as back up compounds in Parkinsonian diseases
and/or new indications in neurodegeneration including orphan indications.
Parkinson's
Disease and Movement Disorders
Parkinson’s
disease, another neurodegenerative disease of the aging population, causes a progressive slowing of movement, tremors and the
loss of fine motor control due to the death of substantia nigra cells in the brain. These cells produce the neurotransmitter
dopamine in the brain, which is required for normal motor control. Existing therapies, such as dopaminergic agents, may provide
symptomatic relief, but do not address the underlying cause of the disease. We believe that drug candidates in our library may
affect the aggregation of the proteins implicated in the pathology of Parkinson’s disease and related movement disorders.
During
2005, we entered into a contractual arrangement with the Integrative Neuroscience Facility based at the Florey Institute of Neuroscience
and Mental Health in Melbourne, or the Florey Institute, to assist in the efficacy evaluation of novel compounds in models relevant
to Parkinson’s disease, specifically the 6-hydroxydopamine mouse model and the MPTP (1-methyl-4-phenyl-1,2,3,6-tetrahydropyridine)
mouse model. The toxins used in these two mouse models mimic the disease by causing impairment of the cells of the substantia
nigra, the area of the brain primarily affected in Parkinson’s disease, and subsequent loss of motor function. During
2009 and 2010, our lead Parkinson’s disease treatment candidate emerged, PBT434, based on significant improvement in motor
function and coordination in both models. Of note, PBT434 improved relevant indices when administered after toxins had destroyed
significant amounts of substantia nigra tissue, indicating that the compound can restore and maintain normal neuronal function.
During 2011, further mechanistic characterisation work demonstrated that PBT434 reduced the accumulation of the target protein
in Parkinson’s disease, alpha-synuclein.
In
August 2011, the New York-based Michael J. Fox Foundation awarded us a $206,000 grant entitled, ‘PBT434, a Novel Neuroprotective
Drug For Parkinson’s Disease; Completion of Pre-Clinical Studies to Enable Human Clinical Trials.’ The research supported
by this grant has included various nonclinical studies (safety pharmacology, general toxicology, genetic toxicology), the results
of which allowed the compound to be positioned for Phase 1 clinical trials in healthy volunteers and larger scale animal toxicology
studies that will enable clinical trials in applicable subjects.
In
November 2012, our scientists, Dr. Robert Cherny and Associate Professor David Finkelstein, Head of the Synaptic Neurobiology
laboratory at the Florey Institute, received an NHMRC grant to study the benefits of PBT434 in a program entitled, "Identifying
the mechanisms of action of a novel 8-hydroxyquinazolinone in models of Parkinson's disease." The program helped elucidate
some of the innate mechanisms of action of PBT434.
In
June 2013, our science was highlighted at the 17th Movement Disorders Congress of Parkinson’s Disease and Movement
Disorders, in Sydney, Australia. Professor Colin Masters, Director of The Mental Health Research Institute at the Florey Institute
and Assoc. Professor David Finkelstein presented data showing that PBT434 prevented the aggregation of alpha synuclein, the protein
target in Parkinson’s and other movement disorders. The ability of PBT434 to reduce alpha-synuclein accumulation has highlighted
the potential for PBT434 to treat other movement disorders characterized by the over expression alpha-synuclein including the
orphan disease Multiple system atrophy, which is a rare form of “atypical parkinsonism”.
Mechanistic
work has demonstrated that PBT434 reduces oxidative stress and inhibits the aggregation of toxic α-synuclein species. Part
of this investigation was supported by Parkinson’s UK grant of £150,000, awarded in 2013 to Leeds University in collaboration
with Associate Professors David Finkelstein and Robert Cherny of the Florey Institute. In 2017, Drs. Finkelstein, Cherny and colleagues
published data indicating that PBT434 prevented
cell death in the substantia nigra in a dose-dependent manner. The data also demonstrated the therapeutic potential of PBT434
to slow neurodegeneration with results in multiple Parkinson’s disease models, including a transgenic model of Parkinson’s
disease (A53T) in which mice over-expressed the alpha-synuclein protein. In A53T mice, animals treated with PBT434 exhibited significantly
increased numbers of s. nigra neurons and a significant reduction in insoluble α-synuclein and incidence of clasping
behavior. These results showed that PBT434 lowered alpha-synuclein, preserved neurons and simultaneously improved motor performance.
The paper was entitled, “The novel compound PBT434 prevents iron mediated neurodegeneration
and alpha-synuclein toxicity in multiple models of Parkinson’s disease” and was published in Acta Neuropathol Comm.
PBT434
has also been profiled in mouse models of atypical Parkinsonian conditions, including orphan diseases such as Multiple system
atrophy (MSA) and Progressive Supranuclear Palsy, a tauopathy. In an animal model of MSA, PBT434 prevents α-synuclein
aggregation and preserves neurons in the substantia nigra and decreased the number of glial cell inclusions in the brains of
treated animals. Glial cell inclusions are the pathological hallmark of MSA and contain abundant aggregated
α-synuclein that is associated with neurodegeneration. The pathologic benefits were associated with improved
motor function in treated animals. In mutant overexpressing tau mice, rTg4510, PBT434 has demonstrated significant
improvement in the Y-maze cognitive assessment and resulted in a significant reduction in the number of abnormal tau deposits
in the hippocampus of 12 month old mice.
A
comprehensive nonclinical program to evaluate PBT434’s profile to support clinical development is ongoing. . PBT434 had
no relevant off-target binding activity in a broad panel of protein interactions. PBT434 did not have significant inhibitory activity
of the hERG channel relevant to expected human plasma concentrations in a GLP study. PBT434 is subject to diverse metabolic pathways
and is brain penetrant. PBT434 was well-tolerated in safety pharmacology studies (GLP cardiovascular, respiratory and central
safety pharmacology studies in rat). Long term toxicology and metabolism studies to support patient studies are ongoing.
Alzheimer’s
disease
PBT2,
our product candidate for Alzheimer’s disease, is the result of rational drug design and was built “from the ground
up” to fulfill very specific criteria. It was designed so that it will be orally bioavailable and cross the blood-brain
barrier and to have an improved safety and efficacy profile compared to the prototype MPAC, PBT1. Phase I trials for PBT2 were
completed by February 2006 in healthy young and aged volunteers and demonstrated that the drug was well tolerated and suitable
for Phase II clinical development.
In
2008, top line results for a Phase IIa clinical study in mild Alzheimer’s disease patients were announced, including the
primary endpoints of safety and tolerability being met together with several secondary endpoints in biomarker and cognition endpoints
also being met. In November 2009, an erratum to the July 2008 edition of The Lancet Neurology journal was published that
corrected the original results of the neuropsychological test battery, or NTB, arising from the Phase IIa trial. The corrected
results show that the overall executive function domain of the NTB, comprising five cognitive tests, was significantly improved
for those patients taking 250mg of PBT2 compared to patients on placebo.
In
March 2011, we announced that the New York-based Alzheimer’s Drug Discovery Foundation would make a $700,000 project-based
investment towards a Phase II imaging biomarker study in 40 patients with prodromal or mild Alzheimer’s disease. In March
2014, top line results for the study were announced. The study entailed the use of an amyloid imaging ligand to detect changes
in brain beta-amyloid burden after 52 weeks treatment with PBT2 or placebo. For more information, see Item 4.B. “Information
on the Company - Business Overview - Clinical Trials for Our Product Candidates.”
In
July 2008, the results of extensive pre-clinical research findings for PBT2 were published in the journal Neuron. The paper
by Alterity scientist, Associate Professor Paul Adlard was entitled, “Rapid restoration of cognition in Alzheimer’s
transgenic mice with 8-hydroxyquinoline analogs is associated with decreased interstitial Aβ”. The key findings included
the demonstration that PBT2 could rapidly improve cognition in transgenic mice, prevent the formation of toxic soluble Abeta oligomers,
lower the Abeta levels in the brain of transgenic mice and protect neurons from the toxic effect of Abeta at the synapses between
neurons enabling improved neurotransmission. In March 2009, we published further data on the impact of PBT2 on synapses in transgenic
animal models. The findings demonstrated that PBT2 could prevent the loss of synapses in these Alzheimer’s disease animal
models, indicating that PBT2 has a potent neuroprotective effect on neurons, consistent with the observation that PBT2 can improve
cognitive performance in impaired transgenic animals.
During
2009 and 2010, our scientists further examined the apparent link between aging and disease related defects due to metal imbalances
in the brain. In February 2010, we reported in The Journal of Neuroscience on the loss of synaptic zinc uptake mechanisms
in aged animal models and how this correlated with cognitive impairment. Our scientists also investigated the molecular basis
for the neuroprotective qualities of PBT2 in animal models of Alzheimer’s disease. They found that several important intracellular
signaling pathways required for neuronal function were stimulated when animals were treated with PBT2. In March 2011, we reported
in the scientific journal PLoS ONE that in the same Alzheimer’s animal model where PBT2 is able to significantly improve
cognition, it also caused changes in the brain anatomy. Specifically, it was observed that PBT2 treatment had significantly increased
the numbers of spines on the branches (or dendrites) of neurons in the hippocampus, a memory centre affected in Alzheimer’s
disease. Increasing the number of spines permits many more neurons to interconnect with any particular neuron thereby increasing
the brain’s capacity to carry out learning and memory functions. These findings provide an insight into how PBT2 helps preserve
and protect neurons in Alzheimer’s disease and also in animal models of Huntington disease.
In
September 2011, new data was published on how the ability of PBT2 to transport and deliver zinc and copper in the brain contributes
to mechanisms related to its anti-toxic effects of Alzheimer’s disease, including inhibition of beta-amyloid aggregation
and promotion of the activation of GSK3 protein, an important brain protein suggested to be involved in Alzheimer disease. In
addition, one of our research scientists, Dr. Paul Adlard, received an Australian National Health and Medical Research Council,
or NHMRC, grant to study the benefits of PBT2 and other compounds in age-related cognitive impairment in a program entitled, "The
role of metals in healthy brain aging: identification of novel compounds to prevent age-related cognitive decline.” The
grant provided an opportunity to explore the importance of metal distribution imbalances in the brain to both cognitive deficits
with aging and Alzheimer disease. Also in October 2011, our scientist and co-inventor of PBT2, Dr. Kevin Barnham, was awarded
a NMHRC grant to explore how PBT2's copper binding and transport activity can inhibit brain excitotoxicity, which is the overstimulation
of certain chemical neurotransmitter receptors on neurons (NMDA receptors). Excitotoxicity is a common feature in the brains of
patients affected by neurodegenerative disorders such as Alzheimer’s disease and Huntington disease. In March 2012, our
Chief Scientific Advisor, Professor Rudolph E. Tanzi, published an important body of work on the role of brain metals in the etiology
of Alzheimer’s disease, supporting Alterity’s therapeutic strategy. The paper was entitled, ‘The Zinc Dyshomeostasis
Hypothesis of Alzheimer’s disease’ published in PLoS ONE in March 2012.
In
March 2013, Dr. Paul Adlard, presented a paper entitled, “Metal Chaperones are novel therapeutic agents for tauopathy.”
The findings presented exemplified that the ability of PBT2 to intercede in aberrant metal and target protein interactions and
to correct abnormal metal distribution in the brain resulted in PBT2 being able to prevent the formation of ‘tangle like’
inclusions in neurons in a mouse model. Tau tangles are known to cause neuronal death. This work builds upon the knowledge that
PBT2 can prevent the metal mediated toxic gain of function of target proteins such as Abeta and tau to form harmful aggregates
in the brain. The data was generated in transgenic mouse model of tauopathy and demonstrated a significant decrease in tau tangle
formation, a significant increase in cortical and hippocampal neurons and significant increase in cognitive performance as measured
by the Y-maze.
In
October 2013, Dr. Adlard also published a paper on the ability of PBT2 to restore learning and memory in aged mice. His paper,
entitled “A Novel Approach To Rapidly Prevent Age-Related Cognitive Decline” and published in the journal Aging
Cell, demonstrated that PBT2 could restore the cognition of aged mice to that of young, cognitively normal mice. Age-related
cognitive decline is associated with measurable structural and biochemical changes in the brain, which Alterity scientists have
shown to be significantly improved by PBT2 administration. Importantly, it has been shown that PBT2 increased expression of markers
of neurogenesis and increased synaptic density which in turn, correlated with improved performance on memory tasks.
The
underlying mechanisms of action of PBT2 work to prevent metal mediated neurodegenerative processes including oxidative stress,
formation of toxic amyloid oligomers and compromised neuronal and synaptic function leading to cognitive impairment. In Alzheimer’s
disease, beta-amyloid aggregates in the synaptic cleft have been associated with impaired synaptic transmission as evidenced by
reduced Long Term Potentiation experiments (LTP) in mice. Alterity scientists have published that PBT2 is able to inhibit the
beta-amyloid induced inhibition of LTP, thus restoring synaptic capability and cognitive function. In February 2015, a new mechanism
of action of PBT2 was published in Neurobiology of Disease which demonstrated the ability of PBT2 to protect against glutamate-induced
(synaptic) excitotoxicity in a metal dependent manner. The paper was entitled, “PBT2
inhibits glutamate-induced excitotoxicity in neurons through metal-mediated preconditioning”. The
over excitation of NMDA receptors in glutamatergic neurons leads to mitochondrial damage and cell death and has been postulated
as one of the pathological events in Alzheimer’s disease and Huntington disease. Further elucidation of the protective role
of PBT2 is required, however it appears that the zinc ionophore property of PBT2 works to increase intracellular zinc in the post
synaptic terminal, triggering the release of calcium which in turn, leads to neuroprotective pathways being activated inside the
neuron that prevent excitotoxicity. Over recent years, the ability of PBT2 to reduce the phosphorylation of the microtubule-associated
protein ‘tau” has been demonstrated in new in vitro screening assays and modelled in transgenic mice. Phosphorylated
tau is deposited in cells as fibrillar aggregates in numerous neurodegenerative diseases, notably Alzheimer's disease and
also Huntington disease and other neurodegenerative disorders. The functions of tau are regulated by site-specific phosphorylation
events, which are dysregulated in the disease state, resulting in tau dysfunction and mislocalization. This can lead to aggregation,
neuronal dysfunction and death. Unpublished data show that PBT2 can reduce tau phosphorylation
and improve cognitive function in a transgenic tau mouse model.
Huntington
disease
Huntington
disease is a crippling genetic neurodegenerative disorder of the central nervous system caused by a mutation in a gene which encodes
the huntingtin protein. The disease results in progressive deterioration of physical, cognitive and emotional abilities that lead
to severe incapacitation and eventually death, generally 15-25 years after the onset of the disease. Huntington disease primarily
affects adults, usually between the ages of 30 and 50.
U.S.-based
researchers have presented the effects of clioquinol in an animal model of Huntington disease, showing evidence of improved behavior,
motor skills and inhibition of the abnormal form of the Huntingtin protein. Based on these findings, we have tested several proprietary
compounds in collaboration with researchers based at the Veterans Affairs Medical Center and the Department of Neurology, University
of California, San Francisco, under a collaborative research agreement. PBT2 has shown good efficacy in the R6/2 mouse model of
Huntington disease.
In
late July 2008, we received the findings from a report commissioned by us from U.S.-based clinical researchers on the suitability
of PBT2 for Huntington disease. The report detailed the relevance of animal modeling experiments done with PBT2, its demonstrated
mode of action in the brains of Huntington disease model mice and its promising safety and efficacy findings in the earlier Alzheimer’s
disease Phase IIa study with PBT2. The report recommended that we proceed to clinical trials in Huntington disease research participants.
In
July 2010, we presented data emerging from our research and development that the neuroprotective qualities of our product candidate
PBT2 indicated that it may have clinical application in Huntington disease patients in addition to Alzheimer’s disease.
At the International Conference on Alzheimer’s disease in Hawaii, Dr. Robert Cherny described how PBT2 prolonged survival,
increased motor strength and delayed involuntary limb clenching that otherwise presents in the transgenic mouse model of Huntington
disease. In addition, PBT2 appears to prevent the aggregation of the hallmark toxic mutant huntingtin protein. Examination of
the brains of transgenic mice revealed that PBT2 had a significant impact on preventing the degeneration of neurons, providing
further evidence of the neuroprotective attributes of PBT2 that had been reported earlier in our work on Alzheimer’s disease.
In
December 2010, our management assembled a team to develop a Phase IIa clinical trial protocol for the treatment of Huntington
disease with PBT2. The group comprised leading clinical researchers from Australia and the United States, including members from
the Huntington Study Group based in the United States and Australia. The team designed a six month Phase IIa clinical trial testing
PBT2, or the Reach2HD Trial, which included a randomized, double blind placebo controlled study of patients with early to mid-stage
Huntington disease. For additional details regarding the clinical trial in Huntington disease with PBT2, see Item 4.B. “Information
on the Company - Business Overview - Clinical Trials for Our Product Candidates.”
In
December 2012, we announced the publication of the paper entitled, "PBT2 extends lifespan, reduces striatal atrophy and improves
motor performance in a transgenic mouse model of Huntington disease" in the Journal of Huntington disease. This paper describes
how PBT2 significantly improved functional performance of the mice in the R6/2 model as a consequence of the neuroprotective properties
of PBT2 by regulating certain metal mediated events in the brain.
As
described in the preceding section, ‘Platform Technology, Discovery and Translational Research Programs – Alzheimer’s
disease’, in October 2013 Alterity scientist Associate Professor Paul Adlard published a paper in the journal Aging Cell,
demonstrating that PBT2 could restore the cognition of aged mice to that of young, cognitively normal mice. Age-related cognitive
decline is associated with measurable structural and biochemical changes in the brain, which Alterity scientists have shown to
be significantly improved by PBT2 administration. In particular, this restoration of cognitive function was accompanied by an
increase in underlying hippocampal neurons, synaptic density and neuronal proliferation markers around the lateral ventricles,
a region susceptible to atrophy in Huntington disease.
Important
support for the role of copper in the disease process in Huntington disease came from Tsinghua University in China (Xiao et al
PNAS 2013). Using a Drosophila model of Huntington disease, bearing an expanded polyQ Htt gene, workers showed that altered expression
of genes involved in copper metabolism significantly modulates disease progression. Intervention in dietary copper levels also
modified Huntington disease phenotypes in the fly and copper reduction decreased the level of oligomerized and aggregated Htt
protein. Critically, substitution of two potential copper-binding residues of Htt, Met8 and His82, completely dissociated the
copper-intensifying toxicity of Htt exon1-polyQ. The authors specifically identified copper binding compounds as an ideal therapy
for Huntington disease. As mentioned above, in relation to our Alzheimer’s disease research, the finding that PBT2 can positively
reduce the phosphorylation of tau, supports the emerging profile of PBT2 as a compound with neuroprotective characteristics to
support neuronal health and function with potential application in Huntington disease.
In
2015, Alterity scientist Associate Professor Kevin Barnham and colleagues published on the ability of PBT2, through its ionophore
properties, to inhibit the over-excitation of the glutamate neuronal transmission pathway that can lead to neuronal death in the
paper entitled, “PBT2 inhibits glutamate-induced excitotoxicity in neurons through metal-mediated preconditioning”
in the journal, Neurobiology of Disease. Such excitotoxicity is implicated in neurodegenerative diseases including Alzheimer
disease and Huntington disease.
Clinical
Trials for Our Product Candidates
ATH434
(formerly PBT434)
We
announced in July 2019 the completion of clinical trial evaluating the safety and pharmacokinetics of ATH434 (formerly PBT434)
in healthy volunteers. The Phase 1 study, conducted in Australia, recruited 70 adult volunteers and ten elderly volunteers with
the key goals of assessing the safety, tolerability and drug disposition within the body (pharmacokinetics) of ATH434 after single
and multiple oral dose administration.
The
volunteers in the single ascending dose phase of the study, made up of four individual dose levels in ascending order, received
a single oral dose of ATH434 and a blood sampling over the next 72 hours. In the multiple ascending dose phase of the study, volunteers
received eight days dosing with ATH434, administered as three successively higher dose levels, with intensive blood sampling for
pharmacokinetics on days 1 and 8. At the two highest multiple dose levels, cerebrospinal fluid was collected at steady state to
determine drug penetration to the site of action in the brain. Older adult (≥65 years) received the highest dose level for
8 days as well.
The
study was successfully completed with systemic exposure to the drug comparable between elderly and healthy volunteers. ATH434
was found to be safe and well tolerated. Adverse event rates were found to be comparable with placebo and no subject experienced
a serious adverse event or an adverse event that led to discontinuation of the study drug.
The
clinical data were presented at the American Academy of Neurology Annual Meeting in in May 2020. The presentation was based on
an abstract entitled A phase 1 Study of PBT434, a Novel Small Molecule Inhibitor of α-synuclein Aggregation, in Adult
and Older Adult Volunteers published in the journal Neurology. In September 2019, the Company presented a poster titled: A
First in Human Study of PBT434, a Novel Small Molecule Inhibitor of α-Synuclein Aggregation at the 2019 International
Congress of Parkinson’s Disease and Movement Disorders (MDS Congress) in Nice, France. The poster presented findings from
the completed Phase 1 trial of ATH434.
We
are focusing on the treatment of Parkinsonian disorders, a group of neurodegenerative disorders which have Parkinsonism as a feature.
Parkinsonism is a general term for slowed movement, stiffness and tremor, and occurs in idiopathic Parkinson disease and atypical
forms such as MSA, Progressive Supranuclear Palsy, among others. The atypical forms of Parkinsonism have a limited response to
available drugs for treating symptoms of Parkinson disease and prominent non-motor symptoms. Alterity’s lead indication
for ATH434 is MSA, a highly debilitating disease with no approved treatments.
MSA
is a rapidly progressive neurodegenerative disorder leading to severe disability and impairment in quality of life. It is a sporadic
disease (not inherited) and typically presents in 50s to 60s. It is an Orphan disease with a prevalence of approximately 5 per
100,000 in the US. In addition to Parkinsonism as described above, affected individuals experience symptoms of autonomic failure
such as orthostatic hypotension, bladder dysfunction, erectile dysfunction and constipation as well as cerebellar impairments
such as impaired gait and difficulty speaking and swallowing.
We
applied to the FDA for Orphan Drug designation for the proposed use of ATH434 for the treatment of MSA, and the designation was
granted in January 2019. Orphan designation entitles Alterity to seven years of market exclusivity for the use of ATH434 in the
treatment of MSA and qualifies the sponsor of the drug for various development incentives of the Orphan Drug Act, including tax
credits for qualified clinical testing.
In
January 2020 we announced that the European Commission (EC) granted Orphan Drug designation to ATH434, which entitles Alterity
to ten years of market exclusivity in the European Union for the use of ATH434 in the treatment of MSA and other benefits including
assistance in developing clinical protocols, reduced fees and access to EU-funded research grants.
In
June 2020 we announced that we had received guidance from the US Food and Drug Administration (FDA) in relation to the development
pathway for ATH434 following the successful completion of its Phase 1 clinical trial. The pre-IND (Investigational New Drug) meeting
was to obtain input on the clinical development plan for ATH434, including feedback on the Phase 2 study design.
We
reached agreement with the FDA on the non-clinical investigations required to support the Phase 2 study. In addition, the
FDA agreed to key aspects of the Phase 2 study design including the proposed patient population, safety monitoring plan and strategy
for evaluating drug exposure during the study.
As
there are currently no approved treatments for MSA and, therefore, no regulatory precedent regarding accepted efficacy endpoints,
we agreed to work together with the FDA to develop an endpoint that is best suited for the MSA patients to be studied. The FDA
has also encouraged us to utilise data from a natural history study that Alterity has planned with clinical and neuroimaging experts
at Vanderbilt University Medical Center in the US.
This
natural history study, referred to as bioMUSE, or biomarkers of Progression in Multiple System Atrophy, will enroll early stage
MSA patients and track change in clinical parameters and biomarkers for up to one year. Natural history studies are important
for characterizing disease progression over time in selected patient populations. Well-conducted, these studies can provide
vital information to optimize clinical trial design and inform the selection of biomarkers to evaluate target engagement of drug
candidates.
In
parallel with the US strategy, we are also pursuing a regulatory pathway in Europe and Australia. Given the uncertainty
of study conduct and recruitment in the COVID-19 era, and with the need to target sites that are minimally impacted, it is prudent
to be flexible in identifying and recruiting sites around the world and maintaining optionality. Planning is underway to
meet with European authorities.
We
have continued to build on our body of scientific evidence for ATH434 drug, with the presentation of pre-clinical evidence of
ATH434 treatment for MSA at the International Congress of Parkinson’s Disease and Movement Disorders at Hong Kong in October
2018. The pre-clinical data demonstrated that ATH434 prevented α-synuclein aggregation, preserved neurons, decreased the
number of glial cell inclusions and reduced motor impairment in an animal model of MSA. These findings are consistent with previous
Parkinsonian disease animal models that have undergone ATH434 treatment.
In
August 2020, we announced that new clinical and experimental pharmacology data has been selected for presentation at the 2020
International Congress of Parkinson’s Disease and Movement Disorders (MDS 2020) and the American Neurological
Association’s 2020 Annual Meeting (ANA 2020). The new data were generated from an experiment testing ATH434 in an
animal model of Multiple System Atrophy (MSA) in the laboratory of Dr. Nadia Stefanova, Professor of Translational
Neurodegeneration Research at the Medical University of Innsbruck. It independently confirmed and extended previous findings
demonstrating that ATH434 reduces α-synuclein pathology, preserves neurons, and improves motor performance. The new
cardiac safety data to be presented are based on the evaluating electrical activity in the heart as measured by the QT
interval. The data reinforces previous safety findings from the Phase 1 clinical study that ATH434 was generally well
tolerated at all doses and had an adverse event profile comparable to placebo in adult and older adult volunteers. The data
indicate that there is no evidence of cardiac liability at clinically tested doses.
PBT2
In
November 2005, we successfully completed the first Phase I trial for PBT2, a double blind, placebo-controlled single dose escalation
study, conducted on 55 healthy male volunteers between the ages of 18 and 50, which was designed to evaluate the safety, tolerability
and pharmacokinetics of PBT2. Data from the study showed that PBT2 was well tolerated with little difference in the incidence
of adverse events between those receiving PBT2 and those receiving the placebo. Additionally, the pharmacokinetic analysis demonstrated
that the drug exposure increased/decreased predictably and in a linear manner, both of which are desirable characteristics for
a central nervous system drug.
In
February 2006, we completed the second Phase I safety clinical trial for PBT2. This trial was a multi-dose escalation trial of
PBT2 conducted in elderly, healthy male and female volunteers completed in December 2005. Volunteers were dosed at a selected
dose for seven days; the dose range was from 200mg to 800mg per day. Both Phase I trials demonstrated that PBT2 was well tolerated
and suitable for progression to Phase II trials in patients with Alzheimer’s disease.
In
February 2008, we reported the top line results of our three month double-blind, placebo-controlled safety and tolerability Phase
IIa study of PBT2 in 80 elderly male and female patients with mild forms of Alzheimer’s disease. We announced that the trial
primary endpoints of safety and tolerability were met and we also announced that with respect to the secondary endpoints, namely
biomarker, cognition and behavioral changes, several significant and promising changes were observed. Specifically, that in the
cerebrospinal fluid (CSF), PBT2 treatment at a 250mg dose resulted in a significant decrease in the target Abeta 42 protein. In
addition, at the 250mg dose, while no significant effect was observed with the ADAS-cog, two of the five NTB tests for improvement
in executive function were significantly improved. In July 2008, the results of the Phase IIa trial were published in The Lancet
Neurology journal.
In
November 2009, an erratum to the July 2008 edition of The Lancet Neurology journal was published that corrected the original
results of the NTB cognitive findings arising from the Phase IIa trial. The corrected results show that in addition to the two
measures of executive cognitive function found to be significantly improved, the overall executive function domain of the NTB,
comprising five cognitive tests, was significantly improved for those patients taking 250mg of PBT2 compared to patients on placebo.
In April 2010, we published an analysis of the responses of individual patients treated with PBT2 in the Phase IIa clinical trial
in the Journal of Alzheimer’s Disease. The analysis demonstrated that there was a significant probability that any
patient that showed cognitive executive function improvement in the trial was being treated with 250mg of PBT2. Moreover, 81%
of patients on the 250mg dose of PBT2 responded better on the executive function of the NTB score than the best performing patient
on placebo. Improvement in ADAS-cog, a measure of memory and cognition, was observed with patients treated with 250mg of PBT2,
almost reaching statistical significance by 12 weeks of the Phase IIa trial. The corrected cognitive data from the Phase IIa trial
together with the additional analysis provides strong evidence of the ability of PBT2 to improve cognitive executive function
as measured by the NTB.
Also
in November 2009, we presented our pre-clinical and clinical information package on PBT2 to the FDA in accordance with the Pre-Investigational
New Drug, or IND, Consultation Program. The meeting provided useful guidance on possible steps to take to open an IND Application
with the FDA to undertake clinical trials in the United States in Alzheimer’s disease or Huntington disease. The meeting
provided us with important information to help form our regulatory strategy for the development of PBT2 in these neurological
indications.
In
November 2011, we announced the approval from the Austin Health Research Ethics Committee based at the Austin Hospital in Melbourne,
to commence a 12 month Phase II imaging trial with PBT2 in patients with prodromal or mild Alzheimer disease. The study was supported
in part by a grant of U.S.$700,000 from the New York based Alzheimer's Drug Discovery Foundation, or ADDF. The trial entailed
forty patients treated for twelve months with either 250mg PBT2 or a placebo. The trial was designed to investigate the effect
of PBT2 on a patient’s beta amyloid burden in the brain as measured by Positron Emission Tomography imaging (PET), secondary
endpoints included brain metabolic activity as measured by F-18-fluorodeoxyglucose, FDG - PET and brain volume by Magnetic Resonance
Imaging, or MRI, and safety. No significant changes in the primary endpoint comparing beta amyloid burden as measured using the
imaging agent, Pittsburgh compound B (PiB) in the 27 patients treated with 250mg PBT2 compared to the 15 patients on placebo.
Confounding interpretation of the result was the observed overall decline in amyloid burden in the placebo group. No improvement
was observed for the secondary endpoints including brain metabolic activity, cognitive and functional measures. However, for patients
treated with PBT2 there was a trend towards preserving brain volume in the hippocampus compared to those patients on placebo.
A key secondary endpoint was the safety profile of PBT2 after 52 weeks treatment – the longest duration of PBT2 exposure
to date in a clinical trial. The adverse event profile of the treatment versus placebo group was equivalent and 40 of the 42 enrolled
participants completed the 52 week trial. Participants were provided the option to continue treatment on PBT2 for a further 52
weeks in an open label study, the ‘IMAGINE Extension study’ and thirty three
participants elected to do so with twenty-seven participants completing the IMAGINE Extension
study. The independent Data Safety Monitoring Board did not identify any safety concerns related to PBT2 over
the combined two year period of the IMAGINE and IMAGINE Extension studies. Unpublished analysis of the IMAGINE Extension
data does not distinguish between 12 and 24 months of exposure to PBT2 on any of the measured trial outcomes. However, exploratory
post-hoc information from the Extension phase suggest that for the cohort of 27 trial participants that completed all 24 months
(11 of the 15 participants that started IMAGINE on placebo together with 16 of the 25 participants that remained on PBT2 for 24
months), the amyloid levels decreased in this cohort compared to an historical control group from the Australian Imaging Biomarker
and Lifestyle (AIBL) study.
In
late 2012 we finalized the enrolment to a Phase II trial to test PBT2 in patients with Huntington disease over six months. The
trial, known as "Reach2HD", was undertaken under an open IND application through the FDA and was conducted in clinical
sites across the United States and Australia. The Phase IIa trial design entailed a double blind placebo controlled study of 109
patients with early to mid-stage Huntington disease. The primary objective for the trial was safety and tolerability of PBT2 in
this Huntington disease patient population. Secondary endpoints included the effect of PBT2 on cognition, behaviour, functional
capacity, motor effects. In addition, a small (n=6) exploratory arm of the study, was undertaken under the guidance of the co-Principal
Investigator of the study, Professor Diana Rosas, using MRI brain imaging to undertake iron mapping and volumetric assessment
in a patient’s brain. Professor Rosas has published that iron and other metals change in concentration and distribution
in the brain with increasing severity of the condition. This study was the first clinical trial with PBT2 in this patient population
and the results were reported in February 2014. The primary objective of the study was achieved with PBT2 being demonstrated as
safe and well tolerated in this first study of PBT2 in Huntington disease.
Cognition
was pre-specified as the primary efficacy endpoint and was assessed using three Composite z-scores selected from individual tests;
Category Fluency, Trail Making Test Part B, Map Search, Symbol Digit Modalities and Stroop Word Reading. The Main Cognition Composite
– comprised of all five tests was not improved with treatment over the six months, nor was the Exploratory Cognition Composite
– comprised of all five tests in addition to the Speeded Tapping Test. However, the Executive Function Composite, comprised
of the Trail Making Test Part B and Category Fluency Test was significantly improved at 12 weeks (p=0.005) and trended towards
improvement at 26 weeks (p=0.069). In the early stage Huntington disease patients, there was a significant improvement in the
Executive Function composite (p=0.038). Of particular note, the Trail Making Test Part B of itself was significantly improved
at 12 weeks (p=0.001) and at 26 weeks (p=0.042).
There
were no significant findings in the other secondary endpoints although there was a small but positive signal in the Total Functional
Capacity score. Interestingly, while the MRI did not detect changes in brain iron distribution in the study, the rate of brain
cortical tissue thinning was greater in the placebo group compared to the two combined PBT2 treatment groups (100mg and 250mg).
In
September 2014, we announced that PBT2 had been granted Orphan Drug designation in the treatment of Huntington disease by the
FDA. Orphan Drug designation confers a number of incentives to drug developers including increased facilitation of communication
with regulators to achieve concurrence on the development of the Orphan drug towards market approval. To achieve Orphan Drug designation,
it must be established that the disease indication is of relatively low prevalence, that there is no existing comparable treatment
option for patients and that the drug offers a plausible treatment. In June 2015, the European Commission approved Orphan Drug
designation for PBT2 for the treatment of Huntington disease, stating that we have shown that PBT2 might be of significant benefit
for patients with Huntington disease. The approval was based on the recommendation of a positive opinion from the EMA Committee
for Orphan Medicinal Products.
During
2015 and 2016, three new PBT2 Phase 1 trials were successfully completed. The data from these trials have provided further safety,
pharmacokinetic and pharmacodynamic information on PBT2 and will assist in the design of Phase 3 protocols for PBT2. These Phase
1 studies comprised:
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A
drug to drug interaction study, ‘PBT2-104’. Based on in vitro metabolism
studies indicating that PBT2 is both a substrate for, and an inhibitor of, CYP1A2, this
study was designed to investigate the potential for drug to drug interactions in healthy
volunteers when PBT2 is concurrently administered with other agents metabolized by this
CYP450 isozyme.
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A
food interaction Study, PBT2-103’. Healthy volunteers were randomized into 2 dosing
groups; one which was administered 250mg PBT2 after a 12 hour fast, the other which was
administered 250mg PBT2 after a prescribed FDA meal. Blood samples were taken over multiple
time points over 24 hours to determine the pharmacokinetic profile of PBT2 and its metabolites.
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Evaluation
of the three pharmacokinetic parameters, absorption, metabolism and excretion (ADME)
of [C]-PBT2 and to estimate the Absolute Bioavailability of PBT2 in healthy volunteers,
‘PBT2-102’ to understand the passage of the drug in humans after administration.
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Notwithstanding
the clinical safety demonstrated to date with PBT2 in our Phase II programs in Alzheimer’s disease and Huntington disease,
in February 2015 we reported that the FDA had placed PBT2 on Partial Clinical Hold, or PCH, based on particular nonclinical neurotoxicology
findings in a dog study. These dog findings limit the dose of PBT2 that we can use in future trials. With the assistance of third
party specialist pharmacometricians, clinical safety physicians and clinical pharmacologists, we have undertaken extensive safety
analyses to characterize the behavior of PBT2 drug exposure in the dog and human and how this translates to the comparative safety
profile in the dog relative to humans. Based on the emerging strong safety profile for PBT2, we have prepared a robust safety
monitoring plan for future trials in Huntington disease. These plans, the pharmacological evidence and a Phase 3 protocol were
submitted to the FDA in 2016 as part of our response to the PCH and to the Swedish Medical Products Agency (MPA) and the United
Kingdom’s Medicines and Healthcare Products Regulatory Agency (MHRA) for non-binding scientific advice. The collective response
from the FDA and advice from the European regulators was that more characterization of the nature of the dog neurotoxicity findings
and its reversibility would be required to support the future development of PBT2 in Huntington disease. We are considering our
options to continue development of PBT2, which may include conducting further toxicology studies, investigating the utility of
lower doses and/or clinical development of PBT2 in alternative therapeutic indications.
Patents
and Licenses
Patent
Matters
Patent
matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and
breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Statutory differences in patentable
subject matter may limit the protection we can obtain on some or all of our inventions outside Australia or prevent us from obtaining
patent protection outside Australia, either of which could adversely affect our business, financial condition and results of operations.
For example, methods of treating humans are not patentable in many countries outside Australia and the United States. Moreover,
since patent applications are not published until at least 18 months from their first filing date and the publication of discoveries
in the scientific literature often lags behind actual discoveries, we cannot be certain that we or any of our licensors were the
first creator of inventions covered by pending patent applications or that we or our licensors were the first to file patent applications
for such inventions. Additionally, the grant and enforceability of a patent is dependent on a number of factors that may vary
between jurisdictions. These factors may include the novelty of the invention, the requirement that the invention not be obvious
in the light of prior art (including prior use or publication of the invention), the utility of the invention, and the extent
to which the patent clearly describes the best method of working the invention.
While
we intend to seek patent protection for our therapeutic candidate products and technologies, we cannot be certain that any of
the pending or future patent applications filed by us or on our behalf will be approved, or that we will develop additional proprietary
products or processes that are patentable or that we will be able to license any other patentable products or processes. We also
cannot be certain that others will not independently develop similar products or processes, duplicate any of the products or processes
developed or being developed by us or licensed to us, or design around the patents owned or licensed by us, or that any patents
owned or licensed by us will provide us with competitive advantages. Furthermore, we cannot be certain that patents held by third
parties will not prevent the commercialization of products incorporating the technology developed by us or licensed to us, or
that third parties will not challenge or seek to narrow, invalidate or circumvent any of the issued, pending or future patents
owned or licensed by us.
Our
commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court of
competent jurisdiction determines that we were infringing any third party patents, we could be required to pay damages, alter
our products or processes, obtain licenses or cease certain activities. We cannot be certain that the licenses required under
patents held by third parties would be made available on terms acceptable to us or at all. To the extent that we are unable to
obtain such licenses, we could be foreclosed from the development, export, manufacture or commercialization of the product requiring
such license or encounter delays in product introductions while we attempt to design around such patents, and any of these circumstances
could adversely affect our business, financial condition and results of operations.
We
may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third
party proprietary rights. Such litigation could result in substantial costs and diversion of effort by us. We may have to participate
in opposition proceedings before the Australian Patent and Trademark Office or another foreign patent office, or in interference
proceedings declared by the U.S. Patent and Trademark Office, to determine the priority of invention for patent applications filed
by competitors. Any such litigation, interference or opposition proceeding, regardless of outcome, could be expensive and time
consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or commercializing
our products and could adversely affect our business, financial condition and results of operations.
In
addition to patent protection, we rely on unpatented trade secrets, know-how and other confidential information as well as proprietary
technological innovation and expertise. Although we have taken steps to protect our trade secrets and unpatented know-how, including
entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees,
consultants and advisers, third parties may still obtain this information or come upon this same or similar information independently.
Patent
Portfolio
Since
June 30, 2019 we have continued to advance our patent portfolio.
The
Company’s previously reported March 2019 provisional patent application, that exemplifies in excess of 180 novel compounds
matured on 13 March 2020 to a PCT application and also to a United States complete application. On 18 June 2020 Alterity Therapeutics
filed another application for a patent that claims another 60 compounds novel compounds. Alterity Therapeutics is confident of
securing both composition of matter and methods of treating diseases claims in both these patents.
In the past 12 months the Company has advanced
those of its patent families that are pending registration, and continues to maintain those of its patent families that comprise
mostly of granted patents, as described below.
Patent
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Invention
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“8-Hydroxyquinoline Derivatives” Filed: July 16, 2003
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Patents in Europe, the USA, New Zealand, Canada, Japan, Russia, Singapore, South Korea, Australia, Israel, China, Mexico and South Africa have been Granted. A patent in Hong Kong has been registered.
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The invention is directed to chemical scaffolds of the 8-Hydroxyquinoline metal protein attenuating compounds (MPAC) class and their utility in the treatment of neurological conditions.
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“Neurologically-Active Compounds” Filed: October 3 , 2003
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Patents in the USA, New Zealand, Canada, Japan, Mexico, India, Australia, China, South Korea, Japan, Israel, South Africa and Singapore have been Granted. A case has been Granted in Europe and has been validated in separate countries. A patent in Hong Kong has been registered.
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The invention is directed to alternative MPAC chemical structures and their utility in the treatment of neurological conditions.
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“Neurologically- Active Compounds” Filed: April 1, 2005
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Patents have been Granted in Singapore, Japan, Mexico, Russia, Australia, the USA, China, Canada, Europe, India, South Korea, Israel, New Zealand and South Africa. A case has been Granted in Europe and has been validated in separate countries. A patent in Hong Kong has been registered.
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The invention is directed to ‘F4’ MPAC chemical structures and their utility in the treatment of neurological conditions and includes Parkinson’s Disease lead compounds.
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“Method of treatment and prophylaxis and agents useful for same" Filed: April 13, 2007
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Patents have been Granted in Australia, Singapore, South Africa, Canada, Japan, Israel, China and New Zealand and the USA. A case has been Granted in Europe and has been validated in separate countries. An application is under examination in Brazil.
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This invention was originally filed to claim the use of MPAC compounds for the treatment of Age related Macular Degeneration.
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“A method of prophylaxis or treatment and agents for same”. Filed: June 22, 2007
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A patent has been Granted in the USA, China, Australia, Canada and Japan. A case has been Granted in Europe and has been validated in separate countries.
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This invention is directed to novel MPAC compounds and compounds for treating certain brain cancers.
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Patent
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Status
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Invention
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“Quinazolinone compounds” Filed: 24 December 2008
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Patents have been Granted in Japan, Australia, Europe and the USA.
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This invention is directed to novel MPAC compounds and to selected MPAC’s used in the treatment of Parkinson’s Disease. Particularly new 2,3 disubstituted F4 compounds.
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“4H-Pyrido(1,2-a)
Pyrimidin-4-one compounds” Filed: 2 December 2015
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PCT National phase patent applications has been filed in Australia, Brazil, Canada, China, EA, EU, India, Japan, Malaysia, NZ, Korea and the USA. A case in the USA has proceed to Grant.
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This invention is directed to novel MPAC compounds for the treatment of neurodegenerative diseases. Particularly new ‘F3’ compounds.
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“Method of treating immunoglobulin light chain amyloidosis” Filed: 1 July 2016
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A PCT patent application has entered National Phase and awaits examination.
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This invention is directed to the treatment of light chain amyloidosis with a known compound.
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“Compounds for Methods of Treating Diseases” Filed 13 March 2020
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A PCT application has been filed.
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This invention is directed to 180 novel compounds and for the treatment of neurodegenerative diseases.
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“A method of the production of 2-substituted-3H-quinazolin-4-ones-I” Filed: 20 March 2020
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An Australian provisional application has been refiled.
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This invention is directed to synthetic routes for making quinazolinone compounds.
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“A method of the production of 2-substituted-3H-quinazolin-4-ones-II” Filed: 20 March 2020
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An Australian provisional application has been refiled.
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This invention is directed to synthetic routes for making quinazolinone compounds.
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“Compounds for Methods of Treating Diseases” Filed 18 June 2020
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An Australian provisional patent application has been filed.
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This invention is also directed to 80 novel compounds and for the treatment of neurodegenerative diseases.
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Competition
The
pharmaceutical industry is extremely competitive. We believe that we will face competition in differing levels of intensity in
all of the areas in which we are conducting research. ATH434, if approved for the treatment of MSA, may compete in a highly competitive
market. Our competitors, which are located worldwide, are numerous and include, among others, major pharmaceutical companies,
biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that
are more effective than any that we are developing, or which would render our technology and products obsolete or non-competitive.
Many of these competitors have greater financial, research and screening capabilities, technical resources and manufacturing and
marketing capabilities than we do. In addition, many of our competitors may have more experience than we do in non-clinical and
human clinical trials of new or improved drugs, as well as in obtaining FDA, EMA, TGA and other regulatory approvals. We cannot
provide assurance that we can compete effectively with these other competitor companies.
There
are currently no approved drugs for the treatment of Multiple system atrophy (MSA). If we are able to successfully develop ATH434
and gain approval for the treatment of MSA, we may compete with the following drug candidates which are in development:
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BHV-3241
(Formerly AZD-3241). This product is being developed by Biohaven, who licensed it from AstraZeneca after a failed Phase 2 study
in MSA. It is thought to act by inhibiting the enzyme myeloperoxidase. A Phase 3 study is ongoing.
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Anle138b.
This product is being developed by Modag, GmBH and is thought to act by dissolving aggregated forms of the alpha-synuclein protein.
They have recently completed a Phase 1 study.
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BIIB101.
This product is being developed by Biogen and is thought to act by interfering with the synthesis of the alpha-synuclein protein.
The product is administered by direct injection into cerebrospinal fluid. A phase 1 study recently started.
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PD04.
This product is being developed by Affiris. The product is a vaccine designed to elicit an immune response to alpha-synuclein
and it is in the preclinical stage.
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Regulatory
Considerations
Our
ongoing research and development activities are, and the production and marketing of our pharmaceutical product candidates derived
from those activities will be, subject to regulation by human research ethics committees and institutional research boards, as
well as numerous governmental authorities in Australia, principally the TGA, the FDA in the United States, the MHRA in the United
Kingdom and the EMA in Europe. Prior to marketing, any therapeutic product developed must undergo rigorous pre-clinical testing
and clinical trials, as well as an extensive regulatory approval process mandated by the TGA and, to the extent that any of our
pharmaceutical products under development are marketed abroad, by foreign regulatory agencies, including the FDA, EMA and MHRA.
Clinical
trials can take many years to complete and require the expenditure of substantial resources. The length of time varies substantially
according to the type, complexity, novelty and intended use of the product candidate. We cannot make any assurances that once
clinical trials are completed by us or a collaborative partner, we will be able to submit as scheduled a marketing approval request
to the applicable governmental regulatory authority, or that such request and application will be reviewed and cleared by such
governmental authority in a timely manner, or at all. Although we intend to make use of fast-track and abbreviated regulatory
approval programs when possible and commercially appropriate, we cannot be certain that we will be able to obtain the clearances
and approvals necessary for clinical testing or for manufacturing and marketing our pharmaceutical products candidates. Delays
in obtaining regulatory approvals could adversely affect the development and commercialization of our pharmaceutical product candidates
and could adversely impact our business, financial condition and results of operations.
During
the course of clinical trials and non-clinical studies, including toxicology studies, product candidates may exhibit unforeseen
and unacceptable drug-related toxicities or side effects. If any unacceptable toxicities or side effects were to occur, we may,
or regulatory authorities may require us to, interrupt, limit, delay or abort the development of our potential products. In addition,
unacceptable toxicities could ultimately prevent the clearance of our product candidates by human research ethics committees,
institutional research boards, the TGA, EMA, FDA or other regulatory authority for any or all targeted indications. Even after
being cleared by a regulatory authority, any of our products may later be shown to be unsafe or not to have its purported effect,
thereby preventing widespread use or requiring withdrawal from the market. We cannot make any assurances that PBT2, PBT434 or
any other product candidates will be safe or effective when administered to patients.
Manufacturing
and Raw Materials
The
manufacture of pharmaceutical products is complex and requires significant expertise and capital investment, including the development
of advanced manufacturing techniques and process controls. We and our contract manufacturers must comply with GMP regulations
and guidelines. Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up
and validating initial production. These problems include difficulties with production costs and yields, quality control, including
stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with
strictly enforced federal, state and foreign regulations. We cannot make any assurances that we will be able to manufacture sufficient
quantities of product candidate in a cost-effective or timely manner. Any delays in production would delay our nonclinical and
human clinical trials, which could adversely affect our business, financial condition and results of operations. We also cannot
make any assurances that we will be able to enter into collaborative or contracting arrangements on acceptable terms with third
party manufacturers that will meet our requirements for quality, quantity and timeliness.
We
expect that we will be required to design and develop new synthetic pathways and formulations for most, if not all, of the products
that we currently intend to develop or may develop in the future. We cannot predict the success of such efforts, the purity of
the products that may be obtained or the nature of the impurities that may result from such efforts. If we are not able to obtain
a suitable formulation or an acceptable purity for any product candidate or an acceptable product specification, nonclinical and
clinical trials would be delayed, which could adversely affect the priority of the development of our product candidates, our
business, financial condition and results of operations. We cannot guarantee that it will be possible to scale up new synthetic
processes or make the necessary validated process improvements to provide sufficient quantities of drug substance for clinical
drug trials, which could indefinitely delay the initiation of clinical trials utilizing drug substance. We also cannot guarantee
that the drug substance will be suitable for high throughput drug product manufacturing. This may adversely impact the cost of
goods or feasibility of market scale manufacture.
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C.
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Organizational
Structure
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We
have two wholly-owned subsidiaries, Alterity Therapeutics Inc. and Alterity Therapeutics UK Limited, incorporated in the United
States and the United Kingdom, respectively.
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D.
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Property,
Plant and Equipment
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Our
executive offices are located at Level 3, 460 Bourke Street, Melbourne, VIC 3000, Australia, where we occupy approximately 223
square meters. The lease for the facility, which originally expires on September 17, 2020, and now has been extended till December
17, 2020, with an annual rent of A$75,820. Our United States office is located at Suite 360, 39899 Balentine Drive, Newark, California
94560, USA, where we occupy approximately 911 square feet. The lease for the facility, which expires on October 31, 2020, has
an annual rent of U.S.$30,063. The Company also utilizes a facility at 30 Flemington Rd, Parkville, VIC 3010 where we occupy approximately
44 square meters. The lease for the facility which expires on 31 July 2021 has an annual rent of A$15,563.
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ITEM
4A.
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UNRESOLVED
STAFF COMMENTS
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Not
applicable.
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ITEM
5.
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OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
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The
following discussion and analysis includes certain forward-looking statements with respect to the business, financial condition
and results of operations of our company. The words "estimate," "project,” “intend," "expect"
and similar expressions are intended to identify forward-looking statements within the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially
from those contemplated by such forward-looking statements, including those risk factors contained in Item 3.D. of this annual
report. You should read the following discussion and analysis in conjunction with our consolidated financial statements and the
notes thereto included in this annual report.
Background
We
were incorporated under the laws of the Commonwealth of Australia on November 11, 1997. The principal listing of our ordinary
shares and listed options to purchase our ordinary shares is on the ASX. From September 5, 2002 until April 8, 2019, our ADSs
traded on the NASDAQ Capital Market under the symbol “PRAN”. On April 8, 2019 we changed our name to Alterity Therapeutics
Limited and our ADSs have traded under the symbol “ATHE” since that date.
Our
consolidated financial statements appearing in this annual report comply with IFRS as issued by IASB. In this annual report, all
references to “U.S. dollars” or “U.S.$” are to the currency of the United States, and all references to
“Australian dollars” or “A$” are to the currency of Australia. All of our revenues are generated in Australian
dollars, except for interest earned on foreign currency bank accounts, and the majority of our expenses are incurred in Australian
dollars.
Overview
We
are a development stage enterprise at an early to mid-stage in the development of our pharmaceutical products that are designed
to treat the underlying causes of neurodegeneration of the brain. We have incurred net losses since inception and expect to incur
substantial and increasing losses for the next several years as we expand our research and development activities and move our
product candidates into later stages of development. All of our product candidates are in discovery phase or early and mid-stage
of development and we face the risks of failure inherent in developing drugs based on new technologies. The process of carrying
out the development of our products to later stages of development may require significant additional research and development
expenditures, including nonclinical testing and clinical trials, as well as for obtaining
regulatory approval. To date, we have funded our operations primarily through the sale of equity securities, proceeds from the
exercise of options, government grants, licensing and research collaborations and interest income.
Since
completing our initial public offering and listing process on the ASX on March 28, 2000, we have concentrated our resources toward
the pursuit of our disease targets. We have completed four Phase I studies of PBT2 and a Phase IIa clinical trial for PBT2 in
patients with Alzheimer’s disease. We have completed the “IMAGINE” Phase II biomarker imaging trial in Alzheimer’s
disease and a fifty-two week open label IMAGINE Extension study and the “Reach2HD” Phase IIa trial in Huntington disease.
In 2019 completed a Phase I clinical trial of ATH434 (formerly PBT434) in healthy volunteers. For details regarding clinical trials
for our lead compounds, see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Product
Candidates.”
Critical
Accounting Estimates
We
prepare our financial statements in accordance with IFRS as issued by IASB. As such, we are required to make certain estimates,
judgments, and assumptions that management believes are reasonable based upon the information available. These estimates, judgments
and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods presented. The significant accounting policies listed in Note 1 to the consolidated
financial statements that management believes are the most critical to aid in fully understanding and evaluating our financial
condition and results of operations under IFRS are discussed below.
Going concern basis. We are a development
stage medical biotechnology company and as such expects to be utilizing cash until our research activities have become marketable.
We have incurred recurring losses since inception including a loss of $13,456,800 in the year ended June 30, 2020 (2019: $12,337,830)
and an operating cash outflow of $9,431,122 in fiscal 2020 (2019: $13,954,818). We expect to continue incurring losses for the
foreseeable future and will need to raise additional capital to continue the development of our planned research and development
programs, and as a result, there is substantial doubt about our ability to continue as a going concern. The consolidated
financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of
our assets and the satisfaction of our liabilities in the normal course of business.
Our
continuing viability is subject to our ability to raise additional capital to finance the continuation of our planned research
and development programs, maintaining implemented cost containment and deferment strategies, and successfully commercializing
our initiatives. We intend to raise new equity funding within the next six months to enable progression of our planned research
and development programs, however there is uncertainty associated with our ability to successfully raise such funds in the time
and amounts needed to meet our requirements.
The
inability to obtain funding, as and when needed, would have a negative impact on our financial condition and ability to pursue
our business strategies. If we are unable to obtain the required funding to operate and to develop and commercialize our product
candidates, we could be forced to delay, reduce or eliminate some or all of our research and development programs, which would
adversely affect our business prospects.
Management and the directors
believe that we will be successful in the above matters and, accordingly, have prepared the financial report on a going concern
basis, notwithstanding that there is a material uncertainty that may cast significant doubt on our ability to continue
as a going concern and that the we may be unable to realize our assets and discharge our liabilities in the normal course
of business.
References to matters that may cast significant
doubt about our ability to continue as a going concern also raise substantial doubt as contemplated by the Public Company Accounting
Oversight Board (“PCAOB”) standards.
Research
and development payments. Expenditure during the research phase of a project is recognized as an expense when incurred. Where
no internally generated intangible assets can be recognized, development expenditure is recognized as an expense in the period
as incurred. Development costs are capitalized if and only if, all of the following are demonstrated:
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the
technical feasibility of completing the intangible asset so that it will be available
for use or sale;
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the
intention to complete the intangible asset and use or sell it;
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the
ability to use or sell the intangible asset;
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how
the intangible asset will generate probable future economic benefits;
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●
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the
availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
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●
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the
ability to measure reliably the expenditure attributable to the intangible asset during
its development.
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Internally-generated
intangible assets, capitalized development costs, are stated at cost less accumulated amortization and impairment, and are amortized
on a straight-line basis over their useful lives from the point at which the asset is ready for use.
Share-based
payments. Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use
of the Black-Scholes model (for options without market conditions) or the Barrier Pricing model (for options with market conditions).
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations. The date used to value share-based payments for non-employees may be different
to the grant date used to value employee share-based payments where service conditions apply. The fair value of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting period for each tranche of equity, based on our estimate
of equity that will eventually vest.
Significant
Costs and Expenses
Research
and development expenses. Our research and development expenses consist primarily of expenses for contracted research and
development activities conducted by third parties on our behalf. Research and development expenses also include costs associated
with the acquisition, development of patents and salaries and fees paid to employees and consultants involved in research and
development activities.
General
and administration expenses. Our general and administration expenses consist of (i) personnel expenses such as directors’
fees, salaries and benefits paid to employees and officers and equity-based payments awarded to directors, officers and employees;
(ii) auditor and accounting expenses which are fees paid to our auditors for services related to annual reports and interim reports
filed or submitted in Australia and the United States and fees paid to other accounting firms in respect of tax and other accounting
advice; (iii) public relations and marketing expenses which are fees paid to outside consultants for services related to ASX and
NASDAQ announcements and presentations; (iv) depreciation expenses; and (v) other administrative and office expenses.
Intellectual
property expenses. Our intellectual property expenses consist of fees paid to our outside counsel for legal fees associated
with patent applications and for the defense of patents.
Other
gains and losses. Other gains and losses consist of foreign exchange gain (loss) which are the net unrealized gain or loss
on cash balances and trade and other payables held in foreign currencies (primarily U.S. dollars, British Pounds and Euros) as
well as net realized gains and losses on foreign currency transactions.
COVID-19
In
December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak
was largely concentrated in China and caused significant disruptions to its economy, it has now spread globally.
The
jurisdictions in which we conduct our business have imposed mandates and regulations or suggested measures to counter the spread
of the COVID-19 virus and control the level of the pandemic within its population and the economic activities of their respective
economies. These collectively have changed over the course of the pandemic and are expected to continue to evolve in response
to the changing nature of the pandemic and the population and economic response to the virus and the many different measures prompted
by the pandemic. We have been affected in a number of ways, such as the way in which we operate our headquarters operations, our
interaction with our scientists and their activities, and planning for and carrying out clinical trials, all of which have experienced
some short-term disruption and may suffer long-term changes in the way we will do business. Actions such as government lock downs
have slowed or, in some cases, temporarily stopped research and development activities and clinical trials. Various safety protocols
for personal interactions may hamper research and development activities.
In
addition to the government mandates for controlling the many different health and economic effects of the COVID-19 virus and pandemic,
individual institutions with which we work, such as hospitals, laboratories and educational institutions have taken actions that
will disrupt the progress of our business plans for the Company and our individual subsidiaries. Most educational institutions
and many laboratories curtailed or limited access to their facilities in the first half of the 2020 year and are still working
out how they will operate going forward; we are expecting that going forward there will be strict limitations on access to these
institutions and facilities for our researchers and research partners. Overall, changes in the way our development activities
can be conducted will result in delays in our conducting research activities, carrying out clinical trials and making regulatory
submissions. The financial effect will be that our development expenses will increase and we will have to obtain additional capital
funding. Any required additional equity funding will be dilutive to the equity of our investors and debt financing will have restrictive
covenants that could adversely affect our business plans and operational objectives. Any further funding that we may need may
not be available or even if available it may not be on terms that are acceptable to the Company.
Results
of Operations
Year
ended June 30, 2020 compared to year ended June 30, 2019
Interest
income
Interest
income decreased to A$17,117 for the year ended June 30, 2020 from A$108,538 for the year ended June 30, 2019, a decrease of A$91,421,
or 84.2%. The decrease in interest income is primarily attributable to the lower interest rates, lower Australian dollar cash
balances and lower utilization of longer-term interest-bearing deposits during the current fiscal year.
Other
Income
We had other income of A$4,951,167 for the year
ending 30 June 2019 relating to eligible research and development activities on which we are entitled to a 43.5% refundable offset
under an Australian tax incentive that was introduced on July1, 2011. The receivable as at 30 June 2019 was subsequently received
as cash in the current period. As per the prior period, and under the same sets of facts, we have applied to the Australian Taxation
Office (ATO) for a determination regarding our eligibility to receive the R&D Tax Incentive as a refundable cash offset. While
a formal determination has not yet been made with respect to our application, we have been advised by the ATO that it is their
preliminary view that we may not receive the tax incentive as a refundable cash offset under the applicable regulations. We are
considering our options, including appealing an unfavorable decision if received. Nevertheless we have not recognized a receivable
and other income of $3,363,433 relating to eligible expenditure for the year ended June 30, 2020.
We had other income of A$122,729 for the year
ended June 30, 2020 relating to government assistance received during the year, from the Australian Governments (at both federal
and state level), in response to the economic and financial challenges in the current economy due to the COVID-19 pandemic.
Research
and development expenses
Our
research and development expenses decreased to A$10,098,439 for the year ended June 30, 2020 from A$12,983,185 for the year ended
June 30, 2019, a decrease of A$2,884,746, or 22.2%. The decrease is attributable to the decrease in activity in relation to the
conduct of our Phase 1 study of our lead product candidate ATH434 which concluded in fiscal year 2019.
General
and administrative expenses
General
and administrative expenses decreased to A$3,446,139 for the year ended June 30, 2020 from A$4,308,352 for the year ended June
30, 2019, a decrease of A$862,213, or 20%. The decrease is attributable to reduced travel, office operating and business development
costs, which were attributable in part to the restrictions imposed as a result of the spread of COVID-19.
Intellectual
property expenses
Intellectual
property expenses, which include patent portfolio costs and intellectual property related legal costs, increased to A$352,922
for the year ended June 30, 2020 from A$322,097 for the year ended June 30, 2019, an increase of A$30,825, or 9.6%.
Foreign
exchange gain (loss)
We
recorded a foreign exchange gain of A$333,055 for the year ended June 30, 2020 compared to a foreign exchange gain of A$349,064
for the year ended June 30, 2019. Foreign exchange gain (loss) reflects the impact of changes in foreign currency exchange rates
on cash that we hold in U.S. dollars, British Pounds and Euros. In the 2020 and 2019 fiscal years, the Australian dollar depreciated
against the U.S. dollar and Euro, which had a favorable impact on the Australian dollar value of our cash held in U.S. dollars
and Euro. In the 2020 fiscal year, we incurred a foreign exchange gain of A$262,977 attributable to the cash balances that we
held in U.S. dollars, and a foreign exchange gain of A$70,078 attributable to foreign currency transactions. In the 2019 fiscal
year, we incurred a foreign exchange gain of A$403,879 attributable to the cash balances that we held in U.S. dollars, and a foreign
exchange loss of A$54,815 attributable to foreign currency transactions.
For
a comparison of our results of operations between year ended June 30, 2019 and year ended June 2018, see Item 5.A. “ Results
of Operations” of our annual report on Form 20-F as filed on August 30, 2019.
Inflation
and Seasonality
Management
believes inflation has not had a material impact on our company’s operations or financial condition and that our operations
are not currently subject to seasonal influences.
Conditions
in Australia
We
are incorporated under the laws of, and our principal offices and research and development facilities are located in, the Commonwealth
of Australia. Therefore, we are directly affected by political and economic conditions in Australia. See Item 3.D. “Key
Information – Risk Factors – Risks Relating to Our Location in Australia” for a description of factors that
could materially affect our operations.
Recently
Issued International Accounting Standards and Pronouncements
New
and amended Accounting Standards and Interpretations issued and effective
We
have adopted IFRS 16 using the modified retrospective approach with an effective date of 1 July 2019, but has not restated comparatives,
as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from
the new leasing rules are therefore recognized in the opening balance sheet on 1 July 2019.
On
adoption of IFRS 16, we recognized lease liabilities in relation to leases which had previously been classified as ‘operating
leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease
payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The weighted average lessee’s
incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 5.20%.
The
associated right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognized in the balance sheet as of June 30, 2020. There were no onerous lease
contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
In
applying IFRS 16 for the first time, we have used the following practical expedients permitted by the standard:
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the
use of a single discount rate to a portfolio of leases with reasonably similar characteristics
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reliance
on previous assessments on whether leases are onerous
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the
accounting for operating leases with a remaining lease term of less than 12 months as of July 1, 2019 as short-term leases, and
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the
use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
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We
have also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for
contracts entered into before the transition date we relied on our assessment made applying IAS 17 and Interpretation 4 Determining
whether an arrangement contains a Lease.
On
impact of adoption, the right-of-use assets of A$88,477 are classified under right-of-use assets in the consolidated statement
of financial position. The corresponding current lease liability of A$77,665 and the non-current lease liability of A$17,073.
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B.
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Liquidity
and Capital Resources
|
We
are a development stage company, have had no sales income to date and as of June 30, 2020, our accumulated deficit totaled A$154,419,061.
We had A$ 9,196,892 of cash and cash equivalents as of June 30, 2020, compared to A$ 14,399,904 as of June 30, 2019. From inception
until our initial public offering in March 2000 we financed our operations primarily through borrowings from two of our then directors,
which were repaid from the proceeds of such offering. Since our initial public offering, we have financed our operations primarily
through sales of equity securities, proceeds from the exercise of options, government grants, licensing and research collaborations
and interest earned on investments. During the period from 2001 to 2006, we were awarded government grants in the aggregate amount
of A$3.3 million.
In September 2009, we raised A$6.0 million before
costs in a private placement to one of our institutional shareholders in the United States of 30 million ordinary shares (equivalent
to 500,000 ADSs on a post reverse ratio basis) at a price of A$0.20 per share (A$12 per ADS on a post reverse ratio basis)). We
also agreed to grant the investor, subject to shareholder approval, options to purchase 10 million ordinary shares (equivalent
to one million ADSs) at an exercise price of A$0.30 per share (A$18 per ADS on a post reverse ratio basis)) that would expire four
years after the date of the issuance of the shares in the September 2013 private placement. We also issued to the investor, based
on an agreed upon formula, an additional 750,000 ordinary shares pursuant to the approval of our shareholders obtained in November
2009.
In July 2010, we raised A$1.15 million (U.S.$1.0
million) before costs in a private placement of 7.065 million of our ordinary shares (equivalent to 117,750 ADSs on a post reverse
ratio basis)) to Quintiles, at a price of A$0.1624 per ordinary share (U.S.$9.74 per ADS on a post reverse ratio basis).
On
February 21, 2011, the ADDF awarded us a grant of U.S.$700,000, to be provided in two equal instalments over two years. The purpose
of the grant was to support a Phase II imaging trial with PBT2 to investigate the effect of PBT2 on the deposition of beta-amyloid
in the brains of patients with mild Alzheimer’s disease The ADDF is based in New York and functions on a venture philanthropy
model. We issued a convertible promissory note to the ADDF in the principal amount of the grant and a five-year warrant to purchase
612,397 ordinary shares of our company at a price per share of A$0.17 (equivalent to U.S.$0.169), being the closing pricing of
our ordinary shares on the ASX on the date of our agreement with ADDF. We also agreed to issue an additional five-year warrant
to purchase U.S. $105,000 of our ordinary shares at a price per share equal to the closing price of our ordinary shares on the
ASX on the date the second instalment of U.S.$350,000 was paid. The note was repaid in full.
In
March 2011, we completed a private placement of our securities to institutional investors for aggregate gross proceeds of approximately
A$6.12 million. Under the terms of the offering, we sold an aggregate of approximately 27.2 million ordinary shares (equivalent
to 453,333ADSs) at a price of A$0.225 per share (A$13.5 per ADS on a post reverse ratio basis). We also granted to the investors
options to purchase up to an aggregate of approximately 6.8 million ordinary shares (equivalent to 113,333 ADSs) at an exercise
price of A$0.225 per share (A$13.2 per ADS on a post reverse ratio basis) that expired .
In
June 2011, we completed a private placement of 5.69 million of our ordinary shares to institutional investors and Quintiles Limited,
at a price of A$0.225 per share, for aggregate gross process of approximately A$1.28 million (U.S.$1.4 million). We also granted
the investors options to purchase 1.42 million ordinary shares at an exercise price of A$0.225 per share that expired on March
24, 2015.
In
July 2011, we entered into an At-The-Market Issuance Sales Agreement with McNicoll, Lewis & Vlak LLC, now known as MLV &
Co. LLC, We issued 2,785,221 million ADSs on a post reverse ratio basis under the At-The-Market Issuance Sales Agreement for gross
proceeds of A$39.4 million. On November 26, 2014 we entered into Amendment No.2 to our At-The-Market Issuance Sales Agreement
to continue the at-the-market equity program. We sold 749,242 of our ADSs on a post reverse ratio basis for aggregate gross proceeds
of approximately A$7.11 million (U.S.$5.54 million) through this facility.
In
October 2012, we raised approximately A$6.0 million through a private placement of 32.5 million ordinary shares (equivalent to
0.54 million ADSs on a post reverse ratio basis) at a price of A$0.185 per ordinary share. The capital was raised in order to
support our two ongoing Phase II clinical trials, the IMAGINE trial and Reach2HD trial.
In
March 2013, we completed a private placement of 36.0 million ordinary shares to Australian institutions and high net worth investors,
at a price of A$0.195 per share, for aggregate gross proceeds of approximately A$7 million.
On
October 13, 2016, we entered into an At-The-Market Issuance Sales Agreement with FBR Capital Markets & Co. and Jones Trading
Institutional Services LLC, which was amended on November 8, 2017. We have raised US$ 5,124,764 under this program.
On
December 28, 2018, we entered into a securities purchase agreement with Life Biosciences whereby Life Biosciences agreed to invest
US$7.5 million in our company. Following shareholder approval, this investment was completed on April 8, 2019 with the issuance
of 269,905,533 ordinary shares at an issue price of A$0.039 per share and 539,811,066 warrants each with an exercise price of
A$0.045 per share and expiring on December 19, 2019. These warrants expired, unexercised.
As
of June 30, 2020, we had a total of 21.55 million unlisted, unexercised options outstanding. The options have exercise prices
ranging from A$0.07 to A$0.11. If all unlisted options were exercised, we would receive consideration of A$2.07 million in total.
From
inception to June 30, 2020, our capital expenditures have totaled A$744,388, consisting of computer equipment, furniture and fixtures,
fit-out costs and laboratory equipment that is being used in connection with our research facility at the University of Melbourne.
Capital expenditures for equipment are depreciated on a straight-line basis over the estimated useful lives of 3 to 20 years,
with a net balance as of June 30, 2020 of A$ 39,503. We currently do not have significant capital spending requirements, but we
expect to continue to engage in capital spending consistent with anticipated growth in our operations and personnel.
We
believe that Australian Government tax incentive scheme relating to eligible research and development activities, introduced on
July 1, 2011, will provide us with significant benefits in future years. Such eligible R&D activities include but are not
limited to:
|
●
|
Core
activities, which are experimental activities whose outcome cannot be known or determined
in advance, but can only be determined by applying a systematic progression of work;
|
|
●
|
Core activities conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved processes and materials); or
|
|
●
|
Supporting
activities that are directly related and designed to support the above).
|
Under
the research and development tax incentive scheme, entities with an aggregated turnover for the income year of less than A$20
million will be entitled to a 43.5% refundable tax incentive. As per the prior period, and under the same sets of facts, we have
applied to the Australian Taxation Office (ATO) for a determination regarding our eligibility to receive the R&D Tax Incentive
as a refundable cash offset. While a formal determination has not yet been made with respect to our application, we have been
advised by the ATO that it is their preliminary view that we may not receive the tax incentive as a refundable cash offset under
the applicable regulations. We are considering our options, including appealing an unfavorable decision if received, nevertheless
we have not recognized a receivable and other income of $3,363,433 relating to eligible expenditure for the year ended June 30,
2020.
We have incurred recurring losses since
inception, including an operating loss of A$13.5 million and A$12.3 million for the years ended June 30, 2020 and 2019, respectively,
and an operating cash outflow of A$9.4 million and A$14.0 million, respectively. We expect to continue incurring losses for the
foreseeable future and will need to raise additional capital to continue the development of our planned research and development
programs. We believe that our cash and cash equivalents on hand as of June 30, 2020 of A$ 9,196,892 is sufficient to meet our forecast
cash outflows for, at least six months from the date of this report, and as a result, there is substantial doubt about our ability
to continue as a going concern. The consolidated financial statements have been prepared assuming that we will continue as
a going concern, which contemplates the realization of our assets and the satisfaction of our liabilities in the normal course
of business.
Our continuing viability is subject to our
ability to raise additional capital to finance the continuation of our planned research and development programs, maintaining implemented
cost containment and deferment strategies, and successfully commercializing our initiatives. We intend to raise new equity funding
within the next six months to enable progression of our planned research and development programs, however there is uncertainty
associated with our ability to successfully raise such funds in the time and amounts needed to meet our requirements.
The inability to obtain funding, as and
when needed, would have a negative impact on our financial condition and ability to pursue our business strategies. If we are unable
to raise the required funding to operate and develop and commercialize our produce candidates, we could be forced to delay, reduce
or eliminate some or all of our research and development programs, which would adversely affect our business prospects.
Management and the directors
believe that the Group will be successful in the above matters and, accordingly, have prepared the financial report on a going
concern basis, notwithstanding that there is a material uncertainty that may cast significant doubt on our ability to continue
as a going concern and that the Group may be unable to realize our assets and discharge our liabilities in the normal
course of business.
References to matters that may cast significant
doubt about the Group’s ability to continue as a going concern also raise substantial doubt as contemplated by the Public
Company Accounting Oversight Board (“PCAOB”) standards.
Cash
Flows
The
following table summarizes our cash flows for the periods presented:
|
|
Year ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
(A$)
|
|
Net cash (used) in operating activities
|
|
|
(9,431,122
|
)
|
|
|
(13,954,818
|
)
|
|
|
(6,245,188
|
)
|
Net cash used in investing activities
|
|
|
(16,744
|
)
|
|
|
(7,022
|
)
|
|
|
(18,417
|
)
|
Net cash generated from(used) in financing activities
|
|
|
3,981,877
|
|
|
|
12,722,309
|
|
|
|
(107,678
|
)
|
Net (decrease) in cash and cash equivalents
|
|
|
(5,465,989
|
)
|
|
|
(1,239,531
|
)
|
|
|
(6,371,284
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
14,399,904
|
|
|
|
15,235,556
|
|
|
|
21,884,957
|
|
Exchange rate adjustments on cash held in foreign currencies
|
|
|
262,977
|
|
|
|
403,879
|
|
|
|
(278,118
|
)
|
Cash and cash equivalents at end of period
|
|
|
9,196,892
|
|
|
|
14,399,904
|
|
|
|
15,235,556
|
|
Net
cash used in operating activities was A$9,431,122, A$13,954,818 and A$6,245,188 during the years ended June 30, 2020, 2019 and
2018, respectively. Our payments to suppliers and employees during the years ended June 30, 2020, 2019 and 2018 were A$14,363,974,
A$17,325,579 and A$9,466,459, respectively. Our operating activity receipts for the years ended June 30, 2020, 2019 and 2018 of
A$ 4,824,880, A$3,251,672, and A$3,022,673 consisted of R&D tax incentive refunds and interest. The A$2,961,605 decrease in
payments to suppliers and employees for the year ended June 30, 2020 when compared to the year ended June 30, 2019 reflects the
decrease in activity since the end of the fiscal year 2019 due to the conclusion of the Phase 1 study of ATH434 during the prior
period. The A$7,859,120 increase in payments to suppliers and employees for the year ended June 30, 2019 when compared to the
year ended June 30, 2018 reflects the increase in activity at the end of the fiscal year due to the conduct of the Phase 1 study
of ATH434 and other research and development activity during the period. During the years ended June 30, 2020, 2019 and 2018,
our payments to suppliers and employees was offset by interest received of A$19,162, A$119,089 and A$198,598, respectively.
Net
cash used in investing activities was A$16,744, A$7,022 and A$18,417 during the years ended June 30, 2020, 2019 and 2018, respectively.
Cash flows used for investing activities was primarily attributable to payments for the purchase of a property and equipment for
the years ended June 30, 2020, 2019 and 2018.
Net
cash generated from(used) in financing activities was A$3,981,877, A$12,722,309 and (A$107,679) for the years ended June 30, 2020,
2019 and 2018. Cash generated from financing activities in the year ended June 30, 2020 and 2019 mainly related to gross proceeds
from the issuance of shares amounting to A$4,363,886 and A$13,084,629 respectively. Cash used in financing activities for the
year ended June 30, 2018 related to costs of raising capital (A$107,679).
Unrealized
foreign exchange gains of A$ 262,977 and A$403,879 respectively were incurred for the years ended June 30, 2020 and 2019 and foreign
exchange loss of A$278,118 for the year ended June 30, 2018. In 2020, the Australian dollar depreciated against the U.S. dollar
by 1.66%. In 2019, the Australian dollar depreciated against the U.S. dollar by 5.16%. In 2018, the Australian dollar depreciated
against the U.S. dollar by 3.61%.
|
c.
|
Research
and Development, Patents and Licenses
|
In
recent years, we have continued our practice of building valuable research collaborations with institutes based in Australia,
the United States, the United Kingdom and other countries to enable us to investigate a variety of therapeutic indications including
Alzheimer’s disease, Huntington disease, Parkinsonian movement disorders and selected cancers. These collaborative arrangements
ensure that we work with well-respected laboratories with specific expertise in screening and animal modelling of relevance to
the particular indication, without incurring ongoing administrative and personnel costs. We maintain in-house patent counsel and
research and development project expertise to coordinate these research collaborations.
Our
research and development expenses consist primarily of expenses for contracted research and development activities conducted by
third parties on our behalf, including personnel, testing facilities and other payments in accordance with our research and clinical
agreements. Research and development expenses also include costs associated with the acquisition and development of patents. Due
to the numerous variables and the uncertain nature of the development of a clinical compound, including obtaining regulatory approvals,
we are not able to reasonably estimate the nature, timing and costs of the future expenditures necessary to complete our research
and development projects, the anticipated completion dates of each project and when material net cash flows from our research
and development programs will commence.
When
a product candidate is identified as suitable for clinical development, we establish a project team to coordinate all non-clinical
and clinical development and manufacturing activities. Typically, we engage a clinical research organization to manage patient
enrollment, data management, clinical site coordination and statistical analysis, as was the case with the development of our
lead compound PBT2 through Phase I and II development and prospectively for Phase III. We manage our manufacturing campaigns through
clinical manufacturing organizations for quality assurance and GMP compliance. All clinical, non-clinical, clinical development
and manufacturing of our compounds is performed in compliance with the appropriate governing authorities, regulators and standards
(for example, the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for
Human Use).
Our
technology does not require the licensing of enabling technology licenses or freedom to operate licenses. Our product candidates
are designed and synthesized by our employees and the intellectual property of such product candidates is owned by us.
We
are a development stage company and while we believe that our technology will offer novel therapeutic strategies into an expanding
market, we cannot predict with any degree of accuracy the outcome of our research or commercialization efforts.
We
have not commercialized any products to date. Accordingly, any trends within the markets in which we operate are expected to have
more direct impact on our business in the event that we are successful in commercializing our product candidates, including ATH434,
PBT2 and new candidate products.
We
will need substantial additional funding in order to complete the development, testing and commercialization of our product candidates.
The commitment to these projects will require additional external funding, at least until we are able to generate sufficient cash
flow from sale of one or more of our products to support our continued operations. If adequate funding is not available, we may
be required to delay, scale back or eliminate certain aspects of our operations or attempt to obtain funds through unfavorable
arrangements with partners or others that may force us to relinquish rights to certain of our technologies, products or potential
markets or that could impose onerous financial or other terms. Management is continuing its efforts to obtain additional funds
so that we can meet our obligations and sustain operations.
|
e.
|
Off-Balance
Sheet Arrangements
|
We
are not a party to any material off-balance sheet arrangements. In addition, we have no unconsolidated special purpose financing
or partnership entities that are likely to create material contingent obligations.
|
f.
|
Tabular
Disclosure of Contractual Obligations
|
The
following table summarizes our minimum contractual obligations as of June 30, 2020. The majority of our contracts for research
and development programs have a termination notice period of 30 days. As of June 30, 2020, we had research and development termination
commitments approximating A$2.0 million. No liability has been recognised within our financial statements for this period. In
addition, we have the ability to scale down our operations and prioritize our research and development programs in neurology to
reduce expenditures as discussed in Item 5.B. Liquidity and Capital Resources.
|
|
Payments
due by period (A$)
|
|
Contractual
Obligations
|
|
Total
|
|
|
less
than
1 year
|
|
|
1-3 years
|
|
|
3-5 Years
|
|
|
more
than
5 years
|
|
Operating
lease obligations
|
|
|
68,821
|
|
|
|
67,953
|
|
|
|
868
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
68,821
|
|
|
|
67,953
|
|
|
|
868
|
|
|
|
-
|
|
|
|
-
|
|
|
ITEM
6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
|
|
A.
|
Directors
and Senior Management
|
Our
directors and executive officers are as follows:
Name
|
|
Age
|
|
Position
|
Geoffrey
P. Kempler
|
|
65
|
|
Chairman
of the Board of Directors and Chief Executive Officer
|
Kathryn
J.E. Andrews
|
|
53
|
|
Chief
Financial Officer
|
David
A. Stamler
|
|
59
|
|
Chief
Medical Officer and Senior Vice President Clinical Development
|
Lawrence
B. Gozlan
|
|
41
|
|
Director
|
Peter
A. Marks(1) (2)
|
|
64
|
|
Director
|
Brian
D. Meltzer(1)(2)
|
|
66
|
|
Director
|
David
A. Sinclair
|
|
51
|
|
Director
|
Tristan
Edwards
|
|
45
|
|
Director
|
|
(1)
|
Member
of the Audit Committee
|
|
(2)
|
Member
of the Remuneration Committee and Share Plan Committee
|
Mr.
Geoffrey Paul Kempler has served as Chairman of our Board of Directors since November 1997, between November 1997 and August
2004 he served as our Chief Executive Officer, and in June 2005 he again assumed the position of Chief Executive Officer. Mr Kempler
is one of the founders of the Group. Mr Kempler is a qualified psychologist. Mr Kempler, who has extensive experience in investment
and business development, has been responsible for the implementation of our strategic plan and the commercialization of our technology.
Ms.
Kathryn Andrews was appointed as Chief Financial Officer of our company on November 4, 2014. From December 2012 to October
2014 Ms. Andrews held a senior role with The CFO Solution, a firm focused on the listed company and life sciences environments.
Between 2007 and 2012 Ms. Andrews provided contract accounting, governance and consulting services to various mining and government
organizations. Between 2002 and 2006 Ms. Andrews was the Chief Financial Officer and Company Secretary of Antisense Therapeutics
Limited. Between 1999 and 2002 Ms. Andrews provided contract accounting and consulting services to various mining and resources,
technology and government organizations. Between 1989 and 1998 Ms. Andrews was employed by Rio Tinto Limited in a variety of accounting,
auditing and financial management roles. Between 1985 and 1989 Ms. Andrews was employed by BP Australia Limited in an accounting
role. Ms. Andrews is a Certified Practicing Accountant and holds a Bachelor of Commerce from the University of Melbourne.
Dr.
David Stamler has served as our Chief Medical Officer and Senior Vice President, Clinical Development since May 2017. Prior
to joining Alterity, Dr. Stamler served as the Vice President, Clinical Development and Therapeutic Head for Movement Disorders
at Teva Pharmaceutical Industries, from 2015 to 2017. Dr. Stamler was the Chief Medical officer of Auspex Pharmaceuticals from
January 2011 until 2015 when Teva acquired Auspex. Prior to that, Dr. Stamler served as Senior Vice President and Chief Medical
Officer at XenoPort, Inc., a publicly-traded biopharmaceutical company, from 2008 to 2010 and Chief Scientific Officer and Head
of Drug Development at Prestwick Pharmaceuticals, Inc., a private pharmaceutical company, from 2005 to 2008. Prior to Prestwick
Pharmaceuticals, Inc., Dr. Stamler worked at Fujisawa Pharmaceutical Co. and its subsidiaries from 1997 to 2005, in various leadership
roles, including Vice President, Research and Development, Medical Sciences at Fujisawa Healthcare, Inc. from 2003 to 2005 and
as Vice President, Clinical Research Center at Fujisawa Research Institute of America from 2000 to 2003. Dr. Stamler began his
career at Abbott Laboratories, a publicly-traded global pharmaceuticals and healthcare products company, where he served in various
positions from 1993 to 1997, including Director of Clinical Research, Pharmaceutical Products for the International Division.
Dr. Stamler received an M.D. from the University of Chicago—The Pritzker School of Medicine and a B.A. in Biology from the
University of Chicago.
Mr.
Lawrence Gozlan has served as a director of our company since August 2011. Mr. Gozlan, a leading biotechnology investor and
advisor, is the Chief Investment Officer and Founder of Scientia Capital, a specialised global investment fund focused exclusively
in life sciences. Scientia Capital was founded to provide high level expertise and to manage investments for high net worth individuals,
family offices and institutional investors wanting exposure to the biotechnology industry. Prior to this, Mr. Gozlan was responsible
for the largest biotechnology investment portfolio in Australia as the institutional biotechnology analyst at QIC (“the
Queensland Investment Corporation”), an investment fund with over A$60 billion under management. He previously worked as
the senior biotechnology analyst in the equities team at Foster Stockbroking Pty Ltd, and gained senior corporate finance experience
advising life sciences companies at Deloitte. Mr. Gozlan is currently a Director of Opthea Limited, an ASX listed drug development
company and a number of private biotechnology companies in the USA. He holds a Bachelor of Science with Honors in microbiology
and immunology from the University of Melbourne.
Mr.
Peter Marks has served as a director of our company since July 2005. During the period November 21, 2006 to October 20, 2011,
Mr. Marks has also served as Executive Chairman of iSonea Ltd, formerly KarmelSonix Ltd, a medical devices company listed on the
ASX that was focused on developing and commercializing a range of devices in the respiratory and medicine space. For over 13 years
until the end of August 2014, Mr. Marks was a Director of Peregrine Corporate Ltd, an Australian-based investment banking and
corporate advisory firm. Mr. Marks was until late 2016, a Director of Armadale Capital Plc (formerly Watermark Global Plc), an
AIM listed investment company, focused on natural resources projects based principally in Africa with its current major investments
being a gold exploration company in DRC and a coal briquetting operation in South Africa. Mr. Marks is currently a Consultant
at Henslow Pty Ltd (formerly Halcyon Corporate Pty Ltd), a corporate and capital markets advisory firm specializing in advising
small to mid-cap companies. Mr. Marks was until 31 March, 2020 a non-executive Director of Fluence Corporation Ltd. (formerly
Emefcy Group Limited and prior to that Savcor Group Limited), an ASX listed municipal & industrial waste water technology
business. Mr. Marks is also a non-executive director of Terragenic International Ltd, (renamed Electriq~Global Ltd) an unlisted
public company developing a novel hydrogen fuel system. He also currently serves as Director of ASX listed biotech company, Noxopharm
Ltd. which is progressing a clinical program in using chemical sensitisers to enhance the effectiveness of existing chemotherapy
drugs and radiation therapies and a Director of Noxopharm subsidiary, Nyrada Inc, which is developing several pre-clinical non-oncology
projects, and which was listed on ASX in January 2020. From September 1998 until March 2001, Mr. Marks was employed by KPMG Corporate
Finance Ltd (Australia), where he rose to Director and was responsible for heading up the equity capital markets group in Melbourne.
From January 1992 until July 1994, Mr. Marks served as Head of the Melbourne Companies Department at the ASX and was founding
Director of Momentum Funds Management Pty Ltd, an Australian venture capital firm. From December 1990 until December 1991, Mr.
Marks served as Director of Corporate Finance at Burdett Buckeridge & Young Ltd in their Melbourne offices, from August 1988
until November 1990, he held senior corporate finance position at Barings Securities Ltd, and from July 1985 until July 1988,
he served as an Associate Director of McIntosh Securities, now Merrill Lynch Australia. In his roles with these various financial
institutions, Mr. Marks was responsible for advising a substantial number of listed and unlisted companies on issues ranging from
corporate and company structure, to valuation, business strategies, acquisitions and international opportunities. Mr. Marks holds
a Bachelor of Economics degree, a Bachelor of Law degree and Graduate Diploma in Commercial Law from Monash University in Melbourne,
Australia, and an MBA degree from the Scottish School of Business at the University of Edinburgh.
Mr.
Brian Derek Meltzer has served as a director of our company since December 1999. Subsequent to several years as Chief Economist
of ICI Australia (now Orica), Mr Meltzer spent 25 years in investment banking. His breadth of expertise includes major property
transactions, corporate advisory, corporate finance, management buyouts, venture capital and large-scale syndications. He has
held a number of Board and Board Advisory roles for private companies in the human resources, health, aged care, software, entertainment
and finance sectors, including Director of a federal government licensed Innovation Investment Fund. Mr Meltzer is also a Director
of the Australia-Israel Chamber of Commerce, Chairman of Independence Australia and Chairman of a privately owned corporate health
and wellness business.
Mr.
Tristan Edwards was appointed as a director on April 8, 2019. Mr Edwards is the co-founder and President of Life Biosciences
LLC. Tristan has extensive global financial capital markets, regulatory compliance, and fiduciary oversight experience, following
a 16-year investment career spanning leading financial organizations across Australia, London, HK and Singapore. His professional
background has been in senior investment roles at leading financial groups such as Goldman Sachs, Brevan Howard, Trafalgar Capital
and Mosaic Asset Management. He started his career as an analyst with the Australian Commonwealth Department of Finance. Tristan
has a degree in Commerce from the University of Tasmania, and held the CFA, CMT and CPA designations.
Dr.
David Andrew Sinclair was appointed as a director on April 8, 2019. He is the co-founder and Chairman of Life Biosciences
LLC. He was recruited to Harvard Medical School in 1999 and is a tenured professor in the Department of Genetics and a co-director
of the Paul F. Glenn Center for the Biology of Aging Research and serves on the non-profit boards of the American Federation for
Aging Research and the Sanford Lorraine Cross Award. Dr. Sinclair is regarded as one of the world’s leading researchers
on aging and age-associated diseases, with key contributions to understanding why we age and how to slow and even reverse the
process. He has co-founded multiple biotechnology and genomics companies working on aging, neurological, metabolic, infectious
and rare diseases. He has received more than 35 awards for his medical research, innovation, and teaching. In 2014, he was named
in TIME Magazine’s “100 Most Influential People in the World” and in 2018 was named in TIME Magazine’s
“50 Most Influential People in Health Care”. In 2018 Dr Sinclair was appointed an Officer of the Order of Australia
for “distinguished service to medical research into the biology of aging and lifespan extension, as a geneticist and academic,
to biosecurity initiatives, and as an advocate for the study of science”.
There
are no family relationships among our directors and senior executives.
The
following table sets forth all compensation we paid for the year ended June 30, 2020 with respect to each of our executive officers
and directors during the 2020 fiscal year.
|
|
Salaries, fees,
commissions,
bonuses
and other
|
|
|
Pension, retirement and other similar
benefits
|
|
|
|
A$
|
|
|
A$
|
|
Geoffrey P. Kempler (1)
|
|
|
412,544
|
|
|
|
33,465
|
|
Kathryn Andrews (1)
|
|
|
228,788
|
|
|
|
29,069
|
|
David A. Stamler (1)
|
|
|
625,470
|
|
|
|
-
|
|
Peter A. Marks
|
|
|
60,000
|
|
|
|
-
|
|
Brian D. Meltzer
|
|
|
73,059
|
|
|
|
6,941
|
|
Lawrence B. Gozlan
|
|
|
60,000
|
|
|
|
-
|
|
David A. Sinclair
|
|
|
45,000
|
|
|
|
-
|
|
Tristan Edwards
|
|
|
45,000
|
|
|
|
-
|
|
All executive officers and directors as a group (8 persons)
|
|
|
1,549,861
|
|
|
|
69,475
|
|
|
(1)
|
Base
Fee includes movements in annual leave provision for Mr. Kempler, Mr. Stamler and Ms. Andrews accrued in accordance with their
employment contracts.
|
In
accordance with the approval of our shareholders at our 2004 annual general meeting of shareholders, the aggregate amount available
per annum for the remuneration of our non-executive directors for their services (payable in cash, ordinary shares or options)
is A$1,250,000.
As
of June 30, 2020, our directors and executive officers as a group, then consisting of eight persons, held options to purchase
13,250,000 of our ordinary shares. Of such options, (i) options to purchase 4,500,000 ordinary shares exercisable for A$0.07 consideration
on or before June 6, 2022; and (ii) options to purchase 8,750,000 ordinary shares exercisable for A$0.11 consideration on or before
December 14, 2022. All such options were granted under our 2004 Employees’, Directors’ and Consultants’ Share
and Option Plan. See Item 6.E. “Directors, Senior Management and Employees - Share Ownership – Stock Option Plans.”
Agreement
with Chief Executive Officer. On September 21, 2007, we entered into an agreement with Mr. Geoffrey Kempler, a director, in
connection with his employment as our Chief Executive Officer. Under the agreement, we agreed to pay Mr. Kempler a base salary
of A$386,400 per annum (which may be increased at the discretion of our Board of Directors). Mr. Kempler is entitled to a bonus
of A$6,000 for holding regular meetings (minimum twice a year) of the full Research and Development Advisory Board. Mr. Kempler
is entitled to up to 20 days’ vacation a year (vacation days that are not used in any calendar year will be carried over
for use in the following year to a maximum carry-over of two years) and reimbursement of reasonable business expenses incurred
in the performance of his duties. Mr. Kempler is also entitled to participate in the employee benefits established by our company,
as applicable to executives, including, without limitation, a Section 401(k) retirement plan, health, dental, life insurance and
short and long term disability plans. The agreement contains customary confidentiality provisions.
In
the event of termination of Mr. Kempler’s employment:
|
●
|
By
our company without cause (as defined in the agreement) or by Mr. Kempler with good reason
(as defined in the agreement), he will be entitled to: (i) the sum of A$1 million
provided we have sufficient capital requirements to fulfill this obligation within 90
days of termination date; (ii) business expenses that have not been reimbursed and
accrued and unused vacation days; and (iii) the acceleration of the vesting of any
unvested options to purchase ordinary shares which may be purchased during the remainder
of the exercise period of such options.
|
|
●
|
By
our company with cause (as defined in the agreement) or by Mr. Kempler without good reason
(as defined in the agreement), he will be entitled to business expenses that have not
been reimbursed and accrued and unused vacation days. Mr. Kempler will only be permitted
to exercise unvested options to purchase shares that had been granted to him prior to
the employment agreement.
|
|
●
|
Due
to death or disability (as defined in the agreement), we shall pay Mr. Kempler or his
estate, as applicable, all accrued base salary, pro-rata bonus, business expenses that
have not been reimbursed and accrued, unused vacation days (and in the case of disability,
less such amounts under any disability policy maintained by our company). Mr. Kempler
or his estate, as applicable, will be entitled to exercise vested options for ordinary
shares.
|
Agreement
with Chief Financial Officer. On November 11, 2014, we entered into an agreement with Ms. Kathryn Andrews in connection with
her employment as our Chief Financial Officer. In the event of termination of Ms. Andrews’s employment:
|
●
|
By
our company without cause (as defined in the agreement) or by Ms. Andrews, a 30 day notice
period is required. Ms. Andrews will be (i) entitled to business expenses that have not
been reimbursed and accrued and unused leave entitlements; and (ii) must exercise unexercised
options within 30 days after the date of termination.
|
|
●
|
By
our company with cause (as defined in the agreement), no notice period is required. Ms.
Andrews will be entitled to business expenses that have not been reimbursed and accrued
and unused leave entitlements. Ms. Andrews will be (i) entitled to business expenses
that have not been reimbursed and accrued and unused leave entitlements; and (ii) must
exercise unexercised options within 30 days after the date of termination.
|
Agreement
with Chief Medical Officer and Senior Vice President, Clinical Development. On April 18, 2017, we entered into an agreement
with Dr. David Stamler in connection with his employment as our Chief Medical Officer and Senior Vice President, Clinical Development.
In the event of termination of Dr. Stamler’s employment:
|
●
|
By
our company without cause (as defined in the agreement) or by Dr. Stamler with good reason,
a 3-month notice period is required, increasing to a 6-month notice period after 18 months
of employment. Dr. Stamler will be entitled to (i) an amount equal to seventy-five percent
of his current annualized salary; (ii) business expenses that have not been reimbursed
and accrued and unused leave entitlements; and (iii) must exercise unexercised options
within 30 days after the date of termination.
|
|
●
|
By
our company with cause (as defined in the agreement), no notice period is required. Dr.
Stamler will be (i) entitled to business expenses that have not been reimbursed and accrued
and unused leave entitlements; and (ii) must exercise unexercised options within 30 days
after the date of termination.
|
Introduction
Our
Board of Directors is elected by and accountable to our shareholders. Our Board of Directors’ responsibilities are divided
into operating activities, financial and capital markets activities and scientific activities. The Chairman of our Board of Directors,
currently Mr. Geoffrey Kempler, is responsible for the management of the Board of Directors and its functions.
Election
of Directors
Directors
are elected at our annual general meeting of shareholders. Under our Constitution, the term of office of our directors are staggered,
such that at every annual general meeting of shareholders one-third, rounded down to the nearest whole number, of the directors,
except a Managing Director, must retire from office and may offer himself/herself for re-election. No director, except a Managing
Director, shall retain office for a period in excess of three years without submitting for re-election. Our Board of Directors
has the power to appoint any person to be a director, either to fill a vacancy or as an additional director (provided that the
total number of directors does not exceed the maximum allowed by law), and any director so appointed may hold office only until
the next annual general meeting when he or she shall be eligible for election. Mr. Kempler is our Managing Director. Messrs. Lawrence
Gozlan and Peter Marks must retire and may stand for re-election at our 2020 annual general meeting of shareholders.
Non-Executive
and Independent Directors
Australian
law does not require a company to appoint a certain number of independent directors to its board of directors or audit committee.
Under
the rules of the NASDAQ Stock Market, a majority of our Board of Directors must qualify as independent directors within the meaning
of the rules of the NASDAQ Stock Market, each of whom satisfies the respective “independence” requirements of the
NASDAQ Stock Market Rules and the Securities and Exchange Commission. Our Board of Directors has determined that each of Messrs.
Peter Marks and Brian Meltzer qualifies as an independent director under the NASDAQ Stock Market and the Securities and Exchange
Commission. As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we are permitted to follow certain
home country corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules. This includes NASDAQ
rule 5605(b)(1) requiring a majority of independent directors.
Committees
of the Board of Directors
Our
Board of Directors has established the following committees:
Audit
Committee. The NASDAQ Stock Market rules require us to establish an audit committee comprised of at least three members,
each of whom is financially literate and satisfies the respective “independence” requirements of the Securities and
Exchange Commission and NASDAQ and one of whom has accounting or related financial management expertise at senior levels within
a company. As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we are permitted to follow certain
home country corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules. This includes the
Rule related to Audit Committee Composition rule 5605(c)(2)(A)): we may have an audit committee composed of two members instead
of “at least three members”.
Our
Audit Committee assists our Board of Directors in overseeing the accounting and financial reporting processes of our company and
audits of our financial statements, including the integrity of our financial statements, compliance with legal and regulatory
requirements, our independent public accountants’ qualifications and independence, the performance of our internal audit
function and independent public accountants, and such other duties as may be directed by our Board of Directors. The Audit Committee
is also required to assess risk management. The audit committee meets at least four times per year.
Our
Audit Committee currently consists of two board members, each of whom satisfies the “independence” requirements of
the Securities and Exchange Commission and the NASDAQ Market Rules. Our Audit Committee is currently composed of Messrs. Marks
and Meltzer. Our Board of Directors has determined that Mr. Meltzer meets the definition of an audit committee financial expert,
as defined by rules of the Securities and Exchange Commission.
Remuneration Committee. Our Board of Directors
has established a Remuneration Committee, which is comprised solely of independent directors, within the meaning of the NASDAQ
Stock Market Rules. The Remuneration Committee is responsible for reviewing the salary, incentives and other benefits of our executive
officers and to make recommendations on such matters for approval by our Board of Directors. The Remuneration Committee is also
responsible for overseeing and advising our Board of Directors with regard to the adoption of policies that govern our compensation
programs, including share and ADS option and employee benefit plans. Additionally, the Remuneration Committee administers our
share and ADS option plans and any other employee benefit plans through a sub-committee that it established for this purpose (see
Share Plan Committee below). Messrs. Marks and Meltzer are the current members of the Remuneration Committee, each of whom qualifies
as an “independent director” within the meaning of the NASDAQ Stock Market Rules.
Share
Plan Committee. Our Remuneration Committee has established a sub-committee, the Share Plan Committee, which administers
our share and ADS option plans. Messrs. Marks and Meltzer are the current members of the Share Plan Committee, each of whom qualifies
as an “independent director” within the meaning of the NASDAQ Stock Market Rules.
Directors’
Service Contracts
Except
for the agreement with Mr. Kempler in connection with his employment as our Chief Executive Officer, as described above, there
are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the
other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries.
Indemnification
of Directors and Officers
Our
Constitution provides that, subject to the Australian Corporations Act, every director, secretary, manager or officer of our company
or any person employed by our company as auditor shall be indemnified out of our funds against all liability incurred by such
person as a director or officer in defending proceedings, whether civil or criminal, in which judgment is given in the persons
favor or in which the person is acquitted in connection with any application under the Australian Corporations Act in which relief
is granted to the person by a Court.
Under
our Constitution no director, auditor or other officer shall be liable for (i) any acts, receipts, neglect or defaults of any
other director or officer for joining in any receipt or other act for conformity; (ii) any loss or expense that may happen to
us through the inefficiency or deficiency of title to any property acquired by order of the directors or on our behalf; (iii)
the inefficiency or deficiency of any security in or upon which any of our monies shall be invested; (iv) any loss or damage arising
from bankruptcy, insolvency or tortuous act of any person with whom any monies, securities or effects shall be deposited; (v)
any loss occasioned by any error of judgment, omission, default or oversight on the persons part; or (vi) any other loss damage
or misfortune whatsoever which shall happen in relation to those things unless the same shall happen through the persons own negligence,
default, breach or duty, breach of trust or dishonesty.
In
addition, our Constitution provides that to the extent permitted by law, we may pay, or agree to pay, a premium in respect of
a contract insuring a person who is or has been an officer of our company or one of our subsidiaries against a liability:
|
●
|
incurred
by the person in his or her capacity as an officer of our company or a subsidiary of
our company provided that the liability does not arise out of a conduct involving a willful
breach of duty in relation to our company or a subsidiary of our company; or
|
|
●
|
for
costs and expenses incurred by that person defending proceedings, whatever their outcome.
|
We
maintain a directors’ and officers’ liability insurance policy. We have established a policy for the indemnification
of our directors and officers against certain liabilities incurred as a director or officer, including costs and expenses associated
in successfully defending legal proceedings.
As
of June 30, 2020, we had 12 employees. Of such employees, eight persons are employed in research and development and four persons
in management and administration. Eight employees are located in Australia and four employees are located in the United States.
As
of June 30, 2019, we had 14 employees. Of such employees, nine persons are employed in research and development and five persons
in management and administration. Ten employees are located in Australia and four employees are located in the United States.
As
of June 30, 2018, we had 14 employees. Of such employees, nine persons were employed in research and development and five persons
in management and administration. Ten employees were located in Australia and four employees were located in the United States.
Australian
and US labor laws and regulations apply to our employees accordingly. The laws concern various matters, including severance pay
rights at termination, retirement or death, length of work day and work week, minimum wage, overtime payments and insurance for
work-related accidents.
Beneficial
Ownership of Executive Officers and Directors
The following table sets forth certain information
as of September 7, 2020 regarding the beneficial ownership of our ordinary shares
by each of our directors and executive officers and by all our directors and executive officers as a group:
Name
|
|
Number of Ordinary Shares Beneficially Owned (1)
|
|
|
Percentage of
Ownership (2)
|
|
Geoffrey P. Kempler (3)
|
|
|
23,011,000
|
|
|
|
2.08
|
%
|
Kathryn J.E. Andrews (4)
|
|
|
500,000
|
|
|
|
*
|
|
David A. Stamler (5)
|
|
|
4,000,000
|
|
|
|
*
|
|
Lawrence B. Gozlan (6)
|
|
|
1,250,000
|
|
|
|
*
|
|
Peter A. Marks (7)
|
|
|
1,293,111
|
|
|
|
*
|
|
Brian D. Meltzer (8)
|
|
|
1,576,666
|
|
|
|
*
|
|
David A. Sinclair (9)
|
|
|
-
|
|
|
|
*
|
|
Tristan Edwards (9)
|
|
|
-
|
|
|
|
*
|
|
All directors and executive officers as a group (8 persons)
|
|
|
31,630,777
|
|
|
|
2.86
|
%
|
|
1.
|
Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange Commission, and generally includes voting
or investment power with respect to securities. Ordinary shares relating to options currently exercisable or exercisable within
60 days of the date of the above table are deemed outstanding for computing the percentage of the person holding such securities
but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect
to all shares shown as beneficially owned by them.
|
|
2.
|
The
percentages shown are based on 1,106,554,032 consisting of 1,085,004,032 ordinary shares and 21,550,000 unlisted options, issued
and outstanding as of August 17, 2020.
|
|
3.
|
Includes
options to purchase 5,000,000 ordinary shares that are exercisable for A$0.11 consideration on or before December 14, 2022. Of
the 18,011,000 outstanding ordinary shares, 30,000 ordinary shares are held of record by Mr. Kempler, 14,165,000 ordinary shares
are held by Baywick Pty Ltd., an Australian corporation owned by Mr. Kempler, 156,000 ordinary shares are held by Sadarajak Pty
Ltd., an Australian corporation owned by Mr. Kempler, 90,000 ordinary shares are held of record by Crystal Triangle Pty Ltd.,
an Australian corporation owned by Mr. Kempler and 2,970,000 ordinary shares are held of record by NRB Developments Pty Ltd.,
an Australian corporation in which Mr. Kempler holds a 50% interest, 600,000 ordinary shares are held of record by Sandhurst Trustees
Ltd. Mr. Kempler may be deemed to be the beneficial owner of the ordinary shares held of record by Baywick Pty Ltd., Crystal Triangle
Pty Ltd., NRB Developments Pty Ltd. and Sandhurst Trustees Ltd.
|
|
4.
|
Includes
options to purchase 500,000 ordinary shares that are exercisable for A$0.07 consideration on or before 6 June 2022.
|
|
5.
|
Includes
options to purchase 4,000,000 ordinary shares that are exercisable for A$0.07 consideration on or before June 6, 2022.
|
|
6.
|
Includes
options to purchase 1,250,000 ordinary shares that are exercisable for A$0.11 consideration on or before December 14, 2022.
|
|
7.
|
Includes
options to purchase 1,250,000 ordinary shares that are exercisable for A$0.11 consideration on or before December 14, 2022. The
43,111 outstanding ordinary shares are held of record by Lampam Pty Ltd., an Australian corporation owned by Mr. Peter Marks.
|
|
8.
|
Includes
options to purchase 1,250,000 ordinary shares that are exercisable for A$0.11 consideration on or before December 14, 2022. The
326,666 outstanding ordinary shares are held of record by Navigator Australia Ltd., a superannuation fund of Mr. Meltzer.
|
|
9.
|
Mr.
Edwards is President and Mr. Sinclair is Chairman of Life Biosciences LLC, the beneficial owner of 269,905,533 ordinary shares,
representing approximately 24.88% of our outstanding ordinary shares.
|
Stock
Option Plans
In
November 2004, we adopted the 2004 Employees’, Directors’ and Consultants’ Share and Option Plan, or the 2004
ASX Plan, and the 2004 American Depository Share (ADS) Option Plan, or the 2004 ADS Plan. In November 2018 we adopted an updated
ADS plan with substantially the same terms as the 2004 ADS Plan for a new ten-year term. For the description below, the 2004 ASX
Plan and 2018 ADS Plan are referred to together as the Stock Option Plans. Under the 2004 ASX Plan we may issue ordinary shares
and under the 2018 ADS Plan we may issue ADSs. We were initially authorized to issue under the Stock Option Plans up to an aggregate
12,000,000 ordinary shares or ADSs representing 12,000,000 ordinary shares. Pursuant to subsequent shareholder approvals, the
most recent of which was in November 2015, we are entitled to issue up to an aggregate 60,000,000 ordinary shares (or ADSs representing
60,000,000 ordinary shares) under the Stock Option Plans. Any increase in such maximum number of ordinary shares or ADSs issuable
under the Stock Option Plans is subject to shareholder approval.
2004
ASX Plan. The purpose of the 2004 ASX Plan is to promote the interest of our company and the interest of the employees,
directors and consultants of our company and its subsidiaries. Under the 2004 ASX Plan, we may issue to employees, directors and
consultants of our company and its subsidiaries, from time to time, ordinary shares, either by issuance of ordinary shares or
under options to purchase ordinary shares granted under the 2004 ASX Plan.
The
2004 ASX Plan is administered by the Share Plan Committee, a sub-committee of the Remuneration Committee. For the purpose of the
disclosure below, the term “Remuneration Committee” shall refer to the Remuneration Committee or Share Plan Committee,
as applicable. Subject to Board approval where required by applicable law, the Remuneration Committee has the authority, in its
sole discretion, to grant options under the 2004 ASX Plan, to interpret the provisions of the 2004 ASX Plan and to prescribe,
amend, and rescind rules and regulations relating to the 2004 ASX Plan or any issue or grant thereunder as it may deem necessary
or advisable, subject to any other approval if required by applicable law. All decisions made by the Remuneration Committee pursuant
to the provisions of the 2004 ASX Plan will be final, conclusive and binding on all persons.
The
number of shares issued or options granted, the exercise price and option term or options granted, the vesting schedule and escrow
periods of shares issued and options granted, under the 2004 ASX Plan are determined by the Remuneration Committee, in accordance
with the provisions of the ASX Plan, and specified in an offer document from our company and accepted by the eligible person,
subject to the terms of the 2004 ASX Plan. Options granted under the 2004 ASX Plan will be unlisted and exercisable at an exercise
price equal to less than market value of an ordinary share on the ASX at the date of grant, or such other exercise price that
the Remuneration Committee determines to be appropriate under the circumstances. The term of an option granted under the 2004
ASX Plan will be determined by the Remuneration Committee; however, no option will be exercisable after the expiration of ten
years from the date of its grant. Except as otherwise provided in the 2004 ASX Plan or determined by the Remuneration Committee
and set forth in an offer document, the issuance of shares and exercise of options granted under the 2004 ASX Plan will either
(i) be subject to an escrow, under which such shares or options cannot be disposed of or exercised, respectively, within six months
from the date of issue or grant (or 12 months if issued or granted to a director); or (ii) will vest over a four year period in
four equal installments, 25% at the end of each year from the date of grant. Shares issued and options granted under the 2004
ASX Plan may be subject to other performance criteria and hurdles, as determined by the Remuneration Committee.
2018
ADS Plan. The purpose of the 2018 ADS Plan is to promote the interests of our company and non-Australian based employees,
officers, consultants, independent contractors and directors. Options granted under the 2018 ADS Plan may be incentive stock options,
as provided in Section 422 of the Internal Revenue Code of 1986, as amended, or the Code, or non-qualified stock options. Incentive
stock options may only be granted to employees of our company and its subsidiaries (including, without limitation, officers and
directors who are also employees of our company and its subsidiaries) and may not be granted to any owner of 10% or more of the
total combined voting power of all classes of stock of our company and subsidiaries, or a 10% Holder. To the extent that the aggregate
fair market value, determined on the date that an option is granted, of ADSs, with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year exceeds U.S.$100,000, such option shall be treated as a
non-qualified stock option.
Under
the 2018 ADS Plan, we may grant to employees, officers, consultants, independent contractors and directors of our company or any
of its subsidiaries, from time to time, options to purchase ADSs representing our ordinary shares. ADSs that are forfeited under
the terms of the 2018 ADS Plan and ADSs that are the subject to options that expire unexercised or which are otherwise surrendered
by an optionee without receiving any payment or other benefit with respect to such option may again become available for new option
grants under the 2018 ADS Plan.
The
2018 ADS Plan is administered by our Share Plan Committee. Subject to Board approval where required by applicable law, the Remuneration
Committee has authority, in its sole discretion, to grant options under the 2018 ADS Plan, to interpret the provisions of the
2018 ADS Plan and to prescribe, amend, and rescind rules and regulations relating to the 2018 ADS Plan or any options granted
thereunder as it may deem necessary or advisable, subject to any other approval if required by applicable law. All decisions made
by the Remuneration Committee pursuant to the provisions of the 2018 ADS Plan shall be final, conclusive and binding on all persons.
The
type of option (incentive stock option or non-qualified stock option), exercise price, option term and vesting schedule of options
granted under the 2018 ADS Plan are determined by the Remuneration Committee, in accordance with the provisions of the ADS Plan,
and specified in an option agreement by and between our company and the optionee, subject to the terms of the 2018 ADS Plan. The
exercise price per each ADS will be determined by the Remuneration Committee at the time any option is granted, however the exercise
price of an incentive stock option will not be less than 100% of the fair market value of such ADS on the date of the grant and
the price of an incentive stock option granted to a 10% Holder will not be less than 110% of the fair market value of such ADS
on the date of the grant. Options granted under the 2018 ADS Plan will not be exercisable after the expiration of ten years from
the date of grant, and in the case of an incentive stock option granted to a 10% Holder, the term of the option will be five years
from the date of grant or such shorter term as may be provided in the option agreement. The options will vest over a four-year
period in four equal installments, 25% at the end of each year from the date of grant, unless otherwise provided by the Remuneration
Committee in an option agreement.
Options
granted under the 2018 ADS Plan are not assignable or transferable by the grantee, other than by will or the laws of descent and
distribution, and may be exercised during the lifetime of the grantee only by the grantee or his guardian or legal representative.
A
summary of the status of the Stock Option Plans as of June 30, 2020, 2019 and 2018, and changes during the years ended on those
dates, is presented below:
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
Number
|
|
|
Weighted
average
exercise
price
|
|
|
Number
|
|
|
Weighted
average
exercise
price
|
|
|
Number
|
|
|
Weighted average exercise price
|
|
|
|
|
|
|
(A$)
|
|
|
|
|
|
(A$)
|
|
|
|
|
|
(A$)
|
|
Options outstanding at the beginning of the year
|
|
|
25,300,000
|
|
|
$
|
0.12
|
|
|
|
25,216,490
|
|
|
$
|
0.19
|
|
|
|
26,826,063
|
|
|
$
|
0.29
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
2,450,000
|
|
|
$
|
0.10
|
|
|
|
12,100,000
|
|
|
$
|
0.11
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired/forfeited
|
|
|
(3,750,000
|
)
|
|
$
|
0.25
|
|
|
|
(2,366,490
|
)
|
|
$
|
0.87
|
|
|
|
(11,349,573
|
)
|
|
$
|
0.31
|
|
Lapsed
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,360,000
|
)
|
|
$
|
0.31
|
|
Options outstanding at the end of the year
|
|
|
21,550,000
|
|
|
$
|
0.10
|
|
|
|
25,300,000
|
|
|
$
|
0.12
|
|
|
|
25,216,490
|
|
|
$
|
0.19
|
|
Options exercisable at the end of the year
|
|
|
21,550,000
|
|
|
$
|
0.10
|
|
|
|
25,300,000
|
|
|
$
|
0.12
|
|
|
|
25,216,490
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options that may be granted as of the end of the year
|
|
|
21,550,000
|
|
|
$
|
0.10
|
|
|
|
25,300,000
|
|
|
$
|
0.12
|
|
|
|
25,216,490
|
|
|
$
|
0.19
|
|
|
ITEM
7.
|
MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
Pursuant
to a securities purchase agreement dated December 28, 2018, Life Biosciences acquired on April 8, 2019, 269,905,533 ordinary shares
and warrants to purchase up to 539,811,066 ordinary shares upon the closing of the private placement of our securities. The warrants
expired, unexercised on December 19, 2019.
Life
Biosciences is currently the beneficial owner of 269,905,533 ordinary shares, representing approximately 24.88% of the ordinary
shares outstanding on September 7, 2020. Life Biosciences’ principal address is 75 Park Plaza, Level Three, Boston, MA 02116.
There
are no other shareholders as of September 7, 2020, known to us who own beneficially more than 5% of our ordinary shares.
Significant
Changes in the Ownership of Major Shareholders
There
have been no significant changes in the ownership of major shareholders during the year.
Major
Shareholders Voting Rights
A
major shareholder would not have different voting rights.
Record
Holders
As
of September 7, 2020, there were 5,054 holders of record of our ordinary shares, of which 22 record holders, holding approximately
74.24% of our ordinary shares, had registered addresses in the United States. These numbers are not representative of the number
of beneficial holders of our shares nor are they representative of where such beneficial holders reside, since many of these ordinary
shares were held of record by brokers or other nominees. The majority of trading by our U.S. investors is done by means of ADSs
that are held of record by HSBC Custody Nominees Ltd., which held 48.28% of our ordinary shares as of such date.
As
of August 27, 2019, there were 2,961 holders of record of our ordinary shares, of which 22 record holders, holding approximately
79.99% of our ordinary shares, had registered addresses in the United States. These numbers are not representative of the number
of beneficial holders of our shares nor are they representative of where such beneficial holders reside, since many of these ordinary
shares were held of record by brokers or other nominees. The majority of trading by our U.S. investors is done by means of ADSs
that are held of record by HSBC Custody Nominees Ltd., which held 47.58% of our ordinary shares as of such date.
|
B.
|
Related
Party Transactions
|
There
were no other related party transactions other than those related to Director and Key Management Personnel remuneration.
|
C.
|
Interests
of Experts and Counsel
|
Not
applicable.
|
ITEM
8.
|
FINANCIAL
INFORMATION
|
|
A.
|
Financial
Statements and Other Financial Information
|
See
our consolidated financial statements, including the notes thereto, in Item 18.
Legal
Proceedings
We
are not involved in any legal proceedings nor are we subject to any threatened litigation that is material to our business or
financial condition.
Dividend
Distribution Policy
We
have never paid cash dividends to our shareholders. We intend to retain future earnings for use in our business and do not anticipate
paying cash dividends on our ordinary shares in the foreseeable future. Any future dividend policy will be determined by the Board
of Directors and will be based upon various factors, including our results of operations, financial condition, current and anticipated
cash needs, future prospects, contractual restrictions and other factors as the Board of Directors may deem relevant.
There
have been no significant changes in the operation or financial condition of our company since June 30, 2020.
|
ITEM
9.
|
THE
offer and listing
|
|
A.
|
Offer
and Listing Details
|
Australian
Securities Exchange
Our
ordinary shares have traded on the ASX since our initial public offering on March 29, 2000 under the symbol “PBT”.
On April 8, 2019 we changed our name to Alterity Therapeutics Limited and our ADSs have traded under the symbol “ATH”
since that date.
NASDAQ
Capital Market
On
September 5, 2002 our ADSs began trading on the NASDAQ Capital Market under the symbol “PRAN.” On April 8, 2019 we
changed our name to Alterity Therapeutics Limited and our ADSs have traded under the symbol “ATHE” since that date.
Not
applicable.
The
principal listing of our ordinary shares and listed options to purchase ordinary shares is on the ASX. As of April 5, 2002, our
ADSs were eligible to trade on the NASDAQ Capital OTC Bulletin Board in the United States and until September 5, 2002, our ADSs
traded on the NASDAQ Capital Market under the symbol “PRAN.” On April 8, 2019 we changed our name to Alterity Therapeutics
Limited and our ADSs have traded under the symbol “ATHE” since that date. We entered into a Deposit Agreement with
the Bank of New York under which the Bank of New York, acting as depositary, issues ADRs. Prior to March 24, 2016, each of ADR
represented ten of our ordinary shares. On March 24, 2016, we effected a ratio change so that each ADS now represents 60 ordinary
shares (representing a 6-for-1 reverse split).
Not
applicable.
Not
applicable.
Not
applicable.
|
ITEM
10.
|
ADDITIONAL
INFORMATION
|
Not
applicable.
|
B.
|
Memorandum
and Articles of Association
|
We
were registered on November 11, 1997 as Prana Pty Ltd and on November 26, 1999 we converted to a public company and changed our
name to Prana Corporation Ltd. On January 1, 2000, we changed our name to Prana Biotechnology Limited. On April 8, 2019 we changed
our name to Alterity Therapeutics Limited. Our registration number is ACN 080699065.
Alterity’s
Purposes and Objects
As
a public company we have all the rights, powers and privileges of a natural person. Our Constitution does not specify any purposes
or objects.
The
Powers of the Directors
Under
the provisions of our Constitution our directors may exercise all of the powers of our company, other than those that are required
by our Constitution or the Corporations Act of Australia to be exercised at a general meeting of shareholders. A director may
participate in a meeting and vote on a proposal, arrangement or contract in which he or she is materially interested, so long
as the director’s interest is declared in accordance with the Corporations Act. The authority of our directors to enter
into borrowing arrangements on our behalf is not limited, except in the same manner as any other transaction by us.
Annual
and Extraordinary Meetings
Our
Board of Directors must convene an annual meeting of shareholders at least once every calendar year, within five months of our
last fiscal year-end balance sheet date. Notice of at least 28 days prior to the date of the meeting is required. An extraordinary
meeting may be convened by the board of directors, it decides or upon a demand of any directors, or of one or more shareholders
holding in the aggregate at least five percent of our issued capital. An extraordinary meeting must be called not more than 21
days after the request is made. The meeting must be held not later than two months after the request is given.
Please
refer to Exhibit 2.3 for Items 10.B.3, B.4, B.6, B.7, B.8, B.9 and B.10.
On
December 1, 2000, we entered into a research funding and intellectual property assignment agreement with the University of Melbourne,
under which the University of Melbourne agreed to conduct certain research projects on our behalf. Such projects include structure-based
drug design involving the design of various metal-based compounds as potential diagnostics and therapeutics, drug screening and
development involving the characterization of our compounds in vitro and in vivo models of neurodegenerative disorders, and cell-based
drug discovery involving the screening and assessment of our compounds in cell-based systems to measure toxicity and cellular
dysfunction and to develop new screens for our company. In consideration of such services, we agreed to pay the University of
Melbourne a sum of A$591,000 (inclusive of goods and services tax). In consideration for the assignment of rights to intellectual
property developed by the University of Melbourne during the research period, we agreed to pay to the University of Melbourne
royalties equal to 1.5% of the net invoice price of all products incorporating such intellectual property sold by us or on our
behalf, or, the lesser of 1.5% of the net invoice price of such products sold by a licensee or assignee and 10% of gross revenues
received from licensees or assignees relating to the exploitation of such intellectual property. The parties extended the term
of this agreement by entering into consecutive agreements on December 1, 2003, December 1, 2006 and December 1, 2009. The recent
research funding and intellectual property assignment agreement is deemed to have commenced as of the expiration date of the previous
agreement on December 1, 2009 and expired on December 1, 2012. The parties entered into a new research funding and intellectual
property assignment agreement with the same key terms which expired on December 31, 2013. The University of Melbourne subcontracted
substantial parts of the research to the Florey Institute of Neuroscience and Mental Health. Following the novation of the agreements
with the Florey Institute on November 7, 2014, we entered into a sixth research funding and intellectual property assignment agreement.
This agreement is ongoing.
On
October 13, 2016, we entered into an At-The-Market Issuance Sales Agreement with FBR Capital Markets & Co. and Jones Trading
Institutional Services LLC (collectively, the “Agents”) under which we could sell up to an aggregate of $US44,460,787
of ordinary shares represented by ADSs. We agreed to pay the Agents commission equal to 3% of the gross proceeds of the sales
price of all ADSs sold through them as sales agent under the sales agreement. The offering of our ADSs pursuant to the sales agreement
will terminate on the earliest of (1) the sale of all of the ordinary shares subject to the sales agreement, or (2) termination
of the sales agreement by us or the agent. We and the agent may terminate the sales agreement at any time in our sole discretion
upon five days prior notice. The agent may terminate the sales agreement at any time in certain circumstances, including the occurrence
of a material adverse change that, in the sales agent’s judgment, may make it impracticable or inadvisable to market or
sell our ADSs or a suspension or limitation of trading of our ADSs on The NASDAQ Capital Market.
On
November 8, 2017, we entered into Amendment No. 1 to our At-The-Market Issuance Sales Agreement dated October 13, 2016, to continue
the at-the-market equity program under which we from time to time may sell up to an aggregate of U.S.$50,000,000 of ordinary shares
represented by ADSs. As of June 30, 2020, we issued a total amount of 3.5 million ADSs under this At-The-Market Issuance Sales
Agreement for gross proceeds of A$6.01 million (U.S.$4.05 million).
On
December 28, 2018 we entered into a securities purchase agreement with Life Biosciences whereby Life Biosciences agreed to invest
an initial US$7.5 million in our company. Following shareholder approval, this investment was completed on April 8, 2019 with
the issue of 269,905,533 fully paid ordinary shares at an issue price of A$0.039 per share and 539,811,066 warrants, each with
an exercise price of A$0.045 per share and expiring on December 19, 2019. These warrants expired, unexercised. Pursuant to our
agreement with Life Biosciences we agreed to register for resale the ordinary shares issued to them and such ordinary issued upon
exercise of the warrants. We agreed to keep the registration statement effective until the earlier of (i) such time as all of
the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (ii)
the date on which all of the shares may be sold without restriction pursuant to Rule 144 of the Securities Act.
Australia
has largely abolished exchange controls on investment transactions. The Australian dollar is freely convertible into U.S. dollars.
In addition, there are currently no specific rules or limitations regarding the export from Australia of profits, dividends, capital,
or similar funds belonging to foreign investors, except that certain payments to non-residents must be reported to the Australian
Cash Transaction Reports Agency, which monitors such transactions, and amounts on account of potential Australian tax liabilities
may be required to be withheld unless a relevant taxation treaty can be shown to apply.
The
Foreign Acquisitions and Takeovers Act 1975
Under
Australian law, in certain circumstances foreign persons are prohibited from acquiring more than a limited percentage of the shares
in an Australian company without notification to or approval from the Australian Treasurer. These limitations are set forth in
the Australian Foreign Acquisitions and Takeovers Act, or the Takeovers Act.
Under
the Takeovers Act, as currently in effect, any foreign person, together with associates, is prohibited from acquiring 15% or more
of the shares in any company having total assets exceeding A$266 million or more. In addition, a foreign person may not acquire
shares in a company having total assets of A$266 million or more if, as a result of that acquisition, the total holdings of all
foreign persons and their associates will exceed 40% in aggregate without the approval of the Australian Treasurer. However, for
“U.S. Investors” and investors from certain other countries, a threshold of A$1,154 million applies (except in certain
circumstances) to each of the previous acquisitions. A “U.S. Investor” is defined by the Takeovers Act as a U.S. national
or a U.S. enterprise.
If
the necessary approvals are not obtained, the Treasurer may make an order requiring the acquirer to dispose of the shares it has
acquired within a specified period of time. Under the current Australian foreign investment policy, however, it is unlikely that
the Treasurer would make such an order where the level of foreign ownership exceeds 40% in the ordinary course of trading, unless
the Treasurer finds that the acquisition is contrary to the national interest. The same rule applies if the total holdings of
all foreign persons and their associates already exceeds 40% and a foreign person (or its associate) acquires any further shares,
including in the course of trading in the secondary market of the ADSs. At present, we do not have total assets of A$266 million.
If
the level of foreign ownership exceeds 40% at any time, we would be considered a foreign person under the Takeovers Act. In such
event, we would be required to obtain the approval of the Treasurer for our company, together with our associates, to acquire
(i) more than 15% of an Australian company or business with assets totaling over A$252 million; or (ii) any direct or indirect
ownership interest in Australian residential real estate.
The
percentage of foreign ownership in our company would also be included in determining the foreign ownership of any Australian company
or business in which it may choose to invest. Since we have no current plans for any such acquisitions and do not own any property,
any such approvals required to be obtained by us as a foreign person under the Takeovers Act will not affect our current or future
ownership or lease of property in Australia.
Our
Constitution does not contain any additional limitations on a non-resident’s right to hold or vote our securities.
Australian
law requires the transfer of shares in our company to be made in writing. No stamp duty will be payable in Australia on the transfer
of ADSs.
The
following is a discussion of Australian and U.S. tax consequences material to our shareholders. To the extent that the discussion
is based on tax legislation which has not been subject to judicial or administrative interpretation, the views expressed in the
discussion might not be accepted by the tax authorities in question or by court. The discussion is not intended, and should not
be construed, as legal or professional tax advice and does not exhaust all possible tax considerations.
Holders
of our ADSs should consult their own tax advisors as to the United States, Australian or other tax consequences of the purchase,
ownership and disposition of ADSs, including, in particular, the effect of any foreign, state or local taxes.
AUSTRALIAN
TAX CONSEQUENCES
In
this section we discuss the material Australian tax considerations that apply to non-Australian tax residents with respect to
the acquisition, ownership and disposal of the absolute beneficial ownership of ADSs, which are evidenced by ADRs. This discussion
is based upon existing Australian tax law as of the date of this annual report, which is subject to change, possibly retrospectively.
This discussion does not address all aspects of Australian income tax law which may be important to particular investors in light
of their individual investment circumstances, such as ADSs or shares held by investors subject to special tax rules (for example,
financial institutions, insurance companies or tax exempt organizations). In addition, this summary does not discuss any foreign
or state tax considerations, other than stamp duty. Prospective investors are urged to consult their tax advisors regarding the
Australian and foreign income and other tax considerations of the purchase, ownership and disposition of the ADSs or shares.
Nature
of ADSs for Australian Taxation Purposes
Holders
of our ADSs are treated as the owners of the underlying ordinary shares for Australian income tax and capital gains tax purposes.
Therefore, dividends paid on the underlying ordinary shares will be treated for Australian tax purposes as if they were paid directly
to the owners of ADSs, and the disposal of ADSs will be treated for Australian tax purposes as the disposal of the underlying
ordinary shares. In the following analysis we discuss the application of the Australian income tax and capital gains tax rules
to non-Australian resident holders of ADSs.
Taxation
of Dividends
Australia
operates a dividend imputation system under which dividends may be declared to be ‘franked’ to the extent of tax paid
on company profits. Fully franked dividends are not subject to dividend withholding tax. Dividends that are not franked
or are partly franked and are paid to non-Australian resident shareholders are subject to dividend withholding tax, but only to
the extent the dividends are not franked.
Unfranked
dividends paid to a non-resident shareholder are subject to withholding tax at 30%, unless the shareholder is a resident of a
country with which Australia has a double taxation agreement. In accordance with the provisions of the Double Taxation Convention
between Australia and the United States., the maximum rate of Australian tax on unfranked dividends to which a resident of the
United States is beneficially entitled is 15%, where the U.S. resident holds less than 10% of the voting rights in our company,
or 5% where the U.S. resident holds 10% or more of the voting rights in our company. The Double Taxation Convention between
Australia and the United States does not apply to limit the tax rate on dividends where the ADSs are effectively connected to
a permanent establishment or a fixed base carried on by the owner of the ADSs in Australia through which the shareholder carries
on business or provides independent personal services, respectively.
Tax
on Sales or other Dispositions of Shares - Capital Gains Tax
Australian
capital gains derived by non-Australian residents in respect of the disposal of capital assets that are not taxable Australian
property will be disregarded. Non-Australian resident shareholders will not be subject to Australian capital gains tax on
the capital gain made on a disposal of our shares, unless they, together with associates, hold 10% or more of our issued capital,
tested either at the time of disposal or over any continuous 12 month period in the 24 months prior to disposal, and the value
of our shares at the time of disposal are wholly or principally attributable to Australian real property assets.
Australian
capital gains tax applies to net capital gains at a taxpayer’s marginal tax rate. Previously, certain shareholders, such
as individuals were entitled to a discount of 50% for capital gains on shares held for greater than 12 months. However, as part
of the 2012-2013 Federal Budget measures, the Australian Government announced changes to the application of the CGT discount for
foreign resident individuals on taxable Australian assets, including shares. These changes became effective on 29 June 2013.
The
effect of the change is to:
|
●
|
Retain
access to the full CGT discount for discount capital gains of foreign resident individuals
in respect of the increase in the value of a CGT asset that occurred before 9 May 2013;
and
|
|
●
|
Remove
the CGT discount for discount capital gains for foreign resident individuals that arise
after 8 May 2013.
|
Foreign
residents will still have access to a discount on discount capital gains accrued prior to 8 May 2013 provided they choose to obtain
a market valuation for their assets as of that date.
Net
capital gains are calculated after reduction for capital losses, which may only be offset against capital gains.
Tax
on Sales or other Dispositions of Shares - Shareholders Holding Shares on Revenue Account
Some
non-Australian resident shareholders may hold shares on revenue rather than on capital account, for example, share
traders. These shareholders may have the gains made on the sale or other disposal of the shares included in their
assessable income under the ordinary income provisions of the income tax law, if the gains are sourced in
Australia.
Non-Australian
resident shareholders assessable under these ordinary income provisions in respect of gains made on shares held on revenue account
would be assessed for such gains at the Australian tax rates for non-Australian residents, which start at a marginal rate of 32.5%
for non-Australian resident individuals. Some relief from the Australian income tax may be available to such non-Australian
resident shareholders under the Double Taxation Convention between the United States and Australia, for example, because the shareholder
does not have a permanent establishment in Australia.
To
the extent an amount would be included in a non-Australian resident shareholder’s assessable income under both the capital
gains tax provisions and the ordinary income provisions, the capital gain amount would generally be reduced, so that the shareholder
would not be subject to double tax on any part of the income gain or capital gain.
Dual
Residency
If
a shareholder were a resident of both Australia and the United States under those countries’ domestic taxation laws, that
shareholder may be subject to tax as an Australian resident. If, however, the shareholder is determined to be a U.S. resident
for the purposes of the Double Taxation Convention between the United States and Australia, the Australian tax applicable would
be limited by the Double Taxation Convention. Shareholders should obtain specialist taxation advice in these circumstances.
Stamp
Duty
A
transfer of shares of a company listed on the ASX is not subject to Australian stamp duty except in some circumstances where one
person, or associated persons, acquires 90% or more of the shares.
Australian
Death Duty
Australia
does not have estate or death duties. No capital gains tax liability is realized upon the inheritance of a deceased person’s
shares. The disposal of inherited shares by beneficiaries, may, however, give rise to a capital gains tax liability.
Goods
and Services Tax
The
issue or transfer of shares will not incur Australian goods and services.
UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES
The
following is a summary of certain material U.S. federal income tax consequences that generally apply to U.S. Holders (as defined
below) who hold ADSs as capital assets. This summary is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code,
Treasury regulations promulgated thereunder, judicial and administrative interpretations thereof, and the bilateral taxation convention
between Australia and the United States, or the Tax Treaty, all as in effect on the date hereof and all of which are subject to
change either prospectively or retroactively. This summary does not discuss all the tax consequences that may be relevant to an
investment in ADSs by a U.S. Holder in light of such holder’s particular circumstances or to U.S. Holders subject to special
rules, including broker-dealers, financial institutions, certain insurance companies, investors liable for alternative minimum
tax, tax-exempt organizations, regulated investment companies, non-resident aliens of the U.S. or taxpayers whose functional currency
is not the U.S. dollar, persons who hold the ADSs through partnerships or other pass-through entities, persons who acquired their
ADSs through the exercise or cancellation of any employee stock options or otherwise as compensation for their services, investors
that actually or constructively own 10% or more of our shares by vote or value, and investors holding ADSs as part of a straddle
or appreciated financial position or as part of a hedging or conversion transaction.
If
a partnership or an entity treated as a partnership for U.S. federal income tax purposes owns ADSs, the U.S. federal income tax
treatment of a partner in such a partnership will generally depend upon the status of the partner and the activities of the partnership.
A partnership that owns ADSs and the partners in such partnership should consult their own tax advisors about the U.S. federal
income tax consequences of holding and disposing of ADSs.
This
summary does not address the effect of any U.S. federal taxation other than U.S. federal income taxation. In addition, this summary
does not include any discussion of U.S. federal estate and gift tax, state, local or foreign taxation. You are urged to consult
your tax advisors regarding the foreign and U.S. federal, state and local tax considerations of an investment in ADSs.
For
purposes of this summary, the term “U.S. Holder” means an individual who is a citizen or, for U.S. federal income
tax purposes, a resident of the United States, a corporation or other entity taxable as a corporation created or organized in
or under the laws of the United States or any political subdivision thereof, an estate whose income is subject to U.S. federal
income tax regardless of its source, or a trust if (a) a court within the United States is able to exercise primary supervision
over administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the
trust or (b) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
For
purposes of the discussion below, it is assumed that the representations contained in the deposit agreement governing the
ADSs are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance
with their terms.
Taxation
of Dividends
For
U.S. federal income tax purposes, U.S. Holders of ADSs will be treated as owning the underlying ordinary shares represented by
the ADSs held by them. Subject to the passive foreign investment company, or PFIC rules discussed below, the gross amount of any
distributions received with respect to the underlying ordinary shares represented by the ADSs, including the amount of any Australian
taxes withheld therefrom, will constitute dividends for U.S. federal income tax purposes, to the extent of our current and accumulated
earnings and profits, as determined under U.S. federal income tax principles. You will be required to include this amount of dividends
in gross income as ordinary income. Distributions in excess of our earnings and profits will be treated as a non-taxable return
of capital to the extent of your tax basis in the ADSs. Any amount in excess of your tax basis will be treated as gain from the
sale of ADSs. See “Disposition of ADSs” below for the discussion on the taxation of capital gains. Dividends will
not qualify for the dividends-received deduction generally available to corporations under Section 243 of the Code.
Dividends
that we pay in Australian dollars, including the amount of any Australian taxes withheld therefrom, will be included in your income
in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day such dividends are received. A U.S.
Holder who receives payment in Australian dollars and converts Australian dollars into U.S. dollars at an exchange rate other
than the rate in effect on such day will likely have a foreign currency exchange gain or loss, which would be treated as U.S.-source
ordinary income or loss.
Subject
to complex limitations, any Australian withholding tax imposed on our dividends will be a foreign income tax eligible for credit
against a U.S. Holder’s U.S. federal income tax liability (or, alternatively, for deduction against income in determining
such tax liability). The limitations set forth in the Code include computational rules under which foreign tax credits allowable
with respect to specific classes of income cannot exceed the U.S. federal income taxes otherwise payable with respect to each
such class of income. Dividends generally will be treated as foreign-source passive category income or general category income
for U.S. foreign tax credit purposes, depending upon the holder’s circumstances. A U.S. Holder will be denied a foreign
tax credit with respect to Australian income tax withheld from dividends received with respect to the underlying ordinary shares
represented by the ADSs to the extent such U.S. Holder has not held the ADSs for at least 16 days of the 31-day period beginning
on the date that is 15 days before the ex-dividend date or to the extent such U.S. Holder is under an obligation to make related
payments with respect to substantially similar or related property. Any days during which a U.S. Holder has substantially diminished
its risk of loss on the ADSs are not counted toward meeting the 16-day holding period required by the statute. The rules relating
to the determination of the foreign tax credit are complex. You should consult with your own tax advisors to determine whether
and to what extent you would be entitled to this credit.
Subject
to certain limitations, “qualified dividend income” received by a non-corporate U.S. Holder will be subject to tax
at a reduced maximum tax rate of 20 percent. Distributions taxable as dividends generally qualify for the 20 percent rate provided
that either: (i) the issuer is entitled to benefits under the Tax Treaty or (ii) the ADSs are readily tradable on an established
securities market in the United States and certain other requirements are met. We believe that we are entitled to benefits under
the Tax Treaty and that the ADSs currently are readily tradable on an established securities market in the United States. However,
no assurance can be given that the ADSs will remain readily tradable. Furthermore, the reduced rate does not apply to dividends
received from PFICs. The amount of foreign tax credit is limited in the case of foreign qualified dividend income. U.S. Holders
of ADSs should consult their own tax advisors regarding the effect of these rules in their particular circumstances.
Disposition
of ADSs
If
you sell or otherwise dispose of ADSs, you will recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between the amount realized on the sale or other disposition and your adjusted tax basis in the ADSs. Subject
to the PFIC rules discussed below, such gain or loss generally will be capital gain or loss and will be long-term capital gain
or loss if you have held the ADSs for more than one year at the time of the sale or other disposition. In general, any gain that
you recognize on the sale or other disposition of ADSs will be U.S.-source for purposes of the foreign tax credit limitation;
losses will generally be allocated against U.S.-source income. Deduction of capital losses is subject to certain limitations under
the Code.
In
the case of a cash basis U.S. Holder who receives Australian dollars in connection with the sale or disposition of ADSs, the amount
realized will be based on the U.S. dollar value of the Australian dollars received with respect to the ADSs as determined on the
settlement date of such exchange. A U.S. Holder who receives payment in Australian dollars and converts them into U.S. dollars
at a conversion rate other than the rate in effect on the settlement date may have a foreign currency exchange gain or loss that
would be treated as ordinary income or loss.
An
accrual basis U.S. Holder may elect the same treatment of foreign currency gain or loss required of cash basis taxpayers with
respect to a sale or disposition of ADSs, provided that the election is applied consistently from year to year. Such election
may not be changed without the consent of the Internal Revenue Service, or IRS. In the event that an accrual basis U.S. Holder
does not elect to be treated as a cash basis taxpayer (pursuant to the Treasury regulations applicable to foreign currency transactions),
such U.S. Holder may have a foreign currency gain or loss for U.S. federal income tax purposes because of differences between
the U.S. dollar value of the Australian dollars received prevailing on the trade date and the settlement date. Any such currency
gain or loss would be treated as ordinary income or loss and would be in addition to gain or loss, if any, recognized by such
U.S. Holder on the sale or other disposition of such ADSs.
Passive
Foreign Investment Companies
We
believe that we likely are a PFIC for U.S. federal income tax purposes for some U.S. Holders of our ADSs and a controlled foreign
corporation (CFC) to other U.S Holders of our ADSs. Our treatment as a PFIC could result in a reduction in the after-tax return
to those U.S. Holders of our ADSs and may affect the value of the securities.
For
U.S. federal income tax purposes, we will be classified as a PFIC for any taxable year in which either (i) 75% or more of our
gross income is passive income, or (ii) at least 50% of the average value of all of our assets for the taxable year produce or
are held for the production of passive income. For this purpose, cash is considered to be an asset that produces passive income.
Passive income generally includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the
disposition of assets that produce passive income. As a result of our substantial cash position and the decline in the value of
our stock, we believe that we became a PFIC during the taxable year ended June 30, 2005. We believe that we continued to be classified
as a PFIC during the taxable year ended June 30, 2020 for some U.S Holders of our ADSs and may continue to be a PFIC for each
of the subsequent fiscal years.
As
a PFIC, our dividends (if any are paid) will not qualify for the reduced maximum tax rate, discussed above, and, unless you timely
elect to “mark-to-market” your ADSs, as described below:
|
●
|
you
will be required to allocate “excess distributions” or gain recognized upon
the disposition of ADRs ratably over your holding period for the ADSs. An “excess
distribution” is the amount by which distributions during a taxable year in respect
of an ADS exceed 125% of the average annual distributions during the three preceding
taxable years (or, if shorter, your holding period for the ADSs).
|
|
●
|
the
amount allocated to each year during which we are considered a PFIC, other than the year
of the distribution or disposition, will be subject to tax at the highest individual
or corporate tax rate, as the case may be, in effect for that year and an interest charge
will be imposed with respect to the resulting tax liability allocated to each such year,
|
|
●
|
the
amount allocated to the current taxable year and any taxable year before we became a
PFIC will be taxable as ordinary income in the current year, and
|
|
●
|
you
will be required to file an annual return on IRS Form 8621.
|
The
PFIC provisions discussed above apply to U.S. persons who directly or indirectly hold stock in a PFIC.
Generally,
a U.S. person is considered an indirect shareholder of a PFIC if it is:
|
●
|
a
direct or indirect owner of a pass-through entity, including a trust or estate, that
is a direct or indirect shareholder of a PFIC,
|
|
●
|
a
shareholder of a PFIC that is a shareholder of another PFIC, or
|
|
●
|
a
50%-or-more shareholder of a foreign corporation that is not a PFIC and that directly
or indirectly owns stock of a PFIC.
|
An
indirect shareholder may be taxed on a distribution paid to the direct owner of the PFIC and on a disposition of the stock indirectly
owned. Indirect shareholders are strongly urged to consult their tax advisors regarding the application of these rules.
If
we cease to be a PFIC in a future year, a U.S. Holder may avoid the continued application of the tax treatment described above
by electing to be treated as if it sold its ADSs on the last day of the last taxable year in which we were a PFIC. Any gain would
be recognized and subject to tax under the rules described above. Loss would not be not recognized. A U.S. Holder’s basis
in its ADSs would be increased by the amount of gain, if any, recognized on the sale. Solely for purposes of the PFIC rules, a
U.S. Holder would be required to treat its holding period for its ADSs as beginning on the day following the last day of the last
taxable year in which we were a PFIC.
If
the ADSs are considered “marketable stock” and if you elect to “mark-to-market” your ADSs, you would not
be subject to the rules described above. Instead, you will generally include in income any excess of the fair market value of
the ADSs at the close of each tax year over your adjusted basis in the ADSs. If the fair market value of the ADSs has depreciated
below your adjusted basis at the close of the tax year, you may generally deduct the excess of the adjusted basis of the ADSs
over its fair market value at that time. However, such deductions generally would be limited to the net mark-to-market gains,
if any, that you included in income with respect to such ADSs in prior years. Income recognized and deductions allowed under the
mark-to-market provisions, as well as any gain or loss on the disposition of ADSs with respect to which the mark-to-market election
is made, are treated as ordinary income or loss (except that loss is treated as capital loss to the extent the loss exceeds the
net mark-to-market gains, if any, that a U.S. Holder included in income with respect to such ADSs in prior years). However, gain
or loss from the disposition of ADSs (as to which a “mark-to-market” election was made) in a year in which we are
no longer a PFIC will be capital gain or loss. Our ADSs should be considered “marketable stock” if they traded at
least 15 days during each calendar quarter of the relevant calendar year in more than de minimis quantities.
A
U.S. Holder of ADSs will not be able to avoid the tax consequences described above by electing to treat us as a qualified electing
fund, or QEF, because we do not intend to prepare the information that U.S. Holders would need to make a QEF election.
Additional
Tax on Investment Income
U.S.
Holders that are individuals, estates, or trusts and whose income exceeds certain thresholds will be subject to a 3.8% Medicare
contribution tax on net investment income, which will include dividends on and capital gains from the sale or other taxable disposition
of ADSs, subject to certain limitations and exceptions.
Backup
Withholding and Information Reporting
Payments
in respect of ADSs may be subject to information reporting to the IRS and to U.S. backup withholding tax at a rate equal to the
fourth lowest income tax rate applicable to individuals (which, under current law, is 24%). Backup withholding will not apply,
however, if you (i) are a corporation or come within certain exempt categories and demonstrate the fact when so required or (ii)
furnish a correct taxpayer identification number and make any other required certification.
Backup
withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s
U.S. tax liability. A U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing
the appropriate claim for refund with the IRS, which is generally an annual income tax return.
U.S.
individuals who hold certain specified foreign financial assets, including stock in a foreign corporation, with values in excess
of certain thresholds are required to file IRS Form 8938 with their U.S. federal income tax return. Such form requires disclosure
of information concerning such foreign assets, including their value. Failure to file the form when required is subject to penalties.
An exemption from reporting applies to foreign assets held through a U.S. financial institution, generally including a non-U.S.
branch or subsidiary of a U.S. institution and a U.S. branch of a non-U.S. institution. Investors are encouraged to consult with
their own tax advisors regarding the possible application of this disclosure requirement to their investment in our ADSs.
|
F.
|
Dividends
and Paying Agents
|
Not
applicable.
Not
applicable.
We
are subject to the reporting requirements of the Exchange Act, as applicable to “foreign private issuers” as defined
in Rule 3b-4 thereunder. As a foreign private issuer, we are exempt from certain provisions of the Exchange Act. Accordingly,
our proxy solicitations are not subject to the disclosure and procedural requirements of Regulation 14A under the Exchange Act,
transactions in our equity securities by our officers and directors are exempt from reporting and the “short-swing”
profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required to file periodic reports
and financial statements as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
However, we file with the Securities and Exchange Commission an annual report on Form 20-F containing financial statements that
have been examined and reported on, with an opinion expressed by, an independent registered public accounting firm, and we submit
reports to the Securities and Exchange Commission on Form 6-K containing (among other things) press releases and unaudited financial
information for the first six months of each fiscal year. We post our annual report on Form 20-F on our website (www.alteritytherapeutics.com)
promptly following the filing of our annual report with the Securities and Exchange Commission. The information on our website
is not incorporated by reference into this annual report.
The
documents concerning our company referred to in this annual report may also be inspected at our registered office located at Level
3, 62 Lygon Street, Carlton, Victoria, 3053, Australia.
|
I.
|
Subsidiary
Information
|
Not
applicable.
|
ITEM
11.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We
invest our excess cash and cash equivalents in interest-bearing accounts and term deposits with banks in Australia. Our management
believes that the financial institutions that hold our investments are financially sound and accordingly, minimal credit risk
exists with respect to these investments. Certain of our cash equivalents are subject to interest rate risk. Due to the short
duration and conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk.
Our major market risk is changes in foreign exchange rates as we had approximately A$5,403,832, A$9,727,401 and A$6,310,430 cash
held in U.S. dollars, GBP and Euro as of June 30, 2020, 2019 and 2018, respectively. A hypothetical 20% and 10% and adverse movement
in end-of-period exchange rates for U.S. dollars and GBP, respectively, would reduce the cash balance at the end of each year
by approximately A$1,087,605 and A$43 respectively.
We
conduct our activities in mostly in Australia and the USA. We are required to make certain payments in U.S. dollars and other
currencies, however we believe an adverse movement in end-of-period exchange rates would not have a material impact on our operating
results. In the twelve months ended June 30, 2020, the Australian dollar depreciated against the U.S. dollar by 1.66%. In the
financial years 2019 and 2018, the Australian dollar depreciated by 5.27% and 3.61% against the U.S. dollar, respectively. A hypothetical
20% adverse movement in the U.S. dollar, 10% adverse movement in the GBP and 5% adverse movement in the Euro exchange rates would
increase the cost of our foreign currency payables by approximately A$114,349.
We
do not currently utilize derivative financial instruments or other financial instruments subject to market risk.
|
ITEM
12.
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Fees
and Charges Payable by ADS Holders
The
table below summarizes the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, to our depositary,
The Bank of New York Mellon, or BNYM, pursuant to the Deposit Agreement, which was filed as Exhibit 2.1 to our Registration Statement
on Form F-6 filed with the SEC on December 21, 2007, and the types of services and the amount of the fees or charges paid
for such services. The disclosure under this heading “Fees and Charges Payable by ADS Holders” is subject to and qualified
in its entirety by reference to the full text of the Deposit Agreement. The holder of an ADS may have to pay the following fees
and charges to BNYM in connection with ownership of the ADS:
Persons
Depositing or Withdrawing Shares Must Pay:
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|
For:
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|
|
|
● U.S.$3.00 (or less) per 100 ADSs (or portion of 100 ADSs)
|
|
●
Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
|
|
|
●
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
|
● U.S.$0.03 (or less) per ADS
|
|
●
Any cash distribution to you
|
● A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been
deposited for issuance of ADSs
|
|
●
Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS
holders
|
● U.S.$1.50 (or less) per ADS
|
|
●
Transfers, combination and split-up of ADSs
|
● Expenses of the depositary
|
|
●
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
|
|
|
●
Converting foreign currency to U.S. dollars
|
● Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for
example, stock transfer taxes, stamp duty or withholding taxes
|
|
●
As necessary
|
● Any charges incurred by the depositary or its agents for servicing the deposited securities
|
|
●
As necessary
|
The
depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs
for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions
to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the
fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly
billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect
any of its fees by deduction from any cash distribution payable to ADS holders that are obligated to pay those fees. The depositary
may generally refuse to provide fee-attracting services until its fees for those services are paid.
From
time to time, the depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders,
or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance
of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other
service providers that are affiliates of the depositary and that may earn or share fees or commissions.
Fees
and Payments Made by the Depositary to the Company
We
incurred expenses in relation to services for our annual general meeting and special general meeting of shareholders. For the
year ended June 30, 2020, we paid BNYM a total of U.S.$ 23,040 (comprised of payments for the distribution and printing of meeting
material and proxy vote tabulation). For the year ended June 30, 2019, we paid BNYM a total of U.S.$ 33,676 (comprised of payments
for the distribution and printing of meeting material and proxy vote tabulation).
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Background
Alterity Therapeutics Limited and its controlled
subsidiaries, Alterity Therapeutics Inc. and Alterity Therapeutics UK Limited (referred to collectively as “Alterity”
or the “Company”), is a development stage enterprise engaged in the research and development of therapeutic drugs designed
to treat the underlying cause of degeneration of the brain focusing on Alzheimer’s disease, Huntington disease, Parkinson’s
disease and other neurological disorders. Alterity Therapeutics Limited, the parent entity, was incorporated on November 11, 1997
in Melbourne, Australia and the UK and U.S. subsidiaries were incorporated in August 2004.
Financial Reporting Framework
The financial report of Alterity Therapeutics Limited for the
year ended June 30, 2020 was authorized for issue on September 15, 2020.
Alterity Therapeutics Limited is a for-profit
entity for the purpose of preparing the financial statements.
The consolidated financial statements of the
Company comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (IASB).
These financial statements have been prepared
under the historical cost convention, as modified by the revaluation of financial liabilities at fair value through profit or losses.
Accounting policies are selected and applied
in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby
ensuring that the substance of the underlying transactions or other events is reported.
The accounting policies set out below have
been applied in preparing the financial statements for the year ended June 30, 2020 and the comparative information presented in
these financial statements for the years ended June 30, 2019 and 2018.
Critical accounting estimates, judgments
and assumptions
Estimates and judgments are continually evaluated
and are based on historical experience and other factors, including expectations of future events that may have a financial impact
on the entity and that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions
concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Share-based Payments
The value attributed to share options and
remuneration shares issued is an estimate calculated using an appropriate mathematical formula based on an option pricing model.
The choice of models and the resultant option value require assumptions to be made in relation to the likelihood and timing of
the conversion of the options to shares and the value and volatility of the price of the underlying shares.
R&D Tax Incentives
The Australian Government replaced the research
and development tax concession with the research and development tax incentive from July
1, 2011. The provisions provide refundable or non-refundable tax offsets. The research and development tax incentive applies
to expenditure incurred and the use of depreciating assets in an income year commencing on or after July
1, 2011. A 43.5% for FY2020 (43.5% for FY2019 & 43.5% for FY2018) refundable tax offset, will be available to eligible
small companies with an annual aggregate turnover of less than $20 million. As per the prior period, and under the same sets of
facts, the Group have applied to the Australian Taxation Office (ATO) for a determination regarding its eligibility to receive
the R&D Tax Incentive as a refundable cash offset. While a formal determination has not yet been made with respect to the application,
the Group has been advised by the ATO that it is their preliminary view that the Group may not receive the tax incentive as a refundable
cash offset under the applicable regulations. The Group is considering its options, including appealing an unfavorable decision
if received, nevertheless the Group has not recognized a receivable and other income of $3,363,433 relating to eligible expenditure
for the year ended June 30, 2020.
On December 5, 2019, the Treasury Laws Amendment
(R&D Tax Incentive Bill 2019) was introduced into Parliament. The draft bill contains proposed amendments to the R&D tax
incentive regulations. Under the proposed amendments, the refundable tax offset rate for companies with an aggregated turnover
of less than $20 million would become 41% and the maximum refund would be capped at $4m (exclusive of expenditure incurred relating
to clinical trial activities). As of June 30, 2020, the bill remains under review by the Senate Committee.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
Management does not consider the rate reduction
or the refund cap to be substantially enacted as of June 30, 2020 due to the continued legislative debate in Parliament.
Going Concern Basis
The Group is a development stage medical biotechnology company
and as such expects to be utilizing cash until its research activities have become marketable. The Group has incurred
recurring losses since inception including a loss of $13,456,800 (2019: $12,337,830) and an operating cash outflow of
$9,431,122 (2019: $13,954,818). The Group expects to continue incurring losses into the foreseeable future and will need to
raise additional capital to continue the development of its planned research and development programs, and as a result, there
is substantial doubt about the entity’s ability to continue as a going concern for one year from the date of the
issuance of its consolidated financial statements for the year ended June 30, 2020. The consolidated financial statements
have been prepared assuming that the Group will continue as a going concern, which contemplates the realization of assets and
the satisfaction of its liabilities in the normal course of business.
The continuing viability of the Group is dependent on its ability
to raise additional capital to finance the continuation of its planned research and development programs, maintaining implemented
cost containment and deferment strategies, and successfully commercializing its initiatives. The directors intend to raise new
equity funding within the next six months to enable progression of the Group’s planned research and development programs,
however there is uncertainty associated with our ability to execute raisings at the time and amount needed to meet the Group’s
requirements.
The inability to obtain funding, as and when
needed, would have a negative impact on the Group’s financial condition and ability to pursue its business strategies. If
the Group is unable to obtain the required funding to run its operations and to develop and commercialize its product candidates,
the Group could be forced to delay, reduce or eliminate some or all of its research and development programs, which could adversely
affect its business prospects.
Management and the directors believe the Group will be successful
in the above matters and accordingly have prepared the financial report on a going concern basis, notwithstanding there is a material
uncertainty that may cast significant doubt on our ability to continue as a going concern and that the Group may be unable to realize
its assets and liabilities in the normal course of business.
References to matters that may cast significant doubt about the Group’s ability to continue as a
going concern also raise substantial doubt as contemplated by the Public Company Accounting Oversight Board (“PCAOB”)
standards.
Use of Estimates
The preparation of these consolidated financial
statements requires the Group to make estimates and judgments that affect the reported amounts of assets, liabilities, income and
expenses and related disclosures. On an ongoing basis, the Group evaluates its significant accounting policies and estimates. Estimates
are based on historical experience and on various market-specific and other relevant assumptions that the Group believes to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities. Estimates are assessed each period and updated to reflect current information, such as the economic considerations
related to the impact that COVID-19 could have on the Group’s significant accounting estimates. The Group’s future
assessments of the impact of COVID-19 could result in material impacts to the Group’s consolidated financial statements in
future periods.
However, COVID-19 has had limited effect thus
far on the Group’s operation. Development activities have continued with minimal disruption. Slowdown in collaborative research
activities do not have a material impact on the Group’s operations.
Development Stage – Risks and Uncertainties
As a development stage enterprise, the Company’s
prospects are subject to the risks, expenses and uncertainties frequently encountered by companies which have not yet commercialized
any applications of their technology, particularly in new and evolving markets. Alterity’s operating results may fluctuate
significantly in the future as a result of a variety of factors, including capital expenditure and other costs relating to establishing,
maintaining and expanding the operations, the number and mix of potential customers, potential pricing of future products by the
Company and its competitors, new technology introduced by the Company and its competitors, delays or expense in obtaining necessary
equipment, economic and social conditions in the biotechnology industry and general economic conditions.
The Company cannot be certain that it will
be able to raise any required funding or capital, on favorable terms or at all, or that it will be able to establish corporate
collaborations on acceptable terms, if at all. If the Company is unable to obtain such additional funding or capital, it may be
required to reduce the scope of its development plans.
The Company’s experience in exploiting
its technology is limited and it cannot be certain that its operations will be profitable in the short-term, or at all. If the
Company fails in its efforts to establish or expand its business, the results of operations, financial condition and liquidity
of the Company could be materially adversely affected. The Company cannot be certain that it will be able to sell and deliver its
technology or to obtain or retain any permits required in the market in which it operates. Any of these factors could result in
the reduction or cessation of the Company’s operations.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
Significant Accounting Policies
Accounting policies are selected and applied
in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby
ensuring that the substance of the underlying transactions or other events is reported.
The following significant accounting policies
have been adopted in the preparation and presentation of the financial report.
|
(a)
|
Principles of Consolidation
|
The consolidated financial statements are
prepared by combining the financial statements of all the entities that comprise the Company, being Alterity Therapeutics Limited
and its subsidiaries as defined in Accounting Standard IFRS10: Consolidated Financial Statements. Consistent accounting
policies are employed in the preparation and presentation of the consolidated financial statements.
Subsidiaries are all those entities (including
special purpose entities) over which the Company has the power to govern the financial and operating policies, generally accompanying
a shareholder of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Company controls another entity.
Subsidiaries are fully consolidated from the
date on which control is transferred to the Company. They are de-consolidated from the date that control ceases.
In preparing the consolidated financial statements,
all inter-company balances and transactions, and unrealized profits/losses arising within the Company are eliminated in full. Investments
in subsidiaries are accounted for at cost in the individual financial statements of Alterity Therapeutics Limited.
Operating segments are reported in a manner
consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who
is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive
Officer of Alterity Therapeutics Limited. For the current and previous reporting periods, the Group operated in one segment, being
research into Parkinsonian and other neurodegenerative disorders.
Current tax
Current tax is calculated by reference to
the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using
tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods
is recognized as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the liability
method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax base of those items.
In principle, deferred tax assets and liabilities
are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that
sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets
can be utilized. However, deferred tax assets and liabilities are not recognized if the temporary differences giving rise to them
arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither
taxable income nor accounting profit or loss.
Deferred tax liabilities are recognized for
taxable temporary differences arising on investments in subsidiaries except where the Company is able to control the reversal of
the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred
tax assets arising from deductible temporary differences associated with these investments are only recognized to the extent that
it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realized or settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the
reporting date, to recover or settle the carrying amount of its assets and liabilities.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate
to the same taxation authority. Current tax assets and tax liabilities are offset when the entity has a legally enforceable right
to offset and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Current and deferred tax for the period
Current and deferred tax is recognized as
an expense or income in the Statement of Profit or Loss and Other Comprehensive Income, except when it relates to items credited
or debited directly to equity, in which case the deferred tax is also recognized directly in equity, or where it arises from the
initial accounting for a business combination, in which case it is taken into account in the determination of goodwill.
The Company has significant unused tax losses
and as such a significant deferred tax asset; however, the deferred tax asset has not been recognized, as it is not probable that
future taxable profit will be available against which the unused losses and unused tax credits can be utilized, given the nature
of the Company’s business (research and development) and its history of losses.
|
(d)
|
Property and Equipment
|
Property and equipment is measured at historical
cost less accumulated depreciation and impairment and consists of laboratory equipment, computer equipment, furniture and fittings
and leasehold improvements attributable to the Company’s premises at Melbourne, Victoria, Australia and San Francisco, USA.
Historical cost includes expenditure that
is directly attributable to the acquisition of the item.
Subsequent costs are included in the asset’s
carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to the income statement
during the reporting period in which they are incurred.
Depreciation
Depreciation is provided on property and equipment.
Depreciation is calculated on a straight-line method to allocate their cost, net of their residual values, over their estimated
useful lives.
The following estimated useful lives, ranging
from 3 to 20 years are used in the calculation of depreciation:
Class of Fixed Asset
|
|
Depreciation Rate
|
|
|
|
Furniture and fittings
|
|
5-33%
|
Computer equipment
|
|
33%
|
Plant and equipment
|
|
10-33%
|
Leasehold improvements
|
|
33%
|
Leasehold improvements are depreciated over
the shorter of the lease term and useful life.
The depreciation method, residual values and
useful lives are reviewed, and adjusted if appropriate, at each annual reporting period.
The accounting policies for the Group’s
lease recognition are explained in note 13.
|
(f)
|
Investments and other financial assets
|
Classification
From July 1, 2018, the Group classifies
its financial assets in the following measurement categories:
|
●
|
those to be measured subsequently at fair value (either
through OCI or through profit or loss), and
|
|
●
|
those to be measured at amortized cost.
|
The classification depends on the entity’s
business model for managing the financial assets and the contractual terms of the cash flows.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
For assets measured at fair value, gains and
losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this
will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity
investment at fair value through other comprehensive income (FVOCI).
Recognition and derecognition
Regular way purchases and
sales of financial assets are recognized on trade-date, the date on which the Group commits to purchase or sell the asset. Financial
assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred
and the Group has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition,
the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of
financial assets carried at FVPL are expensed in profit or loss.
Assets that are held for
collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at
amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/(losses) together
with foreign exchange gains and losses. Impairment losses are presented as separate line item in the consolidated statement of
profit or loss.
Equity instruments
The Group subsequently
measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses
on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following
the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as other income
when the Group’s right to receive payments is established.
Impairment
From July 1, 2018, the Group assesses on a forward looking
basis the expected credit losses associated with its debt instruments carried at amortized cost and FVOCI. The impairment
methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables,
the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial
recognition of the receivables, see note 10(b) for further details.
Prior Period Accounting Policy
For fiscal year 2018,
loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which
are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet. Trade
receivables, loans, and other receivables are recorded at amortized cost less impairment.
At each reporting date,
the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that
those assets have been impaired. If any such indication exists, the recoverable amount of the asset is estimated to determine the
extent of the impairment loss (if any).
Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit
to which the asset belongs.
Recoverable amount is
the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount
of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating
unit) is reduced to its recoverable amount. An impairment loss is recognized in the consolidated statement of profit or loss and
other comprehensive income immediately.
Where an impairment loss
subsequently reverses, the carrying amount of the asset (or cash-generating unit) is reversed to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss
is recognized in the consolidated statement of profit or loss and other comprehensive income immediately.
No impairment charges were incurred during
the three years ended June 30, 2020, 2019 and 2018.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
|
(h)
|
Intangible Assets - Research and Development
|
Expenditure during the research phase of
a project is recognized as an expense when incurred. Where no internally generated intangible assets can be recognized, development
expenditure is recognized as an expense in the period as incurred. Development costs are capitalized if and only if, all of the
following are demonstrated:
|
●
|
the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
|
|
●
|
the intention to complete the intangible asset and use
or sell it;
|
|
●
|
the ability to use or sell the intangible asset;
|
|
●
|
how the intangible asset will generate probable future
economic benefits;
|
|
●
|
the availability of adequate technical, financial and other
resources to complete the development and to use or sell the intangible asset; and
|
|
●
|
the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
|
Internally-generated intangible assets
(capitalized development costs) are stated at cost less accumulated amortization and impairment, and are amortized on a straight-line
basis over their useful lives over a maximum of five years.
As of June 30, 2020, 2019 and 2018, Alterity
had no capitalized research and development costs.
|
(i)
|
Foreign Currency Transactions and Balances
|
Functional and Presentation Currency
Items included in the financial statements
of each of the Company’s entities are measured using Australian dollars, which is the currency of the primary economic environment
in which the Company operates (the functional currency). The consolidated financial statements are presented in Australian dollars
($), which is Alterity Therapeutics Limited’s functional and presentation currency.
Foreign currency transactions
All foreign currency transactions during the
financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary
items at each reporting date are translated at the exchange rate existing at each reporting date. Non-monetary assets and liabilities
carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair
value was determined.
Exchange differences are recognized in profit
or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign
operation for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation,
are recognized in the foreign currency translation reserve and recognized in profit or loss on disposal of the net investment.
Group
companies
The results and financial position of all
the Company’s entities that have a functional currency difference from the presentation currency are translated into the
presentation currency as follows:
|
●
|
assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that balance sheet, and
|
|
●
|
income and expenses for each income statement are translated
at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions), and
|
|
●
|
all resulting exchange differences are recognized as a
separate component of equity.
|
On consolidation, the assets and liabilities
of the Company’s overseas operations are translated at exchange rates prevailing at the reporting date. Income and expense
items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences
arising, if any, are recognized in the foreign currency translation reserve, and recognized in profit or loss on disposal of the
foreign operations..
Short-term obligations
Short-term employee benefits
are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual
reporting period in which the employees render the related service, including wages, and salaries. Short-term employee benefits
are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Company’s obligations
for short-term employee benefits such as wages and salaries are recognized as a part of current trade and other payables in the
statement of financial position.
The Company’s obligations for annual
leave are presented as part of provisions in the Statement of Financial Position. The obligations are presented as current liabilities
in the Statement of Financial Position if the Company does not have an unconditional right to defer settlement for at least twelve
months after the reporting period regardless of when the actual settlement is expected to occur.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
Other long-term obligations
The liability for long service leave is not
expected to be settled wholly within twelve months after the end of the period in which the employees render the related service.
The liability is therefore recognized in the provision for employee benefits and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit
credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods
of service. Expected future payments are discounted using market yields at the end of the reporting period of government bonds
with terms and currencies that match, as closely as possible, the estimated future cash outflows. Re-measurements as a result of
experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
The obligations are presented as current liabilities
in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the
reporting period, regardless of when the actual settlement is expected to occur.
Provisions are recognized when the Company
has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured
reliably.
The amount recognized as a provision is the
best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows.
When some or all of the economic benefits
required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it
is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.
|
(l)
|
Cash and Cash Equivalents
|
Cash and cash equivalents includes cash on
hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months
or less.
|
(m)
|
Other income from ordinary activities
|
Other income is recognized to the extent that
it is probable that the economic benefits will flow to the entity and the interest can be reliably measured. Other income is made
up of interest income which is recognized on a time proportion basis using the effective interest method.
Grants are recognized when there is reasonable
assurance that the grant will be received and all grant conditions will be complied with.
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 expected
to compensate.
|
(o)
|
Goods and Services Tax (“GST”)
|
Revenues, expenses and assets are recognized
net of the amount of GST, except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances
the GST is recognized as part of the cost of acquisition of the asset or as part of an item of expense.
Receivables and payables in the Balance Sheet
are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables.
Cash flows are included in the Cash Flow Statement
on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or
payable to, the taxation authority is classified as operating cash flows.
|
(p)
|
Trade and Other Payables
|
These amounts represent liabilities for goods
and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually
paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within
12 months from the reporting date. They are recognized initially at their fair value and subsequently measured at amortized cost
using the effective interest method.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
Equity-settled share-based payments granted
after November 7, 2002 that were unvested as of January 1, 2005 are measured at fair value. The measurement date is determined
for share-based payments issued to directors, employees and consultants as follows:
Directors
The issuance of share-based payments to directors
is subject to approval by shareholders as per ASX Listing Rule 10.11. The measurement date for share-based payments issued to directors
is the grant date, being the date at which the share-based payments are approved by shareholders.
Employees
The issuance of share-based payments to employees
may be subject to shareholder approval per ASX Listing Rule 7.1 which prohibits the issuance of more than 15% of the Company’s
shares in a 12 month period without shareholder approval. The measurement date for share-based payments issued to employees is
the grant date, being the date at which a shared understanding of the terms and conditions of the arrangement is reached. However,
if an issuance to an employee is subject to shareholder approval because it exceeds the 15% threshold per ASX Listing Rule 7.1,
then the measurement date of these share-based payments is the date at which the share-based payments are approved by shareholders.
Consultants
The issuance of share-based payments to consultants
may be subject to shareholder approval per ASX Listing Rule 7.1 which prohibits the issuance of more than 15% of the Company’s
shares in a 12 month period without shareholder approval. The measurement date for share-based payments issued to consultants who
provide services considered to be similar to employees is deemed to be the date at which a shared understanding of the terms and
conditions of the arrangement is reached. The measurement date for share-based payments issued to consultants who provide services
considered to be differentiated from those provided by employees is deemed to be the date at which the entity obtains the goods
or the counterparty renders the service. If a service period applies and the work is continually provided over the service period,
and if the share price of the Company does not change significantly during the service period, then the average share price, volatility
and risk-free rate over the service period are used in calculating the value of the share-based payments issued. However, if the
underlying share price of the Company does change significantly during the service period, then the value of share-based payments
are calculated at each individual date that goods and services are provided, using the actual valuation inputs at that date. Shares
issued to consultants for services are recorded as non-cash compensation and are recognized at either the fair value of the services
rendered, or if this cannot be reasonably estimated, the fair value of the underlying equity instruments issued.
Equity-based compensation benefits are provided
to directors, employees and consultants under the 2004 ASX Plan (the “2004 ASX Plan”) and the 2018 American Depository
Share (ADS) Option Plan (the “2018 ADS Plan”). Information relating to this plan is set out in Note 16
The fair value of options granted under these
plans is recognized as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognized
over the period during which the recipients become unconditionally entitled to the options.
The fair value at grant date is independently
determined using a Black-Scholes (for options without market condition) and Barrier Pricing (for options with market conditions)
model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date
and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term
of the option. The expected life used in the model has
been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions, and behavioral considerations.
The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s
estimate of shares that will eventually vest.
Basic loss per share is determined by dividing
the net loss after income tax expense by the weighted average number of ordinary shares outstanding during the financial period.
For all periods presented, diluted loss per share is equivalent to basic loss per share as the potentially dilutive securities
are excluded from the computation of diluted loss per share because the effect is anti-dilutive.
Ordinary share capital is recognized as the
fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognized
directly in equity as a reduction of the share proceeds received.
|
(t)
|
Trade and Other Receivables
|
Trade and other receivables are recognized
initially at fair value and subsequently measured at amortized cost using the effective interest rate method less provision for
impairment.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
1.
|
BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
Comparative figures, are, where appropriate,
reclassified to be comparable with figures presented in the current financial year.
|
(v)
|
New Accounting Standards And Interpretations
|
The Group has adopted
IFRS 16 using the modified retrospective approach with an effective date of July 1, 2019, but has not restated comparatives,
as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognized in the opening balance sheet on July 1, 2019.
On adoption of IFRS 16,
the Group recognized lease liabilities in relation to leases which had previously been classified as ‘operating
leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee’s incremental borrowing rate as of July 1, 2019. The weighted average
lessee’s incremental borrowing rate applied to the lease liabilities on July 1, 2019 was 5.20%.
The associated right-of
use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments
relating to that lease recognized in the balance sheet as of June 30, 2020. There were no onerous lease contracts that would have
required an adjustment to the right-of-use assets at the date of initial application.
In applying IFRS 16 for
the first time, the Group has used the following practical expedients permitted by the standard:
|
●
|
the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
|
|
●
|
reliance on previous assessments on whether leases are
onerous
|
|
●
|
the accounting for operating leases with a remaining lease
term of less than 12 months as of July 1, 2019 as short-term leases, and
|
|
●
|
the use of hindsight in determining the lease term where
the contract contains options to extend or terminate the lease.
|
The Group has also elected
not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into
before the transition date the group relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an
arrangement contains a Lease.
Measurement of Lease Liabilities
|
|
|
|
|
|
|
|
|
|
$
|
|
Operating lease commitments disclosed as of June 30, 2019
|
|
|
111,811
|
|
|
|
|
|
|
Discounted using the lessee’s incremental borrowing rate of at the date of initial application
|
|
|
108,028
|
|
Less short-term lease not recognized as a liability (1)
|
|
|
(13,290
|
)
|
Lease liability recognized as of July 1, 2019
|
|
|
94,738
|
|
|
|
|
|
|
Of which are:
|
|
|
|
|
Current lease liability
|
|
|
77,665
|
|
Non-current lease liability
|
|
|
17,073
|
|
|
|
|
94,738
|
|
|
|
|
|
|
Right of use of asset increased by
|
|
|
88,477
|
|
Lease liability increased by
|
|
|
94,738
|
|
The net impact on retained earnings on July 1, 2019 was
a decrease of
|
|
|
(6,261
|
)
|
|
(1)
|
The practical expedient guidelines
permit operating leases with a remaining lease term of less than 12 months as of July 1, 2019 as short-term leases.
|
On impact of adoption, the
right-of-use assets of $88,477 are classified under right-of-use assets in the consolidated statement of financial position. The
corresponding current lease liability of $77,665 and the non-current lease liability of $17,073.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
2.
|
INTEREST AND OTHER INCOME FROM CONTINUING OPERATIONS
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
17,117
|
|
|
|
108,538
|
|
|
|
201,174
|
|
Total interest income
|
|
|
17,117
|
|
|
|
108,538
|
|
|
|
201,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
R&D Tax Incentive (1)
|
|
|
-
|
|
|
|
4,951,167
|
|
|
|
3,125,775
|
|
COVID-19 relief (2)
|
|
|
122,729
|
|
|
|
-
|
|
|
|
-
|
|
Total other income
|
|
|
122,729
|
|
|
|
4,951,167
|
|
|
|
3,125,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and other income from continuing operations
|
|
|
139,846
|
|
|
|
5,059,705
|
|
|
|
3,326,949
|
|
|
(1)
|
The Australian Government replaced the
research and development tax concession with the research and development tax incentive from July
1, 2011. The provisions provide refundable or non-refundable tax offsets. The research and development tax incentive
applies to expenditure incurred and the use of depreciating assets in an income year commencing on or after July
1, 2011. A 43.5% for FY2020 (43.5% for FY2019 & 43.5% for FY2018) refundable tax offset, will be available to
eligible small companies with an annual aggregate turnover of less than $20 million. As per the prior period, and under the
same sets of facts, the Group have applied to the Australian Taxation Office (ATO) for a determination regarding its
eligibility to receive the R&D Tax Incentive as a refundable cash offset. While a formal determination has not
yet been made with respect to the application, the Group has been advised by the ATO that it is their preliminary
view that the Group may not receive the tax incentive as a refundable cash offset under the applicable regulations. The Group
is considering its options, including appealing an unfavorable decision if received, nevertheless the Group has not
recognized a receivable and other income of $3,363,433 relating to eligible expenditure for the year ended June 30,
2020.
|
|
(2)
|
The COVID-19 relief relates to government assistance received
during the year, from the Australian Governments (at both federal and state level), in response to the economic and financial
challenges in the current economy. This COVID-19 relief consists of the eligible cash flow boost grants and state level payroll
tax refund and waivers. The Company has recognized this relief as part of government grants in line with IAS 20.
|
|
3.
|
EXPENSES FROM ORDINARY ACTIVITIES
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development Expenses (1)
|
|
|
|
|
|
|
|
|
|
Employee expenses
|
|
|
2,698,139
|
|
|
|
2,645,512
|
|
|
|
2,223,807
|
|
Other research and development expenses
|
|
|
7,400,300
|
|
|
|
10,337,673
|
|
|
|
4,474,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administration Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation on fixed assets
|
|
|
25,988
|
|
|
|
29,696
|
|
|
|
21,799
|
|
Depreciation on leased assets
|
|
|
86,439
|
|
|
|
-
|
|
|
|
-
|
|
Employee expenses (non R&D related)
|
|
|
617,889
|
|
|
|
735,775
|
|
|
|
909,756
|
|
Consultant and director expenses
|
|
|
742,390
|
|
|
|
1,477,369
|
|
|
|
1,279,014
|
|
Audit, internal control and other assurance expenses
|
|
|
217,506
|
|
|
|
208,972
|
|
|
|
186,660
|
|
Corporate compliance expenses
|
|
|
384,705
|
|
|
|
470,294
|
|
|
|
351,611
|
|
Insurance expenses
|
|
|
628,060
|
|
|
|
448,769
|
|
|
|
422,475
|
|
Office rental
|
|
|
72,757
|
|
|
|
132,836
|
|
|
|
142,233
|
|
Other administrative and office expenses
|
|
|
670,405
|
|
|
|
804,641
|
|
|
|
902,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other gains and losses
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange (gain)/loss
|
|
|
(333,055
|
)
|
|
|
(349,064
|
)
|
|
|
270,860
|
|
|
(1)
|
Research and development expenses mainly consist of expenses
paid for contracted research and development activities conducted by third parties on behalf of the Company.
|
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
(a) Income tax expense:
|
|
|
|
|
|
|
|
|
|
Current tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjustment for current tax of prior periods
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Deferred tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Numerical reconciliation of income tax expense to prima facie tax payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prima facie tax on net loss before income tax at 27.5% (2019: 27.5%, 2018: 27.5%)
|
|
|
(3,700,620
|
)
|
|
|
(3,392,903
|
)
|
|
|
(2,273,078
|
)
|
Effect of lower tax rates of tax on overseas income
|
|
|
(18,308
|
)
|
|
|
19,045
|
|
|
|
12,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add tax effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenditure (net of tax incentive)
|
|
|
-
|
|
|
|
1,688,887
|
|
|
|
1,187,557
|
|
Other
|
|
|
148,105
|
|
|
|
145,245
|
|
|
|
324,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset not recognized
|
|
|
3,570,823
|
|
|
|
1,539,726
|
|
|
|
748,896
|
|
Income tax expense attributable to loss before income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Potential deferred tax asset as of June 30, 2020, 2019 and 2018 in respect of: tax losses not brought to account is (1):
|
|
|
40,133,912
|
|
|
|
35,913,682
|
|
|
|
34,373,956
|
|
Temporary differences
|
|
|
(1,793,626
|
)
|
|
|
(1,119,563
|
)
|
|
|
(1,254,136
|
)
|
|
(1)
|
As of June 30, 2020, the Group had a potential tax benefit
related to tax losses carried forward of $145,941,499 (2019: $130,709,461). Such amount includes net profit of A$95,446 related
to subsidiaries in the United States (U.S.). The remaining balance is attributable to the Group’s operations in Australia.
|
|
(2)
|
Tax losses can be carried forward indefinitely subject
to continuity of ownership and same business test rules, except for the losses generated for the period since inception to 31
December 2017 by the U.S subsidiary which can only be carried forward for 20 years.
|
|
5.
|
TRADE AND OTHER RECEIVABLES
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Accrued interest income
|
|
|
12,584
|
|
|
|
2,129
|
|
R&D tax incentive receivable
|
|
|
-
|
|
|
|
4,825,270
|
|
Goods and services tax receivable
|
|
|
48,737
|
|
|
|
2,098
|
|
Total Trade and Other Receivables
|
|
|
61,321
|
|
|
|
4,829,497
|
|
R&D tax incentive receivable represents
the amount of the financial year 2020 R&D tax incentive the Company expects to recover. For further details, see note 2.
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Prepayments
|
|
|
567,884
|
|
|
|
621,737
|
|
Other
|
|
|
10,252
|
|
|
|
10,032
|
|
Total
|
|
|
578,136
|
|
|
|
631,769
|
|
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
7.
|
TRADE AND OTHER PAYABLES
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Trade creditors
|
|
|
954,033
|
|
|
|
1,693,885
|
|
Accrued research and development expenses
|
|
|
843,419
|
|
|
|
752,156
|
|
Accrued professional fees
|
|
|
187,199
|
|
|
|
181,378
|
|
Other accrued expenses
|
|
|
73,991
|
|
|
|
79,035
|
|
Other payables
|
|
|
10,962
|
|
|
|
11,720
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,069,604
|
|
|
|
2,718,174
|
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Annual leave (1)
|
|
|
285,360
|
|
|
|
245,804
|
|
Long service leave (1)(2)
|
|
|
326,679
|
|
|
|
356,191
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
612,039
|
|
|
|
601,995
|
|
|
|
|
|
|
|
|
|
|
Non-Current
|
|
|
|
|
|
|
|
|
Long service leave (2)
|
|
|
41,514
|
|
|
|
34,976
|
|
A provision has been recognized for employee
entitlements relating to long service leave. In calculating the present value of future cash flows in respect of long service leave,
the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating
to employee benefits have been included in Note 1 to this report.
|
(1)
|
Movements in provisions
|
Movements in each class of provision during
the financial year are set out below:
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Annual leave
|
|
|
|
|
|
|
|
|
|
Carrying amount at start of year
|
|
|
245,804
|
|
|
|
266,487
|
|
|
|
298,508
|
|
Charged/(credited) to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
-additional provisions recognized
|
|
|
278,686
|
|
|
|
308,032
|
|
|
|
261,354
|
|
Amounts used during the year
|
|
|
(240,734
|
)
|
|
|
(328,715
|
)
|
|
|
(293,375
|
)
|
Change in foreign exchange
|
|
|
1,604
|
|
|
|
1,886
|
|
|
|
-
|
|
Carrying amount at end of year
|
|
|
285,360
|
|
|
|
245,804
|
|
|
|
266,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long service leave
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount at start of year
|
|
|
391,167
|
|
|
|
323,122
|
|
|
|
399,970
|
|
Charged/(credited) to profit or loss
|
|
|
(62,991
|
)
|
|
|
-
|
|
|
|
(103,363
|
)
|
-additional provisions recognized
|
|
|
40,017
|
|
|
|
68,045
|
|
|
|
26,515
|
|
Carrying amount at end of year
|
|
|
368,193
|
|
|
|
391,167
|
|
|
|
323,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
653,553
|
|
|
|
636,971
|
|
|
|
589,609
|
|
|
(2)
|
Amounts not expected to be settled within the next 12
months
|
The current provision for long service leave
includes all unconditional entitlements where employees have completed the required period of service and also those where employees
are entitled to pro-rata payments in certain circumstances.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
8.
|
PROVISIONS (continued)
|
The entire amount is presented as current,
since the Company does not have an unconditional right to defer settlement. However, based on past experience, the Company does
not expect all employees to take the full amount of accrued long service leave or require payment within the next 12 months. The
following amounts reflect leave that is not expected to be taken or paid within the next 12 months.
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Long service leave obligation expected to be settled after 12 months
|
|
|
41,514
|
|
|
|
34,976
|
|
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
R&D Tax Incentive
The Group’s research and development activities
are eligible under an Australian Government tax incentive for eligible expenditure from July 1, 2011. As per the prior period,
and under the same sets of facts, the Group have applied to the Australian Taxation Office (ATO) for a determination regarding
its eligibility to receive the R&D Tax Incentive as a refundable cash offset. While a formal determination has not yet been
made with respect to the application, The Group has been advised by the ATO that it is their preliminary view that the Group may
not receive the tax incentive as a refundable cash offset under the applicable regulations. The Group is considering its options,
including appealing an unfavorable decision if received, nevertheless the Group have not recognized a receivable and other income
of $3,363,433 relating to eligible expenditure for the year ended June 30, 2020.
There are no contingent liabilities at the
date of this report. The Company is not involved in any legal or arbitration proceedings and, so far as management is aware, no
such proceedings are pending or threatened against the Company.
In respect of expenditure commitments,
refer to Note 15.
|
|
|
|
Years Ended June 30,
|
|
|
|
Notes
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,037,358,032 (2019: 860,837,432) fully paid ordinary shares
|
|
10(b)
|
|
|
160,703,754
|
|
|
|
156,632,636
|
|
|
|
143,910,328
|
|
Nil (2019: Nil) options for fully paid ordinary shares
|
|
10(c)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,703,754
|
|
|
|
156,632,636
|
|
|
|
143,910,328
|
|
|
(b)
|
Movements in Issued Shares
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
No. of
shares
|
|
|
A$
|
|
|
No. of
shares
|
|
|
A$
|
|
|
No. of
shares
|
|
|
A$
|
|
Beginning of the year
|
|
|
860,837,432
|
|
|
|
156,632,636
|
|
|
|
533,891,470
|
|
|
|
143,910,328
|
|
|
|
533,891,470
|
|
|
|
144,018,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement during the year
|
|
|
176,520,600
|
|
|
|
4,071,118
|
|
|
|
326,945,962
|
|
|
|
12,722,308
|
|
|
|
-
|
|
|
|
(107,678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the year
|
|
|
1,037,358,032
|
|
|
|
160,703,754
|
|
|
|
860,837,432
|
|
|
|
156,632,636
|
|
|
|
533,891,470
|
|
|
|
143,910,328
|
|
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
10.
|
ISSUED CAPITAL (continued)
|
Details of share issuances are
as follows:
Date
|
|
Details
|
|
Notes
|
|
Number
|
|
|
Issue Price
|
|
|
A$
|
|
Year end June 30, 2017
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(159,564
|
)
|
June 30, 2018
|
|
Security issuance costs
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(107,678
|
)
|
Year end June 30, 2018
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(107,678
|
)
|
13 July 2018
|
|
Issue of shares under ATM Facility
|
|
|
|
|
3,083,580
|
|
|
|
0.05
|
|
|
|
166,086
|
|
4 January 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
15,789,360
|
|
|
|
0.05
|
|
|
|
749,614
|
|
4 February 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
1,912,440
|
|
|
|
0.04
|
|
|
|
78,508
|
|
21 March 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
7,930,740
|
|
|
|
0.05
|
|
|
|
430,346
|
|
21 March 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
3,723,120
|
|
|
|
0.05
|
|
|
|
169,064
|
|
21 March 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
156,000
|
|
|
|
0.05
|
|
|
|
7,341
|
|
21 March 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
1,014,240
|
|
|
|
0.04
|
|
|
|
43,544
|
|
8 April 2019
|
|
Issue of shares under strategic investment by Life Biosciences LLC
|
|
|
|
|
269,905,533
|
|
|
|
0.04
|
|
|
|
10,526,318
|
|
8 April 2019
|
|
Issue of shares to sophisticated and professional investors
|
|
|
|
|
23,430,949
|
|
|
|
0.04
|
|
|
|
913,807
|
|
June 30, 2019
|
|
Security issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,320
|
)
|
Year end June 30, 2019
|
|
|
|
|
|
|
326,945,962
|
|
|
|
|
|
|
|
12,722,308
|
|
31 July 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
7,962,060
|
|
|
|
0.035
|
|
|
|
277,812
|
|
21 November 2019
|
|
Issue of shares under ATM Facility
|
|
|
|
|
3,814,380
|
|
|
|
0.025
|
|
|
|
94,694
|
|
15 January 2020
|
|
Issue of shares under ATM Facility
|
|
|
|
|
758,040
|
|
|
|
0.019
|
|
|
|
14,230
|
|
16 January 2020
|
|
Issue of shares under ATM Facility
|
|
|
|
|
12,244,020
|
|
|
|
0.020
|
|
|
|
249,402
|
|
17 January 2020
|
|
Issue of shares under ATM Facility
|
|
|
|
|
6,754,020
|
|
|
|
0.018
|
|
|
|
123,717
|
|
27 March 2020
|
|
Issue of shares under ATM Facility
|
|
|
|
|
7,042,920
|
|
|
|
0.017
|
|
|
|
120,239
|
|
25 May 2020
|
|
Issue of shares under ATM Facility
|
|
|
|
|
137,945,160
|
|
|
|
0.025
|
|
|
|
3,483,792
|
|
June 30, 2020
|
|
Security issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(292,768
|
)
|
Year end June 30, 2020
|
|
|
|
|
|
|
176,520,600
|
|
|
|
|
|
|
|
4,071,118
|
|
|
(c)
|
Terms and Conditions of Issued Capital
|
Ordinary shares
Ordinary shares have the right to receive
dividends as declared and, in the event of a winding up of the Company, to participate in the proceeds from the sale of all surplus
assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to vote, either
in person or by proxy, at a meeting of the Company’s shareholders.
Options
Option holders do not have the right to receive
dividends and are not entitled to vote at a meeting of the Company’s shareholders. Options may be exercised at any time from
the date they vest to the date of their expiration. Share options convert into ordinary shares on a one for one basis on the date
they are exercised.
|
(d)
|
Shares Issued after Reporting Date
|
Subsequent to the end of the current financial
year, on July 2, 2020, 47,646,000 new ordinary shares were issued. Refer to Note 17 for further details.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
|
|
|
Years Ended June 30,
|
|
|
|
Notes
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,550,000 (2019: 25,300,000, 2018: 25,216,490) options for fully paid ordinary shares
|
|
11(c)
|
|
|
866,121
|
|
|
|
1,158,975
|
|
|
|
1,753,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
866,121
|
|
|
|
1,158,975
|
|
|
|
1,753,954
|
|
The share-based payment reserve is used to
recognize the fair value of options issued to directors, executives, employees and consultants but not exercised. Amounts are transferred
out of the reserve and into issued capital when the options are exercised. When options expire, the amount is transferred from
reserve to accumulated losses.
|
|
|
|
Years Ended June 30,
|
|
|
|
Notes
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nil (2019: 586,672,964, 2018: Nil) warrants for fully paid ordinary shares (1)
|
|
11(c)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
1.
|
On 9 April 2019, the Group issued a total of 586,672,964
two for one free-attaching warrants each with an exercise price of A$0.045 (4.5 cents), vested on 8 June 2019 and expiring on
19 December 2019. These warrants were issued as part of the strategic investment made by Life Biosciences LLC, and an accompanying
placement with sophisticated investors. On 19 December 2019, the warrants expired without exercise.
|
|
(c)
|
Movements in Options/Warrants for Fully Paid Ordinary
Shares
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
Number of
Options/
Warrants
|
|
|
Comp.
Expense
|
|
|
Number of
Options/
Warrants
|
|
|
Comp.
Expense
|
|
|
Number of
Options/
Warrants
|
|
|
Comp.
Expense
|
|
|
|
|
|
|
(A$)
|
|
|
|
|
|
(A$)
|
|
|
|
|
|
(A$)
|
|
Beginning of the year
|
|
|
611,972,964
|
|
|
|
1,158,975
|
|
|
|
25,216,490
|
|
|
|
1,753,954
|
|
|
|
26,826,063
|
|
|
|
2,320,480
|
|
Options issued during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
2,450,000
|
|
|
|
30,370
|
|
|
|
12,100,000
|
|
|
|
764,539
|
|
Warrants issued during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
586,672,964
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants expired during the year
|
|
|
(586,672,964
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired during the year
|
|
|
(3,400,000
|
)
|
|
|
(280,838
|
)
|
|
|
(2,366,490
|
)
|
|
|
(684,117
|
)
|
|
|
(11,349,573
|
)
|
|
|
(1,126,843
|
)
|
Forfeited during the year
|
|
|
(350,000
|
)
|
|
|
(12,016
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,360,000
|
)
|
|
|
(204,221
|
)
|
Share based payment expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,768
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the year
|
|
|
21,550,000
|
|
|
|
866,121
|
|
|
|
611,972,964
|
|
|
|
1,158,975
|
|
|
|
25,216,490
|
|
|
|
1,753,954
|
|
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
Details of option/warrant grants are summarized
as follows.
Year ended June 30, 2018:
|
●
|
On October 10, 2017, 2,360,000 options were forfeited upon
resignation of an employee.
|
|
●
|
On December 13, 2017, 8,500,00 options expired.
|
|
●
|
On January 18, 2018, the Company issued 12,100,000 options
to directors and employees under the 2004 Plan (see Note 15) in recognition of services rendered to the Company. The options are
exercisable at A$0.11 consideration and expire on December 14, 2022. The fair value of the option is A$0.047.
|
|
●
|
On April 6, 2018, 1,200,000 options expired.
|
|
●
|
On June 25, 2018, 1,649,573 options expired.
|
Year ended June 30, 2019:
|
●
|
On July 13, 2018 700,000 options were issued to an employee
of the company under the 2004 plan (see Note 15) in recognition of services rendered to the Company. The options are exercisable
at A$0.083 consideration and expire on January 31, 2023. The fair value of the options is A$0.038.
|
|
●
|
On August 4, 2018 306,490 options expired.
|
|
●
|
On August 28, 2018 500,000 options were issued to a consultant
under the 2004 Plan (see Note 15) in recognition of services rendered to the Company. The options are exercisable at A$0.11 consideration
and expire on December 14, 2022. The fair value of the options is A$0.019.
|
|
●
|
On October 1, 2018 360,000 options expired.
|
|
●
|
On October 24, 2018 200,000 options expired
|
|
●
|
On November 2, 2018 1,250,000 options were issued to a
director under the 2004 Plan (see Note 15) in recognition of services rendered to the Company. The options are exercisable at
A$0.11 consideration and expire on December 14, 2022. The fair value of the options is A$0.016.
|
|
●
|
On November 3, 2018 200,000 options expired
|
|
●
|
On December 11, 2018 1,200,000 options expired
|
|
●
|
On February 5, 2019 100,000 options expired
|
|
●
|
On April 9, 2019 586,672,964 short term warrants were issued
to Life Biosciences LLC and other investors as approved at the shareholder meeting on April 8, 2019. The warrants are exercisable
at A$0.045 consideration and expire on December 19, 2019.
|
Year ended June 30, 2020:
|
●
|
On September 30, 2019, 150,000 options were forfeited upon
resignation of an employee.
|
|
●
|
On January 30, 2020, 200,000 options were forfeited upon
resignation of an employee.
|
|
●
|
On February 18, 2020, 2,000,000 options expired.
|
|
●
|
On May 25, 2020, 1,400,000 options expired.
|
|
●
|
On December 19, 2019 586,672,964 short term warrants expired.
|
|
(d)
|
Terms and Conditions of Reserves
|
Options and warrants
Option holders and warrant holders do not
have the right to receive dividends and are not entitled to vote at a meeting of the Company’s shareholders. Options and
warrants may be exercised at any time from the date they vest to the date of their expiration. Share options are exercisable into
ordinary shares on a one for one basis on the date they are exercised. Options granted under the 2018 ADS Plan are exercisable
into ADRs, being one option for one ADR, which equals ten ordinary shares, on the date they are exercised.
In Australia, there is not a set number
of authorized shares, shares are not reserved for the exercise of options, and shares do not have a par value.
|
(e)
|
Options and Warrants Issued after Reporting Date
|
No option issues have occurred after reporting
date. There have been no warrants granted after reporting date.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
12.
|
ACCUMULATED DEFICIT DURING DEVELOPMENT STAGE
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Balance at beginning of year
|
|
|
141,236,838
|
|
|
|
129,583,125
|
|
|
|
122,648,452
|
|
Impact of initial adoption of IFRS 16
|
|
|
6,261
|
|
|
|
-
|
|
|
|
-
|
|
Net loss for the year
|
|
|
13,456,800
|
|
|
|
12,337,830
|
|
|
|
8,265,737
|
|
Reclassify expired options from contributed equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Reclassify expired options from reserves
|
|
|
(280,838
|
)
|
|
|
(684,117
|
)
|
|
|
(1,331,064
|
)
|
Reclassify expired options/warrants from reserves
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance at end of year
|
|
|
154,419,061
|
|
|
|
141,236,838
|
|
|
|
129,583,125
|
|
|
(i)
|
Amounts recognized in the statement of financial position
|
The statement of financial position shows
the following amounts relating to leases:
|
|
Years Ended June 30,
|
|
Right-of-use assets
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Right-of-use assets
|
|
|
31,866
|
|
|
|
-
|
|
|
|
-
|
|
Lease liabilities
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Current
|
|
|
32,879
|
|
|
|
-
|
|
|
|
-
|
|
Non-current
|
|
|
868
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
33,747
|
|
|
|
-
|
|
|
|
-
|
|
Additions to the right-of-use assets during
the current financial year were $29,827.
|
(ii)
|
Amounts recognized in the statement of profit or loss
|
The statement of profit or loss shows the
following amounts relating to leases:
|
|
Years Ended June 30,
|
|
Depreciation charge of right-of-use assets
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Right-of-use assets
|
|
|
86,439
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
3,877
|
|
|
|
-
|
|
|
|
-
|
|
Expenses relating to short-term leases (included in general and administration expenses)
|
|
|
46,913
|
|
|
|
-
|
|
|
|
-
|
|
Expenses relating to variable lease payments not included in lease liabilities (included in general and administration expenses)
|
|
|
25,844
|
|
|
|
-
|
|
|
|
-
|
|
The total cash outflow for leases in 2020
was $165,875.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
(iii)
|
The group’s leasing activities and how these are
accounted for
|
The Group has adopted IFRS 16 Leases during
the year ended June 30, 2020 using the modified retrospective approach. The modified approach does not require restatement of comparative
periods. Instead the cumulative impact of applying IFRS 16 is accounted for as an adjustment to equity at the start of the current
financial year in which it was first applied, known as the ‘date of initial application’. Refer to note 1(v) for further details.
Leases are recognized as a right-of-use asset
and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged to profit or loss over the lease year so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each year. The right-of-use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease
are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
|
●
|
fixed payments (including in-substance fixed payments),
less any lease incentives receivable
|
|
●
|
variable lease payment that are based on an index or a
rate
|
|
●
|
amounts expected to be payable by the lessee under residual
value guarantees
|
|
●
|
the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option, and
|
|
●
|
payments of penalties for terminating the lease, if the
lease term reflects the lessee exercising that option.
|
The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate applied at
the commencement date.
Right-of-use assets are measured at cost comprising
the following:
|
●
|
the amount of the initial measurement of lease liability
|
|
●
|
any lease payments made at or before the commencement date,
less any lease incentives received
|
|
●
|
any initial direct costs, and
|
Payments associated with short-term leases
and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases
with a lease term of 12 months or less.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
14.
|
CASH FLOW INFORMATION
|
|
(a)
|
Reconciliation
of Net Loss to Net Cash Flows From Operations
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(13,456,800
|
)
|
|
|
(12,337,830
|
)
|
|
|
(8,265,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash items
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment
|
|
|
25,988
|
|
|
|
29,696
|
|
|
|
21,799
|
|
Depreciation on leased assets
|
|
|
86,439
|
|
|
|
-
|
|
|
|
-
|
|
Non-cash issue of equity in consideration of operating expenses
|
|
|
(12,016
|
)
|
|
|
89,138
|
|
|
|
764,539
|
|
Foreign exchange (gain) loss
|
|
|
(262,977
|
)
|
|
|
(403,879
|
)
|
|
|
278,117
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in trade and other receivables
|
|
|
4,768,176
|
|
|
|
(1,677,087
|
)
|
|
|
(116,837
|
)
|
Decrease (increase) in other current assets
|
|
|
53,633
|
|
|
|
(365,144
|
)
|
|
|
18,988
|
|
(Decrease) increase in trade and other payables
|
|
|
(648,570
|
)
|
|
|
662,926
|
|
|
|
1,162,812
|
|
(Decrease) in other current liabilities
|
|
|
(1,577
|
)
|
|
|
-
|
|
|
|
-
|
|
Increase (decrease) in provision for employee entitlements
|
|
|
16,582
|
|
|
|
47,362
|
|
|
|
(108,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(9,431,122
|
)
|
|
|
(13,954,818
|
)
|
|
|
(6,245,188
|
)
|
|
(b)
|
Reconciliation
of Cash and Cash Equivalents
|
Cash and cash equivalents balance comprises:
|
|
|
|
|
|
|
|
|
|
- cash and cash equivalents on hand
|
|
|
9,196,892
|
|
|
|
14,399,904
|
|
|
|
15,235,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing cash and cash equivalents balance
|
|
|
9,196,892
|
|
|
|
14,399,904
|
|
|
|
15,235,556
|
|
|
(c)
|
Non-Cash Financing and Investing Activities
|
There were no non-cash financing and investing
activities during the years ended June 30, 2020, 2019 and 2018.
|
15.
|
EXPENDITURE COMMITMENTS
|
The Company has short term leases contracted
for but not capitalized in the financial statements. The Company has commitments under these contracts within one year of A$35,075.
As of June 30, 2020, the lease commitments mainly relate to the short term leases for the U.S office lease expiring on 31 October
2020 and the extension of 3 months to the Australian office lease expiring on 17 December 2020.
The majority of our contracts for research
and development programs have a termination notice period of 30 days. As of June 30, 2020, we had research and development termination
commitments approximating A$2.0 million. No liability has been recognized within our financial statements for this period. In addition,
we have the ability to scale down our operations and prioritize our research and development programs in neurology to reduce expenditures.
Details in relation to commitments under employee
service agreements with Directors and Key Management Personnel are outlined in Note 21.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
(a)
|
Employee and Consultant Plans
|
At the Annual General Meeting held on November
17, 2004, the shareholders approved the establishment of employee and consultant plans designed to reward directors, employees
and consultants for their contributions to the Company. The plans are to be used as a method of retaining key personnel for the
growth and development of the Company. Due to Alterity’s U.S. presence, a U.S. plan (the 2018 ADS Plan) and an Australian
plan (the 2004 ASX Plan) were developed.
As of June 30, 2020 equity, had been issued
to 4 Directors, 2 former Directors, 2 Key Management Personnel, 9 employees and 5 consultants under the 2004 ASX Plan.
As of June 30, 2019 equity, had been issued
to 4 Directors, 2 previous Directors, 2 Key Management Personnel, 11 employees and 7 consultants under the Australian Plan.
As of June 30, 2018 equity, had been issued
to 5 Directors, 2 Key Management Personnel, 11 employees and 9 consultants under the Australian Plan.
At the 2004 Annual General Meeting, shareholders
authorized the Company to issue in the aggregate up to 12 million ordinary shares under the two plans. This was increased to 22
million ordinary shares at the 2005 Annual General Meeting and further increased to 30 million ordinary shares at the 2007 Annual
General Meeting, 45 million ordinary shares at the 2008 Annual General Meeting and 60 million ordinary shares at the 2009 Annual
General Meeting. The Share Plan Committee, a sub-committee of the Remuneration Committee administers the two plans and is able
to change the terms of the equity issued under them from the default terms.
Under the 2018 ADS Plan, the exercise price
must equal or exceed the fair value of the ADS on the date the options are awarded. The option expiration date cannot exceed ten
years from the date the options were awarded. The default vesting conditions are 25% per year on the date the options were awarded.
Under the 2004 ASX Plan, the exercise price
must be equal or be less than the market value of the ordinary shares on ASX on the date of grant. The option expiration date cannot
exceed ten years from the date the options were granted. The default vesting conditions are 25% per year on the date the options
were granted.
Information with respect to the number of
options granted under the 2004 ASX Plan as follows:
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
(A$)
|
|
|
|
|
|
(A$)
|
|
|
|
|
|
(A$)
|
|
Beginning of the year
|
|
|
25,300,000
|
|
|
|
0.12
|
|
|
|
25,216,490
|
|
|
|
0.19
|
|
|
|
26,826,063
|
|
|
|
0.29
|
|
Issued during the year
|
|
|
-
|
|
|
|
|
|
|
|
2,450,000
|
|
|
|
0.10
|
|
|
|
12,100,000
|
|
|
|
0.11
|
|
Exercised during the year
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Expired during the year
|
|
|
(3,400,000
|
)
|
|
|
0.25
|
|
|
|
(2,366,490
|
)
|
|
|
0.87
|
|
|
|
(11,349,573
|
)
|
|
|
0.31
|
|
Forfeited during the year
|
|
|
(350,000
|
)
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
(2,360,000
|
)
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at year end
|
|
|
21,550,000
|
|
|
|
0.10
|
|
|
|
25,300,000
|
|
|
|
0.12
|
|
|
|
25,216,490
|
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and Exercisable at year end
|
|
|
21,550,000
|
|
|
|
0.10
|
|
|
|
25,300,000
|
|
|
|
0.12
|
|
|
|
25,216,490
|
|
|
|
0.19
|
|
Options outstanding at the end of the year
have the following expiry date and exercise prices:
Series
|
|
Grant
Date
|
|
Expiry
Date
|
|
Exercise
Price
|
|
|
Share
options 2020
|
|
|
Share
options 2019
|
|
|
|
|
|
|
|
$A
|
|
|
|
|
|
|
|
PBTAH
|
|
19 February 2015
|
|
18 February 2020
|
|
|
0.26
|
|
|
|
-
|
|
|
|
2,000,000
|
|
PBTAR
|
|
27 May 2015
|
|
25 May 2020
|
|
|
0.27
|
|
|
|
-
|
|
|
|
1,400,000
|
|
PBTAS
|
|
7 June 2017
|
|
6 June 2022
|
|
|
0.07
|
|
|
|
7,000,000
|
|
|
|
7,350,000
|
|
PBTAAA
|
|
18 December 2017
|
|
14 December 2022
|
|
|
0.11
|
|
|
|
13,850,000
|
|
|
|
13,850,000
|
|
PBTAI
|
|
1 February 2018
|
|
31 January 2023
|
|
|
0.08
|
|
|
|
700,000
|
|
|
|
700,000
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
21,550,000
|
|
|
|
25,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining
contractual life of options outstanding at end of period
|
|
|
|
2.29
years
|
|
|
|
2.95
years
|
|
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
16.
|
SHARE BASED PAYMENTS (continued)
|
Risk free interest rate – This
is the government bond rate (having a term that most closely resembles the expected life of the option) in effect at the grant
date. The Australian government bond rate has been used for options which are exercisable for fully paid ordinary shares and the
U.S. government bond rate has been used for options which are exercisable for ADRs.
Dividend yield – Alterity
has never declared or paid dividends on its ordinary shares and does not anticipate paying any dividends in the foreseeable future.
Expected volatility – Alterity
estimates expected volatility based on historical volatility over the estimated life of the option and other factors. Historical
volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future
movements. The life of the options is based on historical exercise patterns, which may not eventuate in the future.
Expected life – This is the
period of time that the options granted are expected to remain outstanding. This estimate is based primarily on historical trend
of option holders to exercise their option near the date of expiry. As a result, the expected life is considered to equal the period
from grant date to expiry date.
Model inputs – The model inputs
for the valuations of options approved and issued during the current and previous financial years are as follows:
Series
|
|
Grant Date
|
|
Exercise Price per Share
|
|
|
Share Price at Grant Date
|
|
|
Expected Share Price Volatility
|
|
|
Years to Expiry
|
|
|
Dividend Yield
|
|
|
Risk-free Interest Rate
|
|
|
|
|
|
A$
|
|
|
A$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBTAY
|
|
August 5, 2013
|
|
|
0.66
|
|
|
|
0.38
|
|
|
|
62.00
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
3.05
|
%
|
PBTAZ
|
|
October 2, 2013
|
|
|
0.66
|
|
|
|
0.41
|
|
|
|
61.00
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
3.24
|
%
|
PBTAA
|
|
October 25, 2013
|
|
|
0.61
|
|
|
|
0.38
|
|
|
|
63.60
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
3.31
|
%
|
PBTAD
|
|
November 4, 2013
|
|
|
0.73
|
|
|
|
0.44
|
|
|
|
68.80
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
3.46
|
%
|
PBTAE
|
|
December 13, 2013
|
|
|
1.04
|
|
|
|
0.69
|
|
|
|
70.70
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
3.45
|
%
|
PBTAF
|
|
February 7, 2014
|
|
|
1.12
|
|
|
|
1.18
|
|
|
|
58.50
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
3.44
|
%
|
PBTAG
|
|
April 7, 2014
|
|
|
0.25
|
|
|
|
0.23
|
|
|
|
289.40
|
%
|
|
|
4.00
|
|
|
|
0
|
%
|
|
|
3.02
|
%
|
PBTAB
|
|
October 3, 2014
|
|
|
0.34
|
|
|
|
0.22
|
|
|
|
130.50
|
%
|
|
|
4.00
|
|
|
|
0
|
%
|
|
|
2.71
|
%
|
PBTAH
|
|
February 19, 2015
|
|
|
0.26
|
|
|
|
0.16
|
|
|
|
74.80
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
2.00
|
%
|
PBTAR
|
|
May 27, 2015
|
|
|
0.27
|
|
|
|
0.17
|
|
|
|
69.40
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
2.25
|
%
|
PBTAS
|
|
June 7, 2017
|
|
|
0.07
|
|
|
|
0.05
|
|
|
|
100.00
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
1.97
|
%
|
PBTAAA
|
|
December 18, 2017
|
|
|
0.11
|
|
|
|
0.07
|
|
|
|
100
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
2.38
|
%
|
PBTAI
|
|
February 1, 2018
|
|
|
0.08
|
|
|
|
0.06
|
|
|
|
100
|
%
|
|
|
5.00
|
|
|
|
0
|
%
|
|
|
2.24
|
%
|
Information with respect to the number of
shares issued under the 2004 ASX Plan as follows:
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
Number of
Shares
|
|
|
Number of
Shares
|
|
|
Number of
Shares
|
|
Beginning of the year
|
|
|
13,277,715
|
|
|
|
13,277,715
|
|
|
|
13,277,715
|
|
Issued during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the financial year
|
|
|
13,277,715
|
|
|
|
13,277,715
|
|
|
|
13,277,715
|
|
No shares were granted during the year ended
June 30, 2020, 2019 and 2018.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
As announced on July 2, 2020, the Group issued
47,646,000 shares at $0.0328 per share through the use of its “at market” (ATM) facility to fund working capital and
progress its research and development activities.
In accordance to a resolution of shareholders approved at the General
Meeting held on September 3, 2020, incentive options with an exercise price of two times the closing price of the Company’s
ordinary shares on ASX on the last ASX business day immediately before the day the options are issued, expiring 5 years after the
issue date will be issued to the Directors of the Company, as follows:
Geoffrey Kempler
|
|
|
14,000,000
|
|
Tristan Edwards
|
|
|
7,000,000
|
|
Lawrence Gozlan
|
|
|
7,000,000
|
|
Peter Marks
|
|
|
7,000,000
|
|
Brian Meltzer
|
|
|
7,000,000
|
|
David Sinclair
|
|
|
7,000,000
|
|
No other matter or circumstance has occurred
subsequent to year end that has significantly affected, or may significantly affect, the operations of the Group, the results of
those operations or the state of affairs of the Group or economic entity in subsequent financial years.
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share (cents per share)
|
|
|
(1.50
|
)
|
|
|
(2.00
|
)
|
|
|
(1.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares on issue used in the calculation of basic and diluted loss per share
|
|
|
894,872,224
|
|
|
|
615,772,236
|
|
|
|
533,891,470
|
|
The options and warrants in place do not have
the effect of diluting the loss per share.
|
19.
|
KEY MANAGEMENT PERSONNEL COMPENSATION
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Short-term employee benefits
|
|
|
1,549,861
|
|
|
|
2,046,496
|
|
|
|
1,522,777
|
|
Post-employment benefits
|
|
|
48,947
|
|
|
|
41,062
|
|
|
|
44,389
|
|
Long-term benefits
|
|
|
20,528
|
|
|
|
23,016
|
|
|
|
(1,061
|
)
|
Share-based payments
|
|
|
-
|
|
|
|
20,443
|
|
|
|
608,179
|
|
|
|
|
1,619,336
|
|
|
|
2,131,017
|
|
|
|
2,174,284
|
|
|
20.
|
AUDITORS’ REMUNERATION
|
|
|
Years
Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
-
Audit and review of financial statements
|
|
|
194,900
|
|
|
|
210,422
|
|
|
|
180,000
|
|
- Other audit
services1
|
|
|
60,000
|
|
|
|
90,000
|
|
|
|
72,960
|
|
|
|
|
254,900
|
|
|
|
300,422
|
|
|
|
252,960
|
|
|
1.
|
Audit and other audit services consist of fees billed for
assurance and related services that generally only the statutory auditor could reasonably provide to a client. Included in the
balance are amounts related to additional regulatory filings during the 2020, 2019 and 2018 financial years. All services provided
are considered audit services for the purpose of SEC classification.
|
PricewaterhouseCoopers was appointed as the
Company’s principal independent registered public accounting firm on November 30, 2006. Australian law does not require the
Company’s Auditors to be appointed at the Company’s annual general meeting of shareholders. There is an annual engagement
letter which is signed, subject to the Company’s audit committee approval, with PricewaterhouseCoopers for audit and review
work. No non-audit services were provided by PricewaterhouseCoopers during the 2020, 2019 and 2018 fiscal years.
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
21.
|
RELATED PARTY TRANSACTIONS
|
|
a.
|
Equity Interests in Subsidiaries
|
Alterity Therapeutics Limited owns 100% of
its subsidiaries, Alterity Therapeutics Inc. and Alterity Therapeutics UK Ltd.
|
b.
|
Key Management Personnel Remuneration
|
The Directors of Alterity during the year:
Mr. Geoffrey Kempler, Chairman & CEO
Mr. Brian Meltzer, Independent Non-Executive
Director
Mr. Peter Marks, Independent Non-Executive
Director
Mr. Lawrence Gozlan, Non-Executive Director
Dr. David Sinclair, Non-Executive Director
Mr. Tristan Edwards, Non-Executive Director
The Key Management Personnel of the Company
during the year:
Dr. David Stamler
|
Chief Medical Officer and Senior Vice President Clinical Development
|
Ms. Kathryn Andrews
|
Chief Financial Officer
|
Remuneration of all key management personnel
of the Company is determined by the Board of Directors following recommendation by the Remuneration Committee.
The Company is committed to remunerating senior
executives in a manner that is market competitive and consistent with ‘best practice’ including the interests of shareholders.
Remuneration packages are based on fixed and variable components, determined by the executive’s position, experience and
performance, and may be satisfied via cash or equity.
Non-executive Directors are remunerated out
of the aggregate amount approved by shareholders and at a level that is consistent with industry standards. Non-executive Directors
do not receive performance based bonuses and prior shareholder approval is required to participate in any issuance of equity. No
retirement benefits are payable other than statutory superannuation, if applicable.
The Company’s remuneration policy is not solely
based on the Company’s performance, but also on industry practice.
The Company’s primary focus is research activities
with a long term objective of developing and commercializing its research and development results.
The Company envisages its performance in terms
of earnings will remain negative whilst the Company continues in the research and clinical trials. Shareholder wealth reflects
this speculative and volatile market sector. This pattern is indicative of the Company’s performance over the past four years.
The purpose of a performance bonus is to reward
individual performance in line with Company objectives. Consequently, performance based remuneration is paid to an individual where
the individual’s performance clearly contributes to a successful outcome for the Company. This is regularly measured in respect
of performance against key performance indicators (“KPI’s”).
The Company uses a variety of KPI’s to determine
achievement, depending on the role of the executive being assessed. These include:
|
●
|
successful contract negotiations;
|
|
●
|
Company share price reaching a targeted rate on the ASX
or applicable market over a period of time; or
|
|
●
|
achievement of research project milestones within scheduled
time and/or budget.
|
ALTERITY THERAPEUTICS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– in Australian dollars (unless otherwise noted)
|
21.
|
RELATED PARTY TRANSACTIONS (continued)
|
2020
|
|
Short Term Benefits
|
|
|
Post-
Employment
Superannuation
|
|
|
Long Term
Benefits
Long-
service
|
|
|
Equity
|
|
|
|
|
Directors’ remuneration
|
|
Base Fee
|
|
|
Bonus
|
|
|
Contribution
|
|
|
Leave
|
|
|
Options
|
|
|
Total
|
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
Mr. Geoffrey Kempler (1)
|
|
|
412,544
|
|
|
|
-
|
|
|
|
21,003
|
|
|
|
12,462
|
|
|
|
-
|
|
|
|
446,009
|
|
Mr. Brian Meltzer
|
|
|
73,059
|
|
|
|
-
|
|
|
|
6,941
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,000
|
|
Mr. Peter Marks
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
Mr. Lawrence Gozlan
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
Dr. David Sinclair
|
|
|
45,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,000
|
|
Mr. Tristan Edwards
|
|
|
45,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,000
|
|
|
|
|
695,603
|
|
|
|
-
|
|
|
|
27,944
|
|
|
|
12,462
|
|
|
|
-
|
|
|
|
736,009
|
|
|
(1)
|
Base Fee includes movements in the annual leave provision
relating to Mr. Geoffrey Kempler.
|
2019
|
|
Short Term Benefits
|
|
|
Post-
Employment
Superannuation
|
|
|
Long Term
Benefits
Long-
service
|
|
|
Equity
|
|
|
|
|
Directors’ remuneration
|
|
Base Fee
|
|
|
Bonus
|
|
|
Contribution
|
|
|
Leave
|
|
|
Options
|
|
|
Total
|
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
Mr. Geoffrey Kempler (1)
|
|
|
395,728
|
|
|
|
-
|
|
|
|
20,531
|
|
|
|
7,794
|
|
|
|
-
|
|
|
|
424,053
|
|
Mr. Brian Meltzer
|
|
|
80,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,000
|
|
Dr. George Mihaly (2)
|
|
|
66,667
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66,667
|
|
Mr. Peter Marks
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
Mr. Lawrence Gozlan (3)
|
|
|
580,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
580,000
|
|
Dr. Ira Shoulson (2)(4)
|
|
|
58,314
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,443
|
|
|
|
78,757
|
|
Dr. David Sinclair (2)
|
|
|
10,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,750
|
|
Mr. Tristan Edwards (2)
|
|
|
10,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,750
|
|
|
|
|
1,262,209
|
|
|
|
-
|
|
|
|
20,531
|
|
|
|
7,794
|
|
|
|
20,443
|
|
|
|
1,310,977
|
|
|
(1)
|
Base Fee includes movements in the annual leave provision
relating to Mr. Geoffrey Kempler.
|
|
(2)
|
The remuneration for Dr. George Mihaly and Dr. Ira Shoulson
covered the period from 1 July 2018 to 8 April 2019, being the last day of being the Company’s director. The remuneration for
Dr. David Sinclair and Mr. Tristan Edwards covered the period from 8 April 2019, being the date of their appointment as directors
of the Company, to June 30, 2019.
|
|
(3)
|
Includes corporate advisory fees paid to an associated
entity of Mr. Lawrence Gozlan in the amount of A$520,000.
|
|
(4)
|
Dr. Ira Shoulson received unlisted options during the year.
The option prices were calculated using the Black-Scholes Model applying the relevant inputs.
|
2018
|
|
Short Term Benefits
|
|
|
Post-
Employment
Superannuation
|
|
|
Long Term
Benefits
Long-
service
|
|
|
Equity
|
|
|
|
|
Directors’ remuneration
|
|
Base Fee
|
|
|
Bonus
|
|
|
Contribution
|
|
|
Leave
|
|
|
Options
|
|
|
Total
|
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
Mr. Geoffrey Kempler (1) (3)
|
|
|
381,340
|
|
|
|
-
|
|
|
|
20,049
|
|
|
|
7,763
|
|
|
|
235,000
|
|
|
|
644,152
|
|
Mr. Lawrence Gozlan (3)
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,750
|
|
|
|
118,750
|
|
Mr. Brian Meltzer (3)
|
|
|
82,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,750
|
|
|
|
141,250
|
|
Dr. George Mihaly (3)
|
|
|
77,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,750
|
|
|
|
136,250
|
|
Mr. Peter Marks (3)
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,750
|
|
|
|
118,750
|
|
Dr. Ira Shoulson (2)
|
|
|
78,885
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,885
|
|
|
|
|
740,225
|
|
|
|
-
|
|
|
|
20,049
|
|
|
|
7,763
|
|
|
|
470,000
|
|
|
|
1,238,037
|
|
|
(1)
|
Base Fee includes movements in the annual leave provision
relating to Mr Geoffrey Kempler.
|
|
(2)
|
Includes consulting fees paid to Dr Ira Shoulson in the
amount of A$12,021.
|
|
(3)
|
The Directors received unlisted options during the year.
The option prices were calculated using the Black-Scholes Model applying the relevant inputs.
|
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
21.
|
RELATED
PARTY TRANSACTIONS (continued)
|
|
|
|
|
|
|
|
|
Post-Employment
|
|
|
Long Term
Benefits
|
|
|
|
|
|
|
|
2020
|
|
Short Term Benefits
|
|
|
Superannuation
|
|
|
Long-service
|
|
|
Equity
|
|
|
|
|
Executives’ Remuneration
|
|
Base Fee
|
|
|
Other
|
|
|
Contribution
|
|
|
Leave
|
|
|
Options
|
|
|
Total
|
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
Ms. Kathryn Andrews (1)
|
|
|
228,788
|
|
|
|
-
|
|
|
|
21,003
|
|
|
|
8,066
|
|
|
|
-
|
|
|
|
257,857
|
|
Dr. David Stamler (1)
|
|
|
625,470
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
625,470
|
|
|
(1)
|
Base
Fee includes movements in annual leave provision for, Ms Kathryn Andrews and Mr David Stamler accrued in accordance with their
employment contracts.
|
|
|
|
|
|
|
|
|
Post-Employment
|
|
|
Long Term
Benefits
|
|
|
|
|
|
|
|
2019
|
|
Short Term Benefits
|
|
|
Superannuation
|
|
|
Long-service
|
|
|
Equity
|
|
|
|
|
Executives’ Remuneration
|
|
Base Fee
|
|
|
Other
|
|
|
Contribution
|
|
|
Leave
|
|
|
Options
|
|
|
Total
|
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
Ms. Kathryn Andrews (1)
|
|
|
236,665
|
|
|
|
|
|
|
|
20,531
|
|
|
|
15,222
|
|
|
|
-
|
|
|
|
272,418
|
|
Dr. David Stamler (1)
|
|
|
547,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
547,622
|
|
|
(1)
|
Base
Fee includes movements in annual leave provision for, Ms Kathryn Andrews and Mr David Stamler accrued in accordance with their
employment contracts.
|
|
|
|
|
|
|
|
|
Post-Employment
|
|
|
Long Term
Benefits
|
|
|
Equity
|
|
|
|
|
2018
|
|
Short Term Benefits
|
|
|
Superannuation
|
|
|
Long-service
|
|
|
|
|
|
|
|
Executives’ Remuneration
|
|
Base Fee
|
|
|
Other
|
|
|
Contribution
|
|
|
Leave
|
|
|
Options
|
|
|
Total
|
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
|
A$
|
|
Ms. Dianne Angus (1) (2)
|
|
|
81,589
|
|
|
|
-
|
|
|
|
5,736
|
|
|
|
(8,920
|
)
|
|
|
(3,433
|
)
|
|
|
74,972
|
|
Ms. Kathryn Andrews (1) (3)
|
|
|
196,689
|
|
|
|
-
|
|
|
|
18,604
|
|
|
|
96
|
|
|
|
15,735
|
|
|
|
231,124
|
|
Dr. David Stamler (1) (3)
|
|
|
504,274
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,877
|
|
|
|
630,151
|
|
|
(1)
|
Base
Fee includes movements in annual leave provision for Ms Dianne Angus, Ms Kathryn Andrews and Mr David Stamler accrued in accordance
with their employment contracts.
|
|
(2)
|
The
remuneration for Ms. Dianne Angus covers the period from 1 July 2017 to 10 October 2017, being the last day of her employment
with the Company. The amount also includes payments of unused leave balances.
|
|
(3)
|
The
equity component of Kathryn Andrews' and David Stamler's remuneration represents the portion of unlisted options granted in prior
year but vested during the current year.
|
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
21.
|
RELATED
PARTY TRANSACTIONS (continued)
|
The
following Director was under contract during the year ended June 30, 2020:
Directors
|
Duration
|
Notice
Requirements
|
Termination
|
Geoffrey
Kempler
|
Until
termination by either party.
Signed
21 September 2007
|
For
Good Reason Mr Kempler may terminate with 30 days’ notice
|
Pay
Geoffrey Kempler within ninety (90) days of the termination date $1,000,000 provided the Company has sufficient capital requirements
to fulfill this clause
|
|
|
|
Accrued
entitlements including all unreimbursed business expenses
|
|
|
|
Accelerate
the vesting of any unvested options
|
|
|
Without
Good Reason Mr Kempler may terminate with 90 days’ notice
|
Bonus
pro-rated only if termination occurs in 1st year
|
|
|
Without
Cause the Company may terminate with 90 days’ notice
|
Pay
Geoffrey Kempler within ninety (90) days of the termination date $1,000,000 provided the Group has sufficient
capital requirements to fulfill this clause
|
|
|
|
Accrued
entitlements including all unreimbursed business expenses
|
|
|
|
Accelerate
the vesting of any unvested options
|
|
|
With
Cause the Company may terminate with 30 days’ notice
|
Bonus
pro-rated only if termination occurs in 1st year
|
The
following Senior Executives were under contract during the year ended June 30, 2020:
Key
management personnel
|
Duration
|
Notice
Requirements
|
Termination
|
Kathryn
Andrews
|
Until
termination by either party.
Signed
11 November 2014
|
Ms
Andrews may terminate with 30 days’ notice, or
|
Accrued
entitlements including all unreimbursed business expenses
|
|
|
Without
Cause the Company may terminate with 30 days’ notice, or
|
Permitted
to keep and/or exercise options that have vested at the time of termination
|
|
|
With
Cause the Company may terminate without notice
|
|
David
Stamler
|
Until
termination by either party.
Signed
18 April 2017.
|
By
the company without cause or by Dr. Stamler with good reason, 3 months’ notice, increasing to 6 months’ notice
after 18 months of employment, unless otherwise agreed in writing.
|
Payment
equivalent to seventy five percent of current annualized salary Accrued entitlements
including all unreimbursed business expenses
|
Unexercised
options shall be exercisable within 30 days after the date of termination
|
With
Cause, the Company may terminate at any time upon written notice
|
Accrued
entitlements including all unreimbursed business expenses
|
Unexercised
options shall be exercisable within 30 days after the date of termination
|
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
21.
|
RELATED
PARTY TRANSACTIONS (continued)
|
|
c.
|
Key
Management Personnel Equity Holdings
|
Fully Paid Ordinary Shares of the Company
|
|
Balance
July 1,
2019
|
|
|
Received as
Remuneration
|
|
|
Received on
Exercise of
Options
|
|
|
Net Change
Other
|
|
|
Balance
June 30,
2020
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
Mr. Geoffrey Kempler
|
|
|
18,011,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,011,000
|
|
Mr. Lawrence Gozlan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Brian Meltzer
|
|
|
326,666
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
326,666
|
|
Mr. Peter Marks
|
|
|
43,111
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,111
|
|
Dr. David Sinclair
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Tristan Edwards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Kathryn Andrews
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dr. David Stamler
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
18,380,777
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,380,777
|
|
Fully Paid Ordinary Shares of the Company
|
|
Balance
July 1,
2018
|
|
|
Received as
Remuneration
|
|
|
Received on
Exercise of
Options
|
|
|
Net Change
Other
|
|
|
Balance
June 30,
2019
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
Mr. Geoffrey Kempler
|
|
|
18,011,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,011,000
|
|
Mr. Lawrence Gozlan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Brian Meltzer
|
|
|
326,666
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
326,666
|
|
Dr. George Mihaly (1)
|
|
|
226,666
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(226,666
|
)
|
|
|
-
|
|
Mr. Peter Marks
|
|
|
43,111
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,111
|
|
Dr. David Sinclair
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Tristan Edwards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dr. Ira Shoulson
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Kathryn Andrews
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dr. David Stamler
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
18,607,443
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(226,666
|
)
|
|
|
18,380,777
|
|
|
1.
|
Other
changes represented the holdings of Dr. George Mihaly when he ceased to be a director of the Group on 8 April 2019.
|
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
21.
|
RELATED
PARTY TRANSACTIONS (continued)
|
|
c.
|
Key
Management Personnel Equity Holdings (continued)
|
Fully Paid Ordinary Shares of the Company
|
|
Balance
July 1,
2017
|
|
|
Received as
Remuneration
|
|
|
Received on
Exercise of
Options
|
|
|
Net Change
Other
|
|
|
Balance
June 30,
2018
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
Mr. Geoffrey Kempler
|
|
|
18,011,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,011,000
|
|
Mr. Lawrence Gozlan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Brian Meltzer
|
|
|
326,666
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
326,666
|
|
Dr. George Mihaly
|
|
|
226,666
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
226,666
|
|
Mr. Peter Marks
|
|
|
43,111
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,111
|
|
Dr. Ira Shoulson
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Dianne Angus
|
|
|
146,128
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(146,128
|
)
|
|
|
-
|
|
Ms. Kathryn Andrews
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dr. David Stamler (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
18,753,571
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(146,128
|
)
|
|
|
18,607,443
|
|
|
(1)
|
Opening
balance on appointment as Senior Vice President Development and Chief Medical Officer on 15 May 2017.
|
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
21.
|
RELATED
PARTY TRANSACTIONS (continued)
|
|
c.
|
Key
Management Personnel Equity Holdings (continued)
|
Share Options of the Company
|
|
Balance
July 1,
2019
|
|
|
Granted as
Remuneration
|
|
|
Options
Exercised
|
|
|
Options
Expired
|
|
|
Options
Forfeited
|
|
|
Net Change
Other
|
|
|
Options Vested
During
2020
fiscal year
|
|
|
Balance
June 30,
2019
|
|
|
Total
Vested and
Exercisable
June 30,
2020
|
|
|
Total
Unvested
June 30,
2020
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
|
|
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
Mr. Geoffrey Kempler
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
-
|
|
Mr. Lawrence Gozlan
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Mr. Brian Meltzer
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Mr. Peter Marks
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Dr. David Sinclair
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Tristan Edwards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Kathryn Andrews
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
-
|
|
Dr. David Stamler
|
|
|
4,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
|
|
-
|
|
|
|
|
13,250,000
|
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,250,000
|
|
|
|
13,250,000
|
|
|
|
-
|
|
Share Options of the Company
|
|
Balance
July 1,
2018
|
|
|
Granted as
Remuneration
|
|
|
Options
Exercised
|
|
|
Options
Expired
|
|
|
Options
Forfeited
|
|
|
Net Change
Other
|
|
|
Options Vested
During 2019
fiscal year
|
|
|
Balance
June 30,
2019
|
|
|
Total
Vested and
Exercisable
June 30,
2019
|
|
|
Total
Unvested
June 30,
2019
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
|
|
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
Mr. Geoffrey Kempler
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
-
|
|
Mr. Brian Meltzer
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Dr. George Mihaly (1)
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
(1,250,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Peter Marks
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Mr. Lawrence Gozlan
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Dr. Ira Shoulson (1)
|
|
|
-
|
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
(1,250,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dr. David Sinclair
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Tristan Edwards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Kathryn Andrews
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
-
|
|
Dr. David Stamler
|
|
|
4,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
|
|
-
|
|
|
|
|
14,500,000
|
|
|
|
1,250,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
-
|
|
|
|
(2,500,000
|
)
|
|
|
-
|
|
|
|
13,250,000
|
|
|
|
13,250,000
|
|
|
|
-
|
|
|
(1)
|
Dr.
George Mihaly and Dr. Ira Shoulson resigned on 8 April 2019.
|
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
21.
|
RELATED
PARTY TRANSACTIONS (continued)
|
|
c.
|
Key
Management Personnel Equity Holdings (continued)
|
Share Options of the Company
|
|
Balance
July 1,
2017
|
|
|
Granted as
Remuneration
|
|
|
Options
Exercised
|
|
|
Options
Expired
|
|
|
Options
Forfeited
|
|
|
Net Change Other
|
|
|
Options Vested
During 2018
fiscal year
|
|
|
Balance
June 30,
2018
|
|
|
Total
Vested and
Exercisable
June 30,
2018
|
|
|
Total
Unvested
June 30,
2018
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
|
|
|
|
|
|
|
No.
|
|
|
No.
|
|
|
No.
|
|
Mr. Geoffrey Kempler
|
|
|
4,000,000
|
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
(4,000,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
-
|
|
Mr. Lawrence Gozlan
|
|
|
1,000,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
|
|
Mr. Brian Meltzer
|
|
|
1,000,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Dr. George Mihaly
|
|
|
1,000,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
Mr. Peter Marks
|
|
|
1,000,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
1,250,000
|
|
|
|
1,250,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Ira Shoulson
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Dianne Angus (1)
|
|
|
2,360,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,360,000
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ms. Kathryn Andrews
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
-
|
|
Dr. David Stamler
|
|
|
4,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
|
|
-
|
|
|
|
|
14,860,000
|
|
|
|
10,000,000
|
|
|
|
-
|
|
|
|
(8,000,000
|
)
|
|
|
(2,360,000
|
)
|
|
|
|
|
|
|
4,500,000
|
|
|
|
14,500,000
|
|
|
|
14,500,000
|
|
|
|
|
|
|
(1)
|
Ms Angus resigned effective October 10, 2017.
|
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
The
Company’s Chief Executive Officer (Chief Operating Decision Maker) examines internal reports to assess the Company’s
performance and determine the allocation of resources. The Company’s activities are predominantly within Australia and cover
research into Parkinsonian movement disorders, Alzheimer’s disease, Huntington disease, and other neurodegenerative disorders.
Accordingly, the Company has identified one reportable segment.
|
23.
|
FINANCIAL
INSTRUMENTS
|
The
Company’s activities expose it to a variety of financial risks including market risk, credit risk and liquidity risk. The
Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the financial performance of the Company. Risk management is carried out under policies approved by the Board
of Directors and overseen by the Audit Committee.
(i)
Foreign Currency Risk
The
Company engages in international purchase transactions and is exposed to foreign currency risk arising from various currency exposures,
primarily with respect to the Australian dollar. The parent entity also has exposure to foreign exchange risk in the currency
cash reserves it holds to meet its foreign currency payments. The Company does not make use of derivative financial instruments
to hedge foreign exchange risk.
The
following financial assets and liabilities are subject to foreign currency risk, the currency of the original amounts are displayed
in brackets, all the amounts in the table below are displayed in A$ at year-end spot rates:
|
|
Consolidated Entity
|
|
|
|
2020
|
|
|
2019
|
|
|
|
A$
|
|
|
A$
|
|
Cash and cash equivalents (USD)
|
|
|
5,403,402
|
|
|
|
9,726,790
|
|
Cash and cash equivalents (€EUR)
|
|
|
-
|
|
|
|
178
|
|
Cash and cash equivalents (£GBP)
|
|
|
430
|
|
|
|
433
|
|
Trade and other payables (USD)
|
|
|
(562,710
|
)
|
|
|
(1,196,358
|
)
|
Trade and other payables (€EUR)
|
|
|
(12,245
|
)
|
|
|
-
|
|
Trade and other payables (£GBP)
|
|
|
(4,337
|
)
|
|
|
(35,242
|
)
|
Total exposure
|
|
|
4,824,540
|
|
|
|
8,495,801
|
|
As
shown in the table above, the group is primarily exposed to changes in USD/AUD exchange rates. The sensitivity of profit or loss
to changes in the exchange rates arises mainly from US-dollar denominated financial instruments and there is no impact on other
components of equity.
The
Group's exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result of changes
in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities.
Based
on the financial instruments held as of June 30, 2020, had the Australian dollar weakened/strengthened by 2.17% (2019: 6.36%)
against the USD with all other variables held constant, the Group's post-tax loss for the year would have been A$105,090 lower/higher
(2019: A$542,116 lower/higher).
(ii)
Interest Rate Risk
The
Company has an exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a
result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and
financial liabilities.
The
Company’s exposure to interest rate risk has not changed since the prior year.
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
23.
|
FINANCIAL
INSTRUMENTS (continued)
|
At
June 30, 2020, the Company had the following cash accounts:
|
●
|
A$3,448,551
in an Australian dollar transaction account at an interest rate of 0.60% as of June 30, 2020;
|
|
●
|
A$83,932
in an Australian dollar transaction account at an interest rate of 0.05% as of June 30, 2020;
|
|
●
|
A$66,841
in an Australian dollar transaction account at an interest rate of 0.00% as of June 30, 2020;
|
|
●
|
US$3,716,309
(A$5,403,402) in U.S. checking accounts at an interest rate of 0% as of June 30, 2020;
|
|
●
|
A$42,713
in a three month term deposit at a fixed interest rate of 0.80% which matures on September 7, 2020;
|
|
●
|
A$150,000
in a three month term deposit at a fixed interest rate of 0.80% which matures on September 11, 2019.
|
At
June 30, 2019, the Company had the following cash accounts:
|
●
|
A$1,354,771
in an Australian dollar transaction account at an interest rate of 0.60% as of June 30, 2019;
|
|
●
|
A$45,486
in an Australian dollar transaction account at an interest rate of 0.05% as of June 30, 2019;
|
|
●
|
A$66,534
in an Australian dollar transaction account at an interest rate of 0.00% as of June 30, 2019;
|
|
●
|
A$15
in an Australian Trust account at an interest rate of 0% as of June 30, 2019;
|
|
●
|
US$6,836,116
(A$9,726,016) in U.S. checking accounts at an interest rate of 0% as of June 30, 2019;
|
|
●
|
A$2,012,329
in a three month term deposit at a fixed interest rate of 1.50% which matures on August 26, 2019;
|
|
●
|
A$1,000,000
in a three month term deposit at a fixed interest rate of 1.85% which matures on July 27, 2019;
|
|
●
|
A$42,713
in a three month term deposit at a fixed interest rate of 2.00% which matures on September 7, 2019;
|
|
●
|
A$150,000
in a three month term deposit at a fixed interest rate of 2.00% which matures on September 11, 2019.
|
At
June 30, 2018, the Company had the following cash accounts:
|
●
|
A$
2,552,615 in an Australian dollar transaction account at an interest rate of 0.60% as of June 30, 2018;
|
|
●
|
A$63,791
in an Australian dollar transaction account at an interest rate of 0.05% as of June 30, 2018;
|
|
●
|
A$114,990
in an Australian dollar transaction account at an interest rate of 0.00% as of June 30, 2018;
|
|
●
|
A$135
in an Australian Trust account at an interest rate of 0% as of June 30, 2018;
|
|
●
|
US$4,675,242
(A$6,308,538) in U.S. checking accounts at an interest rate of 0.03% as of June 30, 2018;
|
|
●
|
A$3,000,000
in a three month term deposit at a fixed interest rate of 2.40% which matures on September 25, 2018;
|
|
●
|
A$3,000,000
in a three month term deposit at a fixed interest rate of 2.40% which matures on August 3, 2018;
|
|
●
|
A$42,713
in a three month term deposit at a fixed interest rate of 2.40% which matures on September 7, 2018;
|
|
●
|
A$150,000
in a three month term deposit at a fixed interest rate of 2.40% which matures on September 11, 2018.
|
The
weighted average interest rate is 0.12% for cash and cash equivalents and 0.80% for terms deposits over three months and apart
from usual variances in general rates of interest the Company is not exposed to any significant interest rate risk.
ALTERITY
THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
23.
|
FINANCIAL
INSTRUMENTS (continued)
|
Receivables
and payables are non-interest bearing.
The
Company’s exposure to interest rates and the effective weighted average interest rate for classes of financial assets and
liabilities is set out below:
June 30, 2020
|
|
Floating
Interest Rate
|
|
|
Fixed Interest
Maturing in
|
|
|
Non-Interest bearing
|
|
|
Total
|
|
|
Average Interest Rate
|
|
|
|
(A$)
|
|
|
(A$)
|
|
|
(A$)
|
|
|
(A$)
|
|
|
|
|
|
|
|
|
|
1 year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or less
|
|
|
1-5 years
|
|
|
|
|
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
3,532,485
|
|
|
|
192,713
|
|
|
|
-
|
|
|
|
5,471,694
|
|
|
|
9,196,892
|
|
|
|
0.24
|
%
|
Trade and other receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,711
|
|
|
|
61,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Assets
|
|
|
3,532,485
|
|
|
|
192,713
|
|
|
|
-
|
|
|
|
5,533,405
|
|
|
|
9,258,603
|
|
|
|
0.24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,069,604
|
)
|
|
|
(2,069,604
|
)
|
|
|
|
|
Lease liabilities
|
|
|
-
|
|
|
|
(32,879
|
)
|
|
|
(868
|
)
|
|
|
-
|
|
|
|
(33,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Liabilities
|
|
|
-
|
|
|
|
(32,879
|
)
|
|
|
(868
|
)
|
|
|
(2,069,604
|
)
|
|
|
(2,103,351
|
)
|
|
|
|
|
June 30, 2019
|
|
Floating Interest Rate
|
|
|
Fixed Interest
Maturing in
|
|
|
Non-Interest bearing
|
|
|
Total
|
|
|
Average Interest Rate
|
|
|
|
(A$)
|
|
|
(A$)
|
|
|
(A$)
|
|
|
(A$)
|
|
|
|
|
|
|
|
|
|
1 year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or less
|
|
|
1-5 years
|
|
|
|
|
|
|
|
|
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,400,257
|
|
|
|
3,205,042
|
|
|
|
-
|
|
|
|
9,794,605
|
|
|
|
14,399,904
|
|
|
|
0.42
|
%
|
Trade and other receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,829,497
|
|
|
|
4,829,497
|
|
|
|
|
|
Other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
621,737
|
|
|
|
621,737
|
|
|
|
|
|
Other non-current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Assets
|
|
|
1,400,257
|
|
|
|
3,205,042
|
|
|
|
|
|
|
|
15,245,839
|
|
|
|
19,851,138
|
|
|
|
0.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,718,174
|
)
|
|
|
(2,718,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,718,174
|
)
|
|
|
(2,718,174
|
)
|
|
|
|
|
ALTERITY THERAPEUTICS LIMITED
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – in Australian dollars (unless otherwise noted)
|
23.
|
FINANCIAL
INSTRUMENTS (continued)
|
Credit
risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
The Company has no significant concentration of credit risk and it is not the Company’s policy to hedge credit risk.
The
Company ensures that surplus cash is invested with financial institutions of appropriate credit worthiness and limits the amount
of credit exposure to any one counter party.
There
has been no significant change in the Company’s exposure to credit risk since the previous year. The carrying amount of
the Company’s financial assets represents the maximum credit exposure.
Prudent
liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed
credit facilities. The Company manages liquidity risk by maintaining sufficient bank balances to fund its operations and the availability
of funding through committed credit facilities.
Management monitors rolling forecasts of the Company’s
liquidity reserve on the basis of expected cash flows. For further discussion on the going concern basis of preparation, refer
to Note 1.
|
|
Maturities of Financial Liabilities
|
|
|
|
|
|
2020
|
|
Less than
6 months
|
|
|
6-12 months
|
|
|
Greater than
12 months
and less
than 5 years
|
|
|
Total
contracted
cash flows
|
|
|
Carrying
amounts
|
|
Trade and other payables
|
|
|
(2,069,604
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,069,604
|
)
|
|
|
(2,069,604
|
)
|
Lease liabilities
|
|
|
(16,440
|
)
|
|
|
(16,439
|
)
|
|
|
(868
|
)
|
|
|
(33,747
|
)
|
|
|
(33,747
|
)
|
Total
|
|
|
(2,086,044
|
)
|
|
|
(16,439
|
)
|
|
|
(868
|
)
|
|
|
(2,103,351
|
)
|
|
|
(2,103,351
|
)
|
2019
|
|
Less than
6 months
|
|
|
6-12 months
|
|
|
Greater than
12 months
and less
than 5 years
|
|
|
Total
contracted
cash flows
|
|
|
Carrying
amounts
|
|
Trade and other payables
|
|
|
(2,718,174
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,718,174
|
)
|
|
|
(2,718,174
|
)
|
Total
|
|
|
(2,718,174
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,718,174
|
)
|
|
|
(2,718,174
|
)
|
|
(d)
|
Capital
Risk Management
|
The
Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern and to maintain
an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure,
the Company may issue new shares or reduce its capital, subject to the provisions of the Company's constitution. The capital structure
of the Company consists of equity attributed to equity holders of the Company, comprising contributed equity, reserves and accumulated
losses disclosed in Notes 10, 11 and 12. By monitoring undiscounted cash flow forecasts
and actual cash flows provided to the Board by the Company's Management the Board monitors the need to raise additional equity
from the equity markets.
|
(e)
|
Fair
Value Estimation
|
The
carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective
fair values, determined in accordance with the accounting policies disclosed in Note 1 to the financial statements.
Financial
Instruments measured at Fair Value
The
financial instruments recognized at fair value in the Statement of Financial Position have been analyzed and classified using
a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists
of the following levels:
|
-
|
quoted
prices in active markets for identical assets or liabilities (Level 1);
|
|
-
|
inputs
other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (Level 2); and
|
|
-
|
inputs
for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
|
In
2020 and 2019, none of the Company’s assets and liabilities had their fair value determined using the fair value
hierarchy. No transfers between the levels of the fair value hierarchy occurred during the current or previous
years.