VIRALYTICS LTD ABN APPENDIX 4D Half Year Report

Transcription

1 VIRALYTICS LTD ABN APPENDIX 4D Half Year Report For the 6 months ended 31 December (current period) and the previous corresponding period 6 months ended 31 December 2014 Results for announcement to the market 31 Dec 15 ($,000) 31 Dec 14 ($,000) % movement Revenue from ordinary activities Down 23% (Loss) from ordinary activities after tax attributable to members (6,066) (2,449) Up 148% (Loss) for the period attributable to members (6,066) (2,449) Up 148% 31 Dec Dec 14 Net tangible asset backing per ordinary security 19.7 cents 13.2 cents Basic (Loss) per share (3.2 cents) (1.3 cents) An explanation of the result of the current period and full financial details are set out in the attached Directors Report and Financial Report. It is not proposed that any dividends will be paid. No dividends were paid in the previous corresponding period.

2 Viralytics Limited ABN HALF-YEAR FINANCIAL REPORT 31 DECEMBER

3 31 December Half-Year Financial Report Corporate Information Directors Mr Paul Hopper Dr Leonard Post Mr Peter Turvey Dr Malcolm McColl Chairman Non-Executive Director Non-Executive Director Managing Director and Chief Executive Company Secretary Ms Sarah Prince Chief Financial Officer Mr Robert Vickery Principal Place of Business Suite 305, Level 3 66 Hunter Street Sydney NSW 2000 Registered Office c/- Company Matters Level 12, 680 George Street Sydney, NSW 2000 Ph: (02) Fax: (02) investorrelations@viralytics.com Web: Auditors Grant Thornton Audit Pty Ltd Level 17, 383 Kent Street Sydney NSW 2000 Share Registry & Register Link Market Services Limited Level 12, 680 George Street Sydney, NSW 2000 Ph: (02)

4 Directors Report Your directors submit the financial report of the Company for the half-year ended 31 December. DIRECTORS The names of directors in office during the half year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated. Mr Paul Hopper Dr Leonard Post Mr Peter Turvey Dr Malcolm McColl Chairman Non-Executive Director Non-Executive Director Managing Director and Chief Executive RESULTS AND DIVIDENDS The loss after tax of the Company for the half-year was $6.1 million (comparative half-year: loss of $2.4 million). The increase in loss was due largely to increased operational expenditure including trial costs and manufacture of drug. No dividend was proposed or paid. CASH MANAGEMENT AND FUNDING The Company s cash on hand increased in the 6 months to 31 December by $25.0 million to $46.6 million. The increase was due mainly to $27.8 million being received from capital raising. Operating cash outflow for the period was $2.7 million compared to $0.2 million in the prior corresponding period (6 months to 31 December 2014). $2.9m was received from the Research and Development Tax Incentive refund ( $2.5m) and $0.2 million interest was received ( $0.3 million). Payments to suppliers and employees was up by $2.8 million compared to December

5 Directors Report REVIEW OF OPERATIONS Viralytics achieved outstanding progress in this period as we advanced our lead investigational product, CAVATAK, in a growing number of clinical trials, expanded our collaborations with leaders in the oncology field, and generated new and promising patient data in a range of cancer types. Viralytics announced in November that it had entered into a collaboration agreement with subsidiaries of Merck & Co., Inc. in Kenilworth, New Jersey, USA (known as MSD outside the United States and Canada) to conduct a clinical trial focused on the combination of CAVATAK with MSD s KEYTRUDA 1 (pembrolizumab). The Phase 1b study will explore this immunotherapy combination in patients with either advanced stage, non-small cell lung cancer or metastatic bladder cancer. The collaboration represents a major step in our strategy to realize CAVATAK s full potential across a range of cancers, both as a single agent and in combination with other novel therapies, including checkpoint inhibitors. Following the announcement of the Merck collaboration, the company was able to raise $32 million in new capital. This successful financing was achieved through a share placement during the period of $28 million from existing and new institutional investors, as well as a heavily oversubscribed $4 million share purchase plan (SPP) in January We were extremely pleased with the support demonstrated in the SPP with applications received in excess of $10 million. As a result of the capital raising OrbiMed Advisors, a leading New York based global healthcare fund, became a substantial shareholder. With these milestones achieved and resources secured, our goal is to generate further clinical data across a range of cancer indications to drive partnering discussions and shareholder value with the aim of realizing a significant commercial outcome from our innovative technology. Looking ahead, we anticipate a strong news flow as we continue to report on the clinical progress of CAVATAK as a potential new treatment in the fast-growing field of cancer immunotherapy. 1 Keytruda is a trademark of Merck & Company Inc 3

6 Directors Report CLINICAL TRIALS Phase 2 CALM Melanoma Clinical Trial Final results of the 57-patient Phase 2 CALM (CAVATAK in Late-stage Melanoma) trial were presented in September at the European Cancer Congress in Vienna, Austria. In his oral and poster presentations, Dr Robert Andtbacka of the Huntsman Cancer Institute, University of Utah, and Lead Study Investigator, reported an objective response rate of 28% (16/57), with eight patients achieving a complete response. Responses were observed in injected lesions; non-injected, non-visceral lesions, and in distant non-injected visceral lesions, including lung and liver metastases. A durable response persisting for at least 6 months was seen in 21% of patients with a one-year survival rate of 75.4%. Multi-dose intralesional therapy with CAVATAK was generally well tolerated, with no grade 3 or 4 treatment-related adverse events. Dr Andtbacka also reported preliminary results from the 13-patient CALM extension study, in which biopsies were taken from melanoma lesions prior to and after CAVATAK administration. An objective response rate of 31% (4/13) was observed, including tumour responses in advanced melanoma patients who had failed prior immunotherapies, including the checkpoint inhibitors ipilimumab and pembrolizumab. CAVATAK administration also mediated positive changes within the tumor microenvironment including increases in immune cell infiltrates and expression of PD-L1. The company believes that CAVATAK has significant potential for complementary activity when combined with other cancer immunotherapies such as checkpoint inhibitors. The results from the CALM and CALM extension study attracted very favourable attention from an audience of oncologists, institutional investors, and pharma companies. Phase 1 STORM Solid Tumour Cancer Clinical Trial In the ongoing Phase 1 STORM (Systemic Treatment Of Resistant Malignancies) clinical trial, multiple intravenous doses of CAVATAK are being administered to patients with late-stage non-small cell lung cancer, hormone refractory prostate cancer, metastatic bladder cancer, and late-stage melanoma. The first part of the study is underway at three sites in the UK and designed to assess CAVATAK alone in patients with some of the most common solid cancer types. 4

7 Directors Report Initial results from the first 12 patients, including six patients in the third cohort who have been administered the highest dose of CAVATAK, show that multiple infusions of CAVATAK are generally well tolerated with no Grade 3 or higher CAVATAK-related adverse events. In addition, there is evidence of successful tumour targeting in two melanoma patients in Cohort 3 (i.e. highest dose). Several patients achieved a best overall response of stable disease, including one with a confirmed partial response. The second part of the trial, a collaboration with Merck & Co., will commence in This stage of the STORM trial, to be conducted in approximately 80 to 90 patients, will assess the intravenous delivery of CAVATAK in combination with MSD s KEYTRUDA (pembrolizumab) in patients with advanced non-small cell lung or metastatic bladder cancer. The intravenous delivery of CAVATAK, and in particular in combination with checkpoint inhibitors such as KEYTRUDA, has the potential to significantly increase the commercial impact of the agent while benefitting many more cancer patients. This stage of the STORM study is the first clinical trial to explore the combination of an intravenously delivered oncolytic virus with a checkpoint inhibitor in these two very common cancer types. Phase 1 CANON Bladder Cancer Clinical Trial The Phase 1 CANON trial is designed to evaluate the tolerability and anti-cancer activity of CAVATAK delivered via catheter directly into the bladders of patients with non-muscle invasive bladder cancer both as a single agent and in combination with the standard chemotherapy, mitomycin C. Initial encouraging data were reported in November at the Annual Meeting of the Society for the Immunotherapy of Cancer in the United States. According to the Principal Investigator, Professor Hardev Pandha from the University of Surrey in the UK, CAVATAK has been generally well tolerated with no Grade 2 or higher treatment-related adverse events. Evidence that CAVATAK is targeting tumour tissue, including viral replication and tumour cell death, has been seen in patients following single or double administrations of CAVATAK. Also, clinical activity of CAVATAK has been demonstrated, with signs of viral replication and viralinduced tumour inflammation, as well as a complete tumour response in one out of the three patients in the highest dose cohort. Further interim results will be announced in the second quarter of Phase 1b MITCI CAVATAK Combination Clinical Trial Viralytics is conducting the MITCI (Melanoma Intra-Tumoral CAVATAK and Ipilimumab) study, which is designed to evaluate the tolerability and anti-cancer activity of the intralesional injection of CAVATAK in combination with the systemic administration Yervoy 2 (ipilimumab), a top-selling immune checkpoint inhibitor, in patients with unresectable melanoma. 2 Yervoy is a trademark of the Bristol-Myers Squibb company 5

8 Directors Report The company-sponsored study is underway at three sites in the United States. Preliminary findings in the MITCI study indicate no serious CAVATAK-related adverse events to the combination to date, and include a case report of one of the patients showing early signs of anti-tumour activity in metastatic visceral and non-visceral lesions at 14 weeks posttreatment initiation. Further interim results will be announced in the second quarter of Phase 1b CAPRA CAVATAK Combination Clinical Trial Viralytics initiated a clinical trial to assess CAVATAK in combination with the checkpoint inhibitor KEYTRUDA (pembrolizumab) in late-stage melanoma patients in September. The company-sponsored study, labelled CAPRA (CAvatak and PembrRolizumab in Advanced Melanoma), is designed to evaluate the tolerability of intratumoural CAVATAK in combination with KEYTRUDA in 30 patients with advanced melanoma. Investigators will also assess evidence of anti-cancer activity, including response rates and bio-markers of anti-tumour immunity. The lead investigator for the trial is Dr Howard Kaufman MD FACS, Associate Director for Clinical Sciences at the Rutgers Cancer Institute of New Jersey, who is currently serving as the President of the Society for Immunotherapy of Cancer. INTELLECTUAL PROPERTY The Company continues to develop and strengthen its intellectual property portfolio while maintaining a focus on cost and relevance to its strategic goals. New intellectual property is being developed, and existing patent claims are continually being pursued through various International jurisdictions. AUDITOR S INDEPENDENCE DECLARATION A statement of independence has been provided by our auditors, Grant Thornton and is included at page 7. This report is signed in accordance with a resolution of the Board of Directors. Mr. Paul Hopper Chairman Sydney Dated: 23 February

9 Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T F E info.nsw@au.gt.com W Auditor s Independence Declaration To The Directors of Viralytics Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Viralytics Limited for the half-year ended 31 December, I declare that, to the best of my knowledge and belief, there have been: a b No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and No contraventions of any applicable code of professional conduct in relation to the review. GRANT THORNTON AUDIT PTY LTD Chartered Accountants N J Bradley Partner - Audit & Assurance Sydney, 23 February 2016 Grant Thornton Audit Pty Ltd ACN a subsidiary or related entity of Grant Thornton Australia Ltd ABN Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another s acts or omissions. In the Australian context only, the use of the term Grant Thornton may refer to Grant Thornton Australia Limited ABN and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. 7

10 Condensed Statement of Profit or Loss and Other Comprehensive Income for the half-year ended 31 December Note December $ December 2014 $ Revenue Interest Revenue 209, ,031 Total Revenue 209, ,031 Other Income R&D Tax Incentive 453,574 - Unrealised foreign exchange gain - 1,170,200 Total Other Income 453,574 1,170,200 Research and development costs: Clinical trials (2,224,293) (1,260,405) Research and development (1,148,298) (903,275) Drug product (1,016,815) (337,830) Patents and related costs (66,648) (91,937) Amortisation of intangibles (195,156) (195,156) Depreciation expense (18,991) (16,297) Employee costs (620,406) (467,714) Option share based expense 9 (631,530) (78,106) Corporate compliance costs (433,160) (334,233) Administration costs (234,505) (205,593) Interest Expense (4,790) - Foreign currency translation loss (133,760) - Total Expenses (6,728,352) (3,890,546) Loss from ordinary activities before income tax (6,065,683) (2,449,315) Income tax expense - - Loss from ordinary activities after income tax (6,065,683) (2,449,315) Other comprehensive income - - Total Comprehensive Loss (6,065,683) (2,449,315) Basic loss per share (cents per share) 10 (3.2) (1.3) Diluted loss per share (cents per share) 10 (3.2) (1.3) The accompanying notes form part of these financial statements. 8

11 Condensed Statement of Financial Position as at 31 December ASSETS Current Assets Notes December $ June $ Cash and cash equivalents 46,614,153 21,565,813 Trade and other receivables 3 458,810 2,875,480 Total Current Assets 47,072,963 24,441,293 Non-Current Assets Plant and equipment 4 90,660 82,476 Investments Intangible assets 6 1,838,620 2,033,776 Total Non-Current Assets 1,929,280 2,116,252 TOTAL ASSETS 49,002,243 26,557,545 LIABILITIES Current Liabilities Trade and other payables 7 1,769,190 1,685,264 Total Current Liabilities 1,769,190 1,685,264 TOTAL LIABILITES 1,769,190 1,685,264 NET ASSETS 47,233,053 24,872,281 EQUITY Contributed equity 8 115,527,936 87,632,211 Reserves 9 1,740,136 3,430,576 Accumulated losses (70,035,019) (66,190,506) TOTAL EQUITY 47,233,053 24,872,281 The accompanying notes form part of these financial statements. 9

12 Condensed Statement of Changes in Equity for the half-year ended 31 December Contributed Equity Ordinary Convertibl e note Retained Earnings (Accumulate d Losses) Reserves Total Share Based Payment Reserve $ $ $ $ $ Balance at 1 July ,959, ,640 (61,935,729) 3,256,643 28,876,542 Loss for the Period - - (2,449,315) - (2,449,315) Other Comprehensive Income Comprehensive income for the period Share Rights Converted to Shares Share option based compensation Total transactions with owners and other transfers Balance at 31 December (2,449,315) - (2,449,315) 20, (20,242) ,106 78,106 20, ,864 78,106 86,980, ,640 (64,385,044) 3,314,507 26,505,333 The accompanying notes form part of these financial statements. 10

13 Condensed Statement of Changes in Equity for the half-year ended 31 December Contributed Equity Ordinary Retained Earnings (Accumulated Losses) Reserves Total Share Based Payment Reserve $ $ $ $ Balance at 1 July 87,632,211 (66,190,506) 3,430,576 24,872,281 Loss for the Period - (6,065,683) - (6,065,683) Other Comprehensive Income Comprehensive income for the period - (6,065,683) - (6,065,683) Shares Issued during the year 28,362, ,362,736 Funds held in respect of shares to be issued 829, ,726 Cost of fund raising (1,497,537) - - (1,497,537) Exercise of options 100, ,000 Share Rights Converted to Shares 100,800 - (100,800) - Share option based compensation Expired options transferred to Retained Earnings Total transactions with owners and other transfers , ,530-2,221,170 (2,221,170) - 27,895,725 2,221,170 (1,690,440) 28,426,455 Balance at 31 December 115,527,936 (70,035,019) 1,740,136 47,233,053 The accompanying notes form part of these financial statements. 11

14 Condensed Statement of Cash Flow for the half-year ended 31 December Cash flows from Operating Activities December $ December 2014 $ R & D Tax Refund 2,928,531 2,476,255 Payments to suppliers and employees (5,782,209) (2,955,135) Interest Received 207, ,080 Interest Paid (4,790) - Net cash (used in) operating activities (2,650,526) (208,800) Cash flows from Investing Activities Purchase of Plant and equipment (27,175) (39,754) Net cash (used in) investing activities (27,175) (39,754) Cash flows from Financing Activities Proceeds from issue of shares 28,362,736 - Exercise of options 100,000 - Costs of fund raising (1,497,537) - Proceeds from Shares to be issued 829,726 - Net cash provided by financing activities 27,794,925 - Net increase/(decrease) in cash held 25,117,224 (248,554) Net Foreign Exchange Difference (68,884) 1,183,329 Cash at beginning of the financial period 21,565,813 24,335,695 Cash at the end of the financial period 46,614,153 25,270,470 The accompanying notes form part of these financial statements 12

15 Notes to the financial statements for the half-year ended 31 December 1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT This half-year financial report is a general-purpose condensed interim financial report that has been prepared in accordance with Australian Accounting Standard AASB134; Interim Financial Reporting, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act The half-year report does not include full disclosure of the type normally included in an annual financial report. The half-year financial report should be read in conjunction with the Annual Financial Report of Viralytics Limited (the Company) as at 30 June. It is recommended that the half-year financial report be considered together with any public announcements made by the Company during the half-year ended 31 December in accordance with the continuous disclosure obligations arising under the Australian Securities Exchange Listing Rules and the Corporations Act Except as described below, the accounting policies applied by the Company in this half-year financial report are the same as those applied by the Company in the financial report as at and for the year ended 30 June. Going Concern The financial statements for the period ended 31 December are prepared on a going concern basis. Notwithstanding that the Company has a history of losses, the Directors consider that it has sufficient capital to pursue its strategic plan and objectives in the next twelve months as laid out in the Directors Report. This is because the Company has cash assets of $46.6 million at 31 December which it forecasts will fund its programmes beyond 12 months from the signing of this report. The cash holdings will provide sufficient funding to meet foreseeable expenditure commitments and pay debts as and when they fall due. Operating Segments Operating segments are presented using the management approach, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ( CODM ). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. 13

16 Notes to the financial statements for the half-year ended 31 December 2. Operating Segments The entity s operating segment is based on the internal reports that are reviewed and used by the Board of Directors (being the Chief Operating Decision Makers ( CODM )) in assessing performance and determining the allocation of resources. The entity operates in one segment being Development of Oncolytic Therapeutics. The information reported to the CODM, on a monthly basis, is profit or loss before interest, tax, depreciation and amortisation and other one-off-items ( EBITDA ) as well as cash flow. 3. TRADE AND OTHER RECEIVABLES December $ June $ GST Receivable 117,638 46,124 Prepayments 245, ,407 Interest Receivable 43,280 42,456 R&D Tax Refund - 2,474,957 Security Deposits 52,865 52, ,810 2,875, PLANT AND EQUIPMENT Plant and Equipment at cost 953, ,248 Accumulated depreciation (862,763) (843,772) Movements in Carrying Amounts Movements in the carrying amounts at the beginning and end of the current and previous period: 90,660 82,476 Balance at beginning of period 82,476 47,963 Additions 27,175 69,243 Depreciation expense (18,991) (34,730) Balance at end of period 90,660 82,476 14

17 Notes to the financial statements for the half-year ended 31 December 5. INVESTMENTS - EQUITY ACCOUNTED ASSOCIATES December $ June $ InJet Digital Aerosols Limited - - InJet Digital Aerosols Limited is an unlisted Australian public company. Viralytics Ltd has an investment in IDAL of $630,000. This represents 44.5% of that company s issued capital as at 31 December. Viralytics Ltd has recognised the losses attributable to the associate in prior years to the extent of the investment. The most recent financial statements released by IDAL were for the year ended 30 June The net deficiency in assets at that time was $488,517. Consequently, the carrying value of the investment is nil. On 23 December a meeting of creditors resolved that the company be wound up under S. 439C(c) of the Corporations Act and to appoint an external liquidator. 6. INTANGIBLE ASSETS Virotherapy Intellectual Property 8,605,532 8,605,532 Accumulated Amortisation (6,766,912) (6,571,756) 1,838,620 2,033,776 Movement in Intangibles Balance at beginning of period 2,033,776 2,424,088 Amortisation expense for the period (195,156) (390,312) Balance at end of period 1,838,620 2,033, TRADE AND OTHER PAYABLES Trade payables 837,453 1,086,386 Sundry payables and accrued expenses 813, ,010 Employee entitlements annual leave 118,066 92,868 1,769,190 1,685,264 15

18 Notes to the financial statements for the half-year ended 31 December December 8. CONTRIBUTED EQUITY Number $ Ordinary Shares Issued and fully paid 230,791, ,698,210 Funds held in respect of shares to be issued - 829, ,791, ,527,936 Funds held in respect of shares to be issued relates to a Share Purchase Plan which opened in December. The Share Purchase Plan closed in January 2016 with a further 6,504,065 shares issued raising a total $4 million. Movements in ordinary shares on issue At 1 July 184,153,081 87,632,211 Share Rights Converted to Shares 320, ,800 Exercise of Options 200, ,000 Shares Issued net of transaction costs 46,118,270 26,865,199 Shares to be Issued - 829,726 At 31 December 230,791, ,527,936 On 21 December, 46,118,270 shares were issued following a private placement of shares, representing 25% of shares previously on issue. These shares, together with those issued on exercise of options and conversion of share rights, have the same right to receive dividends and the repayment of capital and represent one vote at the shareholders meeting of the Company. 16

19 Notes to the financial statements for the half-year ended 31 December 9. RESERVES December $ June $ Share Based Payments Reserve 1,740,136 3,430,576 In total $631,530 (Dec 2014: $78,106) of employee remuneration expense has been included in profit or loss and credited to the share based payment reserve in respect of equity settled share based payment transactions. If all unlisted options were exercised in accordance with their terms of issue, 15,745,000 shares would be issued (June : 5,745,000) and Contributed Equity would increase by $9.0 million (2014: $3.0 million). The share based payment reserve records items recognised as an expense on payment of share based consideration. The option valuations were calculated using the Black-Scholes option pricing model. Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future movements. For purposes of the valuation the assumed life of the options was based on the historical exercise patterns, which may not eventuate in the future. No special features inherent to the options granted were incorporated into the measurement of fair value. 9,000,000 options issued during the period contained vesting conditions contingent on achievement of performance targets based on share price, clinical trial progress or corporate development activity. A probability discount has not been applied to the measurement of the fair value of those options. This is because some of the options issued had terms in which the vesting conditions are met if either market based or non-market based conditions are met. The company has taken the view that the options are more likely to vest due to one of the non-market conditions (clinical trial progress or corporate development activity) rather than the single market based condition (share price). The result is a higher valuation than would otherwise be the case if the performance conditions were considered in the valuation. The following terms and conditions apply to unlisted options issued: Options issued entitle the holder to acquire an unissued ordinary share in the Company; Options are unlisted and not transferable; Options not exercised in the prescribed period will lapse; Each option has no voting or dividend right; All options issued were issued free of charge. 17

20 Notes to the financial statements for the half-year ended 31 December 9. RESERVES continued Options December Number June Number Unlisted options 15,745,000 5,745,000 Movements in Options: Balance at the beginning of the period 5,745,000 5,025,000 Options issued 10,200,000 1,245,000 Options exercised (200,000) (125,000) Options expired - (400,000) Balance at end of period 15,745,000 5,745,000 Share Rights Unlisted Share Rights 110, ,000 Movements in Share Rights: Balance at the beginning of the period 320,000 69,800 Share Rights issued 110, ,000 Share Rights Converted to Shares (320,000) (69,800) Balance at end of period 110, ,000 18

21 Notes to the financial statements for the half-year ended 31 December 10. EARNINGS PER SHARE December cents December 2014 cents Basic earnings (loss) cents per share (3.2) (1.3) Diluted earnings (loss) cents per share (3.2) (1.3) Income and share information used in the calculations of basic and diluted earnings per share: Net (Loss) used to calculate basic EPS (6,065,683) (2,449,315) Number Number Weighted average number of ordinary shares on issue used to calculate basic earnings per share 188,029, ,001,906 Effect of dilutive securities - - Adjusted weighted average number of Ordinary shares and potential ordinary shares used to calculate diluted earnings per share 188,029, ,001,906 As at the balance date, there are 15,745,000 share options on issue. These potential ordinary shares have not been taken into account when calculating the diluted loss per share due to their anti-dilutive nature. 11. CONTINGENT LIABILITIES/GUARANTEE As at 31 December the Company has bank guarantees in the amount of $19,000 (June : $19,000). At the date of this report there are no other known contingent liabilities. 12. SUBSEQUENT EVENTS Following closure on 21 January of a Share Purchase Plan raising $4 million, the Company issued 6,504,068 shares on 27 January Of this amount $829,726 was received as at 31 December and reflected as cash and equity in the balance sheet, refer Note 8. Apart from the above there have not been any matters or circumstances that have arisen since the end of the period, that have significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company after the half-year period. 19

22 31 December Half Year Financial Report Directors Declaration The directors of the Company declare that: (1) the financial statements and notes, as set out on pages 8 to 19 are in accordance with the Corporations Act 2001 including: (a) complying with the Australian Accounting Standard AASB 134: Interim Financial Reporting, and (b) giving a true and fair view of the Company s financial position as at 31 December and its performance for the half year ended on that date. (2) in the directors opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Mr Paul Hopper Chairman Sydney Date: 23 February

23 Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T F E info.nsw@au.gt.com W Independent Auditor s Review Report To the Members of Viralytics Limited We have reviewed the accompanying half-year financial report of Viralytics Limited ( Company ), which comprises the statement of financial position as at 31 December, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a statement or description of accounting policies, other explanatory information and the directors declaration. Directors responsibility for the half-year financial report The directors of Viralytics Limited are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such controls as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with the Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Viralytics Limited financial position as at 31 December and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of Viralytics Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. Grant Thornton Audit Pty Ltd ACN a subsidiary or related entity of Grant Thornton Australia Ltd ABN Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another s acts or omissions. In the Australian context only, the use of the term Grant Thornton may refer to Grant Thornton Australia Limited ABN and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. 21

24 A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we complied with the independence requirements of the Corporations Act Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Viralytics Limited is not in accordance with the Corporations Act 2001, including: a b giving a true and fair view of the Company s financial position as at 31 December and of its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations GRANT THORNTON AUDIT PTY LTD Chartered Accountants N J Bradley Partner - Audit & Assurance Sydney, 23 February