Western Australia, | 2834 | Not Applicable | ||
Commonwealth of Australia | (Primary Standard Industrial | (I.R.S. Employer | ||
(State or other jurisdiction of incorporation or organization) |
Classification Code Number) | Identification No.) |
Title of Each Class of | Proposed Maximum Offering | Proposed Maximum | Amount of Registration | |||||||||||
Securities to be Registered (1) | Amount to be Registered (2) | Price Per Share | Aggregate Offering Price | Fee | ||||||||||
Ordinary Shares underlying
subordinated convertible note |
49,392,210 | $0.421 (3) | $20,794,118 | $2,226(5) | ||||||||||
Ordinary Shares underlying warrant |
8,239,440 | $0.717 (4) | $5,907,678 | $633(6) | ||||||||||
(1) | American Depositary Shares (ADSs) evidenced by American Depositary Receipts issuable on deposit of the equity shares registered hereby have been registered under a separate statement on Form F-6, Registration No. 333-122158. Each ADS represents ten ordinary shares. | |
(2) | Please refer to the Selling Security Holder section of the prospectus that is a part of this Registration Statement for a description of what comprises the ordinary shares being registered. In accordance with Rule 416(a), the Registrant is also registering hereunder an indeterminate number of ordinary shares that may be issued and resold to prevent dilution resulting from stock splits, stock dividends or similar transactions. | |
(3) | Estimated solely for the purpose of computing the amount of the registration fee and computed pursuant to Rule 457(c) under the Securities Act of 1933 based upon the average of the high and low prices of the Registrants ADSs on June 26, 2006 as reported on the NASDAQ National Market. | |
(4) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) of the Securities Act, based on the higher of (a) the exercise price of the warrants or (b) the offering price of securities of the same class included in this registration statement. The exercise price of the warrant has been adjusted from $7.20 as a result of a recent transaction undertaken by the Registrant | |
(5) | This amount includes $2,209 that was paid to the SEC when this registration statement was originally filed. The remainder has been wired to the SECs account. | |
(6) | $635 was paid to the SEC when this registration statement was originally filed. The new Registration Fee reflects and adjustment to the warrant exercise price. |
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any, jurisdiction where the offer or sale is not permitted.
1 | ||||
7 | ||||
20 | ||||
21 | ||||
22 | ||||
30 | ||||
32 | ||||
32 | ||||
33 | ||||
35 | ||||
37 | ||||
37 | ||||
38 | ||||
38 | ||||
38 | ||||
39 | ||||
39 | ||||
39 | ||||
F-1 |
-i-
-1-
| Biocompatibility BioSilicon is biocompatible, meaning, it is not injurious and does not cause immunological rejection within the body. | ||
| Non-toxicity our studies have shown that BioSilicon degrades in the body into silicic acid, the non-toxic, dietary form of silicon which is found in beer, cereal grains and wine. | ||
| Biodegradability BioSilicon can be made biodegradable in vivo (in animals and humans) and in vitro (in solution). The rate of biodegradation depends on the degree of nanostructuring that is imparted on the material. Thus, we believe that BioSilicon can be made to dissolve in suitable environments in days, weeks or months, depending upon the size and nature of the BioSilicon implanted. |
| The focus of our internal product development is BioSilicon drug delivery, with an initial emphasis on brachytherapy products. Other potential BioSilicon drug delivery products are localized chemotherapy, slow release drugs and the delivery of generic drugs (commonly referred to as re-delivered generics). We have established commercialization plans for BrachySil, pSividas lead product, based upon market sizes, benefits offered to patients and alternative competitive therapies. | ||
| We believe that the platform has now been developed to a stage where licensing BioSilicon to large pharmaceutical and biotech companies for delivery of their patented drugs is possible. We also intend to license diagnostic and sensor applications of the BioSilicon platform technology developed by its subsidiary, AION Diagnostics. | ||
| We believe that sales of early stage non-core applications for BioSilicon may become another possible source of near-term revenue. Such applications include biomaterial in orthopedics, tissue engineering and regenerative medicine producing. | ||
| We believe that the acquisition of CDS will provide us with additional opportunities for strategic growth by providing us with a U.S. presence, greater access to the U.S. market, a range of products and product candidates based upon CDS drug-delivery technologies and strategic collaborations to develop and market these products. |
-2-
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-4-
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| During the half year ended December 31, 2005, pSivida issued 665,000 ADSs (representing 6,650,000 ordinary shares in the Company) at a price of US$6.50 (A$8.48) each, raising A$5.6 million before costs of A$468,873 through a private investment in public equity (PIPE). | ||
| In November 2005, pSivida issued a subordinated promissory note in the principal amount of US$15 million (A$20.5 million) before costs of A$607,196, to an institutional investor. The note is currently convertible into 2,112,676 ADSs at a conversion price of US$7.10 per ADS, subject to adjustment based on certain events or circumstances, in addition to a reset provision effective 10 months (i.e. on August 5, 2006) after entering into the agreement. |
| During the half year ended December 31, 2004, pSivida raised A$3.7 million on the issue of additional share capital upon the exercise of options previously issued. At various times during the half year, a total of 13,070,000 options were exercised at a price of A$0.20, 2,200,000 options were exercised at a price of A$0.40, 150,000 were exercised at a price of A$0.50 and 150,000 options were exercised at a price of A$0.65. | ||
| During the half year ended December 31, 2004, pSivida incurred $27,422 in issue costs in relation to the acquisition of the remaining outside equity interest in pSiMedica in August 2004. |
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| inability to attract clinical investigators for trials; | ||
| inability to recruit patients in sufficient numbers or at the expected rate; | ||
| adverse side effects; | ||
| failure of the trials to demonstrate a products safety or efficacy; | ||
| failure to meet FDA requirements for clinical trial design or for demonstrating efficacy for a particular product; |
-8-
| inability to follow patients adequately after treatment; | ||
| changes in the design or manufacture of a product; | ||
| inability to manufacture sufficient quantities of materials for use in clinical trials; and | ||
| governmental or regulatory delays. |
-9-
| collaboration agreements are, and are expected to be, subject to termination under various circumstances, including, in some cases, on short notice and without cause; | ||
| we are required, and expect to be required, under our collaboration agreements not to conduct specified types of research and development in the field that is the subject of the collaboration. These agreements may have the effect of limiting the areas of research and development that we can pursue; | ||
| our collaborators may develop and commercialize, either alone or with others, products that are similar to or competitive with our products; | ||
| our collaborators may change the focus of their development and commercialization efforts. Pharmaceutical and biotechnology companies have historically re-evaluated and changed their priorities for many reasons. The ability of our products to reach their potential could be limited if our collaborators decrease or fail to increase spending related to such products; and | ||
| our collaborators may lack the funding or experience to develop and commercialize our products successfully or may otherwise fail to do so. |
-10-
| create and maintain scientifically-advanced technology and proprietary products and processes; | ||
| attract and retain qualified personnel; | ||
| develop safe and efficacious products, alone or in collaboration with others; | ||
| obtain patent or other protection for our products and processes; | ||
| obtain required government approvals on a timely basis; | ||
| manufacture products on a cost-effective basis; and | ||
| successfully market products. |
| managing foreign distributors; | ||
| staffing and managing foreign operations; |
-11-
| political and economic instability; | ||
| foreign currency exchange fluctuations; | ||
| foreign tax laws, tariffs and freight rates and charges; | ||
| timing and availability of export licenses; | ||
| inadequate protection of intellectual property rights in some countries; and | ||
| obtaining required governmental approvals. |
| the possibility that third parties may not comply with the FDAs current good manufacturing practices, regulations, other regulatory requirements, and those of similar foreign regulatory bodies, and employ adequate quality assurance practices; | ||
| supply disruption, deterioration in product quality or breach of a manufacturing or license agreement by the third party because of factors beyond CDS control; | ||
| the possible termination or non-renewal of a manufacturing or licensing agreement with a third party at a time that is costly or inconvenient to CDS; and | ||
| inability to identify or qualify an alternative manufacturer in a timely manner, even if contractually permitted to do so. |
-12-
| the accuracy of the assumptions underlying our estimates for our capital needs in the near and long term; | ||
| continued scientific progress in our research and development programs; | ||
| the magnitude and scope of our research and development programs; | ||
| our ability to maintain and establish strategic arrangements for research, development, clinical testing, manufacturing and marketing; | ||
| our progress with preclinical and clinical trials; |
-13-
| the time and costs involved in obtaining regulatory approvals; and | ||
| the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims. |
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-15-
| clinical trial results and other product and technological developments and innovations; | ||
| FDA and other governmental regulatory actions, receipt and timing of approvals of our proposed products, and any denials and withdrawals of approvals; | ||
| competitive factors including new product ideas and technologies, clinical trial results and approvals of competitive products in our markets; | ||
| advancements with respect to treatment of the diseases targeted by our proposed products; | ||
| developments relating to collaborative partners including execution and termination of agreements, achievement of milestones and receipt of payments; | ||
| availability and cost of capital and our financial and operating results; | ||
| changes in reimbursement policies or other practices related to our proposed products or the pharmaceutical industry generally; | ||
| meeting, exceeding or failing to meet analysts or investors expectations, and changes in evaluations and recommendations by securities analysts; | ||
| economic, industry and market conditions, changes or trends; and | ||
| other factors unrelated to us and the biotechnology industry. |
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| coordinating research and development operations in a rapid and efficient manner; | ||
| combining platform technologies of disparate sources; | ||
| demonstrating to collaboration partners that the merger will not result in adverse changes in technology focus or development standards; | ||
| retaining key alliances with collaboration partners; | ||
| absorbing costs and delays in implementing overlapping systems and procedures, including financial accounting systems and accounting principles; | ||
| persuading employees that our business culture and that of CDS are compatible, maintaining employee morale and retaining key employees; and | ||
| overcoming potential distraction of management attention and resources from the business of the combined company. |
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As of | ||||
May 31, 2006 | ||||
Actual | ||||
(In Australian Dollars) | ||||
Indebtedness |
||||
Short-term debt (unsecured, unguaranteed) |
18,903,322 | |||
Total debt |
18,903,322 | |||
Stockholders equity |
||||
Share capital |
226,114,300 | |||
Reserves |
4,108,457 | |||
Deficit accumulated prior to development stage |
(3,813,181 | ) | ||
Deficit accumulated during development stage |
(50,190,115 | ) | ||
Total stockholders equity |
176,219,461 | |||
Total capitalization and indebtedness in accordance with A-IFRS |
195,122,783 | |||
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-22-
pSivida | CDS | Pro Forma | Pro Forma | |||||||||||||||||
Historical | Historical | Adjustments | ||||||||||||||||||
(3a) | (3b) | |||||||||||||||||||
Revenue: |
||||||||||||||||||||
Revenue, related party |
| 446,226 | | 446,226 | ||||||||||||||||
Revenue, other |
50,732 | 197,831 | | 248,563 | ||||||||||||||||
Total revenue |
50,732 | 644,057 | | 694,789 | ||||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
9,058,338 | 1,312,649 | 5,000,000 | (3e | ) | 15,449,516 | ||||||||||||||
78,529 | (3f | ) | ||||||||||||||||||
Selling, general and administrative |
4,369,570 | 6,117,630 | 55,450 | (3f | ) | 10,542,650 | ||||||||||||||
Write off of in-process research and
development |
2,741,706 | | | 2,741,706 | ||||||||||||||||
Foreign exchange gain |
(306,841 | ) | | | (306,841 | ) | ||||||||||||||
Total operating expenses |
15,862,773 | 7,430,279 | 5,133,979 | 28,427,031 | ||||||||||||||||
Loss from operations |
(15,812,041 | ) | (6,786,222 | ) | (5,133,979 | ) | (27,732,242 | ) | ||||||||||||
Interest and other income (expense), net |
(571,618 | ) | 30,178 | | (541,440 | ) | ||||||||||||||
Loss before income tax benefit |
(16,383,659 | ) | (6,756,044 | ) | (5,133,979 | ) | (28,273,682 | ) | ||||||||||||
Income tax benefit |
2,380,063 | | 4,756,009 | (3g | ) | 7,136,072 | ||||||||||||||
Net loss |
(14,003,596 | ) | (6,756,044 | ) | (377,970 | ) | (21,137,610 | ) | ||||||||||||
Accretion of redeemable convertible
preferred stock |
| (1,742,780 | ) | 1,742,780 | (3h | ) | | |||||||||||||
Net income (loss) attributable to
common stockholders |
(14,003,596 | ) | (8,498,824 | ) | 1,364,810 | (21,137,610 | ) | |||||||||||||
Basic and diluted loss per common share |
(0.06 | ) | (4.08 | ) | (0.06 | ) | ||||||||||||||
Basic and diluted weighted average
number of shares |
225,327,359 | 2,083,072 | (6 | ) | 376,147,739 |
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pSivida | CDS | Pro Forma | Pro Forma | |||||||||||||||||
Historical | Historical | Adjustments | ||||||||||||||||||
(3c) | (3d) | |||||||||||||||||||
Revenue: |
||||||||||||||||||||
Revenue, related party |
| 12,768,626 | | 12,768,626 | ||||||||||||||||
Revenue, other |
161,666 | 158,385 | | 320,051 | ||||||||||||||||
Total revenue |
161,666 | 12,927,011 | | 13,088,677 | ||||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development expense |
14,358,160 | 2,107,953 | 10,000,000 | (3e | ) | 27,967,800 | ||||||||||||||
1,501,687 | (3f | ) | ||||||||||||||||||
Selling, general and administrative |
5,406,091 | 8,242,608 | 672,769 | (3f | ) | 14,321,468 | ||||||||||||||
Foreign currency loss |
1,623,484 | | | 1,623,484 | ||||||||||||||||
Total operating expenses |
21,387,735 | 10,350,561 | 12,174,456 | 43,912,752 | ||||||||||||||||
Income (loss) from operations |
(21,226,069 | ) | 2,576,450 | (12,174,456 | ) | (30,824,075 | ) | |||||||||||||
Interest and other income (expense), net |
665,390 | (213,568 | ) | | 451,822 | |||||||||||||||
Income (loss) before income tax benefit |
(20,560,679 | ) | 2,362,882 | (12,174,456 | ) | (30,372,253 | ) | |||||||||||||
Income tax benefit |
3,620,891 | | 3,924,630 | (3g | ) | 7,545,521 | ||||||||||||||
Net loss attributable to minority interest |
378,276 | | | 378,276 | ||||||||||||||||
Net income (loss) |
(16,561,512 | ) | 2,362,882 | (8,249,826 | ) | (22,448,456 | ) | |||||||||||||
Accretion of redeemable convertible
preferred stock |
| (3,246,135 | ) | 3,246,135 | (3h | ) | | |||||||||||||
Net loss attributable to common
stockholders |
(16,561,512 | ) | (883,253 | ) | (5,003,691 | ) | (22,448,456 | ) | ||||||||||||
Basic and diluted loss per common share |
(0.08 | ) | (0.43 | ) | (0.06 | ) | ||||||||||||||
Basic and diluted weighted average number
of shares |
207,802,540 | 2,068,990 | (6 | ) | 358,622,920 |
-24-
1. | Basis of Presentation | |
The unaudited pro forma consolidated statements of operations have been prepared in accordance with US GAAP and are presented in Australian dollars. | ||
2. | Purchase Price Allocation | |
The primary reasons for the acquisition of CDS were: CDS commercialized products, including Vitrasert® for cytomegalovirus retinitis and the recently launched Retisert for uveitis; diversified product portfolio; existing license and development agreements, including those with Bausch & Lomb and Alimera Sciences; and extensive patent portfolio. CDS also could provide a base for the Company near Boston, Massachusetts which is a biotechnology hub that would allow the Companys further expansion into the US market. In addition, as a result of the acquisition, the Company will receive royalty income which is expected to contribute significantly to the continued development of the expanded product portfolio. These factors contributed to the purchase price that resulted in recognition of a significant amount of goodwill as further noted below. | ||
The purchase price of $143,081,155 consists of: |
| $114,319 cash; | ||
| 150,820,380 ordinary fully paid shares of pSivida (represented by 15,082,038 ADSs), with an estimated fair value of $130,610,449 ($0.866 per share, represented by US$6.602 per ADS); | ||
| 9,016,230 nonvested ordinary shares of pSivida (represented by 901,623 nonvested ADSs), with an estimated fair value of $6,231,034, net of $1,577,021 allocated to unearned compensation based on the portion of the fair value at the consummation date related to the future service (vesting) period; | ||
| 1,724,460 share options in pSivida (represented by 172,446 warrants over ADSs), with an estimated fair value of $876,204; and | ||
| direct acquisition costs of $5,249,149. |
Total fair value | ||||||||
(in Australian dollars) | ||||||||
Cash |
228,464 | |||||||
Receivables |
460,351 | |||||||
Other |
282,588 | |||||||
Patents |
120,000,000 | |||||||
In-Process Research and Development |
2,741,706 | |||||||
Property, Plant and Equipment |
624,035 | |||||||
Payables |
(3,549,399 | ) |
-25-
Total fair value | ||||||||
(in Australian dollars) | ||||||||
Provisions |
(621,399 | ) | ||||||
Deferred Revenue |
(1,826,699 | ) | ||||||
Deferred Tax Liability, Net |
(27,294,999 | ) | ||||||
Total |
91,044,648 | |||||||
Purchase price |
143,081,155 | |||||||
Goodwill |
52,036,507 | |||||||
3. | Pro Forma Adjustments | |
Footnotes to the pro forma statements |
(a) | Reflects the historical results of operations of pSivida for the six months ended December 31, 2005 on a US GAAP basis. | ||
(b) | Reflects the historical results of operations of CDS on a US GAAP basis for the period July 1, 2005 to December 29, 2005, derived from internal accounting records. The historical statement of operations data was translated from US dollars to Australian dollars using a weighted average exchange rate of $0.752 for the period July 1, 2005 to December 29, 2005. | ||
(c) | Reflects the historical results of operations of pSivida for the year ended June 30, 2005 on a US GAAP basis. | ||
(d) | Reflects the historical results of operations of CDS on a US GAAP basis for the period July 1, 2004 to June 30, 2005, which have been derived by combining the US GAAP results of operations for the year ended December 31, 2004 (which are incorporated by reference to our Supplemental Disclosure submitted on Form 6-K furnished to the SEC on December 22, 2005) minus the US GAAP results of operations for the six months to June 30, 2004 plus the US GAAP results of operations for the six months to June 30, 2005. The historical statement of operations data was translated from US dollars to Australian dollars using a weighted average exchange rate of $0.754 for the year ended June 30, 2005. Refer to Note 7 below. | ||
(e) | Reflects the amortization of the fair value of patents acquired over an estimated useful life of 12 years (see Note 5). | ||
(f) | Reflects the recognition of compensation cost over the requisite service period for both the 1,211,180 non-vested ordinary shares issued by pSivida in connection with the employee retention agreements and the unearned compensation attributable to the 9,016,230 non-vested ordinary shares issued by pSivida as part of the purchase price. At the date of grant, the individual awards were scheduled to vest over a minimum service period of six months to a maximum service period of 29 months from the acquisition date. In April 2006, the individual awards with a six month vesting period were modified pursuant to an agreement between the Company and the employees to extend the vesting of these awards to periods ranging from 13 to 15 months from the date of the acquisition. The modification is not reflected in the pro forma statements of operations as the modification is not directly attributable to the acquisition. | ||
(g) | Reflects the deferred tax benefit attributable to the reduction of the gross deferred tax liability for the difference between the fair value and tax basis of the acquired patents over the 12 year amortization period, partially offset by deferred tax expense due to a change in the CDS historical valuation allowance as a result of the acquisition, using the CDS combined federal and state statutory tax rate of 40%. There is no impact on current income taxes due to the net operating loss of the combined entity. | ||
(h) | Reflects the elimination of accretion of the CDS Series A redeemable preferred stock due to the elimination of such stock. |
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4. | In-process research and development | |
As indicated in Note 2, pSivida recorded in-process research and development (IPR&D) of $2,741,706 in connection with the acquisition. The IPR&D was expensed at the acquisition date since the acquired IPR&D projects had no alternative future use. Such adjustment has been excluded from the pro forma consolidated statement of operations for the year ended June 30, 2005 as the charge is a non-recurring charge directly attributable to the acquisition. | ||
5. | Patents | |
As indicated in Note 2, the Company acquired patents and filed patent applications with respect to multiple aspects of CDS technologies, products, and processes, including but not limited to, Vitrasert®, Retisert, Medidur, CODRUG and AEON. | ||
In determining the allocation of the purchase price to patents, the Company only considered
patents and patent applications that relate to the Retisert for Uveitis products and to the
Medidur product for Diabetic Macular Edema (DME). The Company determined the estimated
fair value of these patents acquired with reference to a discounted cash flow analysis of the
Retisert and Medidur products. In determining the estimated useful life of the patents acquired to be 12 years, the Company, considered the following attributes described by paragraph 11 of SFAS No. 142, Goodwill and Other Intangible Assets, to be key factors : |
| The patents are currently being commercialized in the form of the Retisert for Uveitis product identified above, and will be commercialized as the Medidur for DME product described above. | ||
| The patents acquired related to these products will expire from 12 to 15 years from the time of the acquisition. | ||
| Although technological progress may cause some of the existing technology to become commercially obsolete before the expiration of the related patent life, on an overall basis the Company believes that the products developed using the capitalized intellectual property will continue to be sold over the next 12 years. | ||
| The patents do not require any material maintenance expenditure to obtain the expected future cash flows. |
The Company will evaluate the patents for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. | ||
6. | Loss per share | |
Pro forma per share data is based on the number of shares of pSividas ordinary shares that would have been outstanding had the acquisition of CDS occurred on July 1, 2004. In order to compute the number of ordinary shares used in the calculation of pro forma basic and diluted loss per common share, the number of ordinary shares (represented by ADSs) to be issued by pSivida to former holders of shares in CDS common stock and preferred stock was added to the weighted average number of pSivida ordinary shares outstanding for the six months ended December 31, 2005 and the year ended June 30, 2005. Under the terms of the agreements a total of 150,820,380 ordinary shares (represented by 15,082,038 ADSs) have been issued in exchange for the outstanding CDS common and preferred shares on the date of the acquisition. A reconciliation of shares used to compute historical basic and diluted loss per share to shares used to compute pro forma basic and diluted loss per common share follows: |
-27-
Six months ended | Year ended June 30, | |||||||
December 31, 2005 | 2005 | |||||||
Ordinary shares used
to compute pSivida
historical basic and
diluted loss per
share |
225,327,359 | 207,802,540 | ||||||
Ordinary shares
issued to former
holders of shares of
vested CDS common
stock |
74,307,640 | 74,307,640 | ||||||
Ordinary shares
issued to former
holders of shares of
CDS convertible
redeemable preferred
stock |
76,512,740 | 76,512,740 | ||||||
Ordinary shares used
to compute pro forma
basic and diluted
loss per share |
376,147,739 | 358,622,920 |
Securities that could potentially dilute earnings (loss) per share in the future, including the pSivida nonvested ordinary shares, share options, warrants and convertible note, are not included in the computation of pro forma diluted loss per share because the effect would be antidilutive due to the net loss attributable to common stockholders. | ||
7. | CDS historical results of operations | |
The following table demonstrates how the historical results of operations of CDS were conformed to pSividas fiscal year-end for purposes of the pro forma consolidated statement of operations for the year ended June 30, 2005. |
Six months | Six months | Six months | ||||||||||||||||||||||
Year ended | ended | ended | ended | Year ended | Year ended | |||||||||||||||||||
December | June 30, | December | June | June 30, | June 30, | |||||||||||||||||||
31, 2004 | 2004 | 31, 2004 | 30, 2005 | 2005 | 2005 | |||||||||||||||||||
CDS | CDS | CDS | CDS | CDS | CDS | |||||||||||||||||||
Historical | Historical | Historical | Historical | Historical | Historical | |||||||||||||||||||
US GAAP | US GAAP | US GAAP | US GAAP | US GAAP | US GAAP | |||||||||||||||||||
US$ | US$ | US$ | US$ | US$ | A$ | |||||||||||||||||||
A | B | C=A-B | D | =C+D | ||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Revenue, related party |
3,120,086 | 51,631 | 3,068,455 | 6,552,960 | 9,621,415 | 12,768,626 | ||||||||||||||||||
Revenue, other |
| | | 119,346 | 119,346 | 158,385 | ||||||||||||||||||
Total revenue |
3,120,086 | 51,631 | 3,068,455 | 6,672,306 | 9,740,761 | 12,927,011 | ||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Research and
development |
2,427,386 | 1,537,944 | 889,442 | 698,943 | 1,588,385 | 2,107,953 | ||||||||||||||||||
Selling, general and
administrative |
6,361,287 | 3,037,379 | 3,323,908 | 2,887,061 | 6,210,969 | 8,242,608 | ||||||||||||||||||
Total operating expenses |
8,788,673 | 4,575,323 | 4,213,350 | 3,586,004 | 7,799,354 | 10,350,561 | ||||||||||||||||||
Income (loss) from
operations |
(5,668,587 | ) | (4,523,692 | ) | (1,144,895 | ) | 3,086,302 | 1,941,407 | 2,576,450 | |||||||||||||||
Interest and other income
(expense), net |
(206,727 | ) | (97,507 | ) | (109,220 | ) | (49,154 | ) | (158,374 | ) | (213,568 | ) | ||||||||||||
Income (loss) before
income tax benefit |
(5,875,314 | ) | (4,621,199 | ) | (1,254,115 | ) | 3,037,148 | 1,783,033 | 2,362,882 | |||||||||||||||
Income tax benefit |
| | | | | | ||||||||||||||||||
-28-
Net loss attributable to
minority interest |
| | | | | | ||||||||||||||||||
Net income (loss) |
(5,875,314 | ) | (4,621,199 | ) | (1,254,115 | ) | 3,037,148 | 1,783,033 | 2,362,882 | |||||||||||||||
Accretion of redeemable
convertible preferred
stock |
(2,123,761 | ) | (947,941 | ) | (1,175,820 | ) | (1,270,208 | ) | (2,446,028 | ) | (3,246,135 | ) | ||||||||||||
Net income (loss)
attributable to common
stockholders |
(7,999,075 | ) | (5,569,140 | ) | (2,429,935 | ) | 1,766,940 | (662,995 | ) | (883,253 | ) | |||||||||||||
Basic and diluted income
(loss) per common share |
(3.50 | ) | (2.83 | ) | (1.34 | ) | 0.85 | (0.32 | ) | (0.43 | ) | |||||||||||||
Basic and diluted
weighted average number
of shares |
2,284,730 | 1,971,332 | 1,810,746 | 2,083,072 | 2,068,990 | 2,068,990 |
-29-
Six months ended December 31, | ||||||||
2005 | 2004 | |||||||
(In Australian Dollars) | ||||||||
STATEMENT OF OPERATIONS DATA: |
||||||||
A-IFRS (as restated for the six
months ended December 31, 2005) (1) |
||||||||
Revenue |
296,921 | 398,501 | ||||||
Loss before income tax |
(13,600,594 | ) | (9,598,661 | ) | ||||
Net loss |
(11,232,939 | ) | (7,330,165 | ) | ||||
Loss per share basic and diluted |
(0.05 | ) | (0.04 | ) | ||||
U.S. GAAP |
||||||||
Revenue |
50,732 | 13,879 | ||||||
Loss from operations |
(16,383,659 | ) | (10,050,086 | ) | ||||
Net loss |
(14,003,596 | ) | (7,421,294 | ) | ||||
Loss per share basic and diluted |
(0.06 | ) | (0.04 | ) |
As of December 31, | ||||
2005 | ||||
BALANCE SHEET DATA: |
||||
A-IFRS (as restated) (1) |
||||
Total assets |
256,114,314 | |||
Net assets |
188,700,028 | |||
Contributed equity |
224,897,860 | |||
U.S. GAAP |
||||
Total assets |
284,777,237 | |||
Net assets |
219,008,698 | |||
Contributed equity |
263,418,932 |
(1) | The A-IFRS consolidated financial statements as of and for the six months ended December 31, 2005 have been restated. Refer to Note 10 to the Companys unaudited interim consolidated financial statements included elsewhere in this registration statement for a description and summary of the significant effects of the restatement. |
-30-
Period from | ||||||||||||||||||||
Inception of | ||||||||||||||||||||
Development | ||||||||||||||||||||
Stage (Dec 1, | ||||||||||||||||||||
Years ended June 30, | 2000) to June | |||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 30, 2001 (2) | ||||||||||||||||
(In Australian Dollars) | ||||||||||||||||||||
STATEMENT OF OPERATIONS DATA: |
||||||||||||||||||||
A-GAAP |
||||||||||||||||||||
Revenue from ordinary activities |
828,976 | 381,679 | 110,675 | 916,600 | 113,145 | |||||||||||||||
Loss from ordinary activities
before income tax |
(15,125,719 | ) | (7,518,976 | ) | (5,356,328 | ) | (3,997,024 | ) | (851,730 | ) | ||||||||||
Net loss |
(14,726,523 | ) | (3,683,205 | ) | (2,765,153 | ) | (2,190,419 | ) | (738,501 | ) | ||||||||||
Loss per share basic and diluted |
(0.07 | ) | (0.03 | ) | (0.03 | ) | (0.02 | ) | (0.01 | ) | ||||||||||
U.S. GAAP (as restated as of June
30, 2004 and 2003 (3)) |
||||||||||||||||||||
Revenues from ordinary activities |
161,666 | 56,200 | | N/A | N/A | |||||||||||||||
Loss from operations |
(20,560,679 | ) | (10,195,615 | ) | (6,076,013 | ) | N/A | N/A | ||||||||||||
Net loss |
(16,561,512 | ) | (5,019,974 | ) | (2,268,603 | ) | N/A | N/A | ||||||||||||
Loss per share basic and diluted |
(0.08 | ) | (0.04 | ) | (0.02 | ) | N/A | N/A |
As of June 30, | ||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 (2) | ||||||||||||||||
BALANCE SHEET DATA: |
||||||||||||||||||||
A-GAAP |
||||||||||||||||||||
Total assets |
82,035,313 | 40,367,058 | 7,175,342 | 11,273,860 | 9,247,729 | |||||||||||||||
Net assets |
79,987,614 | 38,428,943 | 6,299,519 | 10,712,821 | 8,962,180 | |||||||||||||||
Contributed equity |
107,883,835 | 49,957,982 | 15,602,184 | 14,649,616 | 12,107,849 | |||||||||||||||
U.S. GAAP (as
restated as of June
30, 2004 and 2003
(3)) |
||||||||||||||||||||
Total assets |
100,063,276 | 41,295,099 | 8,220,492 | N/A | N/A | |||||||||||||||
Net assets |
87,650,337 | 37,794,706 | 7,140,316 | N/A | N/A | |||||||||||||||
Contributed equity |
117,798,149 | 51,030,718 | 15,428,635 | N/A | N/A |
(2) | The legal entity that became pSivida was incorporated as the Sumich Group Ltd in April 1987. The Sumich Group operated an agriculture business which was placed into administration or receivership on September 30, 1998. pSivida was subsequently formed on December 1, 2000 following upon entering into a court-approved arrangement with Sumich Groups creditors which fully extinguished all prior liabilities as of that time. We then appointed new directors and officers and re-listed on the Australian Stock Exchange under its new name. | |
(3) | The U.S. GAAP financial information as of and for the years ended June 30, 2004 and 2003 has been restated. Refer to Note 27 in the Companys audited consolidated financial statements incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2005 for a description and summary of the significant effects of the restatement. |
-31-
-32-
Maximum Number of | ||||||||||||
ADSs to be Sold | ||||||||||||
Number of ADSs | Pursuant to this | Number of ADSs | ||||||||||
Owned Prior to | Prospectus | Owned After | ||||||||||
Name of Selling Security Holder | Offering (1) | (2)(3) | Offering | |||||||||
Castlerigg Master Investments (4) |
2,746,780 | 5,763,165 | |
(1) | The number of shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which an individual has sole or shared voting power or investment power and also any shares which an individual has the right to acquire within 60 days of the date of this prospectus through the exercise of any stock option or other right. The shares listed in this column include shares underlying the note and shares underlying the warrant acquired in November 2005, in each case, which the selling security holder has the right to acquire within 60 days of June 15, 2006 assuming a conversion price under the note of $7.10. The shares listed in this column do not reflect the 4.99% ownership limitation noted above. Unless otherwise indicated, the selling security holder has sole voting and |
-33-
investment power with respect to the ordinary shares it holds through its ADSs. The inclusion of any ordinary shares in this table does not constitute an admission of beneficial ownership for the selling security holder. | ||
(2) | Assumes the full conversion of the selling security holders note and interest payments due after June 15, 2006 at a conversion price of $4.21 and the full exercise of the selling security holders warrant. Pursuant to Rule 416 of the Securities Act, this registration statement also shall cover any additional ordinary shares that become issuable in connection with the ordinary shares registered for sale hereby by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of our outstanding ordinary shares. | |
(3) | The number of ordinary shares to be sold by the selling security holder is based on 130% of the estimated number of our ordinary shares issuable to the selling security holder upon conversion of the note and upon exercise of the related warrant (assuming for purposes of such calculation, that the note was converted at a conversion price of $4.21 per ADS and the warrant was exercised in full at an exercise price of $7.17 per ADR). | |
(4) | Sandell Asset Management Corp. (SAMC), is the investment manager of Castlerigg Master Investments Ltd. (Master). Thomas Sandell is the controlling person of SAMC and may be deemed to share beneficial ownership of the shares beneficially owned by Master. Castlerigg International Ltd. (Castlerigg International) is the controlling shareholder of Castlerigg International Holdings Limited (Holdings). Holdings is the controlling shareholder of Master. Each of Holdings and Castlerigg International may be deemed to share beneficial ownership of the shares beneficially owned by Castlerigg Master Investments. SAMC, Mr. Sandell, Holdings and Castlerigg International each disclaims beneficial ownership of the securities with respect to which indirect beneficial ownership is described. |
-34-
| on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; | ||
| in the over-the-counter market; | ||
| in transactions otherwise than on these exchanges or systems or in the over-the-counter market; | ||
| through the writing of options, whether such options are listed on an options exchange or otherwise; | ||
| ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | ||
| block trades in which the broker-dealer will attempt to sell the ADSs as agent but may position and resell a portion of the block as principal to facilitate the transaction; | ||
| purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | ||
| an exchange distribution in accordance with the rules of the applicable exchange; | ||
| privately negotiated transactions; | ||
| short sales; | ||
| pursuant to Rule 144 under the Securities Act; | ||
| broker-dealers may agree with the selling security holder to sell a specified number of such ADSs at a stipulated price per ADS; | ||
| a combination of any such methods of sale; and | ||
| any other method permitted pursuant to applicable law. |
-35-
-36-
Fiscal Year Ended | High | Low | ||||||
June 30, 2005 |
A$ | 1.43 | A$ | 0.535 | ||||
June 30, 2004 |
A$ | 1.44 | A$ | 0.23 | ||||
June 30, 2003 |
A$ | 0.275 | A$ | 0.10 | ||||
June 30, 2002 |
A$ | 0.34 | A$ | 0.09 | ||||
June 30, 2001 |
A$ | 0.40 | A$ | 0.21 |
Quarter Ended | High | Low | ||||||
March 31, 2006 |
A$ | 0.79 | A$ | 0.57 | ||||
December 31, 2005 |
A$ | 0.94 | A$ | 0.55 | ||||
September 30, 2005 |
A$ | 0.945 | A$ | 0.75 | ||||
June 30, 2005 |
A$ | 0.935 | A$ | 0.535 | ||||
March 31, 2005 |
A$ | 1.25 | A$ | 0.85 | ||||
December 31, 2004 |
A$ | 1.43 | A$ | 1.02 | ||||
September 30, 2004 |
A$ | 1.16 | A$ | 0.90 | ||||
June 30, 2004 |
A$ | 1.34 | A$ | 1.03 | ||||
March 31, 2004 |
A$ | 1.44 | A$ | 0.52 | ||||
December 31, 2003 |
A$ | 0.70 | A$ | 0.51 | ||||
September 30, 2003 |
A$ | 0.69 | A$ | 0.23 |
Month Ended | High | Low | ||||||
May 31, 2006 |
A$ | 0.64 | A$ | 0.53 | ||||
April 30, 2006 |
A$ | 0.75 | A$ | 0.63 | ||||
March 31, 2006 |
A$ | 0.79 | A$ | 0.63 | ||||
February 28, 2006 |
A$ | 0.71 | A$ | 0.57 | ||||
January 31, 2006 |
A$ | 0.73 | A$ | 0.60 | ||||
December 31, 2005 |
A$ | 0.75 | A$ | 0.58 |
-37-
Quarter Ended | High | Low | ||||||
March 31, 2006 |
US$ | 5.70 | US$ | 4.40 | ||||
December 31, 2005 |
US$ | 7.00 | US$ | 4.21 | ||||
September 30, 2005 |
US$ | 8.75 | US$ | 5.60 | ||||
June 30, 2005 |
US$ | 8.00 | US$ | 4.15 | ||||
March 31, 2005 |
US$ | 12.14 | US$ | 6.30 |
Month Ended | High | Low | ||
May 31, 2006
|
US$5.27 | US$4.10 | ||
April 30, 2006
|
US$5.32 | US$4.90 | ||
March 31, 2006
|
US$5.61 | US$4.65 | ||
February 28, 2006
|
US$5.46 | US$4.40 | ||
January 31, 2006
|
US$5.70 | US$4.68 | ||
December 31, 2005
|
US$5.70 | US$4.32 |
-38-
SEC Registration Fees |
$ | 2,859 | ||
Transfer Agent Fees |
$ | 230,572 | ||
Legal Fees and Expenses |
$ | 75,000 | ||
Accounting Fees |
$ | 200,000 | ||
Miscellaneous (including EDGAR filing costs) |
$ | 5,000 | ||
Total |
$ | 513,386 | ||
| Our Annual Report on Form 20-F for the fiscal year ended June 30, 2005, filed with the SEC on January 18, 2006; | ||
| Our report on Form 6-K furnished to the SEC on November 15, 2005; | ||
| Our report on Form 6-K furnished to the SEC on December 22, 2005; | ||
| Our report on Form 6-K furnished to the SEC on January 31, 2006; | ||
| Our report on Form 6-K furnished to the SEC on February 22, 2006; | ||
| Our two reports on Form 6-K furnished to the SEC on February 23, 2006; | ||
| Our report on Form 6-K furnished to the SEC on March 2, 2006; |
-39-
| Our second report on Form 6-K furnished to the SEC on March 16, 2006; | ||
| Our report on Form 6-K furnished to the SEC on April 28, 2006; | ||
| Our report on Form 6-K furnished to the SEC on May 2, 2006; | ||
| Our report on Form 6-K furnished to the SEC on May 12, 2006; | ||
| Our report on Form 6-K furnished to the SEC on May 23, 2006; | ||
| Our report on Form 6-K furnished to the SEC on May 25, 2006; | ||
| Our report on Form 6-K furnished to the SEC on May 31, 2006; | ||
| Our report on Form 6-K furnished to the SEC on June 13, 2006; | ||
| Our report on Form 6-K furnished to the SEC on June 14, 2006; and | ||
| The description of our securities contained in our Registration Statement on Form 20-F, filed with the SEC on January 20, 2005 and any amendment or report filed for the purpose of updating that description. |
-40-
Unaudited Financial Statements: |
||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 |
F-1
Six months ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
As restated | ||||||||
(Refer Note 10) | ||||||||
$ | $ | |||||||
Revenue |
296,921 | 398,501 | ||||||
Research and development |
(5,698,842 | ) | (3,688,062 | ) | ||||
Employee expenses |
(2,177,738 | ) | (699,059 | ) | ||||
Professional fees |
(1,332,687 | ) | (875,661 | ) | ||||
Office expenses |
(641,828 | ) | (323,929 | ) | ||||
Depreciation and amortization expenses |
(3,345,392 | ) | (2,846,320 | ) | ||||
Interest and finance expenses |
(817,807 | ) | (3,406 | ) | ||||
Foreign exchange gain / (loss) |
306,841 | (1,487,066 | ) | |||||
Other operating expenses |
(190,062 | ) | (73,659 | ) | ||||
Loss before income tax |
(13,600,594 | ) | (9,598,661 | ) | ||||
Income tax benefit |
2,367,655 | 1,869,300 | ||||||
Loss for the period |
(11,232,939 | ) | (7,729,361 | ) | ||||
Loss attributable to minority interest |
| 399,196 | ||||||
Loss attributable to members of the parent entity |
(11,232,939 | ) | (7,330,165 | ) | ||||
Loss per share: |
||||||||
Basic and diluted |
(0.05 | ) | (0.04 | ) |
F-2
Notes | As of | |||||||||||
December 31, | June 30, | |||||||||||
2005 | 2005 | |||||||||||
As Restated | ||||||||||||
(Refer Note 10) | ||||||||||||
$ | $ | |||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
27,683,278 | 12,892,061 | ||||||||||
Trade and other receivables, net |
1,238,335 | 709,418 | ||||||||||
Other |
514,988 | 322,933 | ||||||||||
Total current assets |
29,436,601 | 13,924,412 | ||||||||||
Non-current assets |
||||||||||||
Property, plant and equipment, net |
2 | 3,854,981 | 3,273,663 | |||||||||
Goodwill |
52,366,787 | 23,305,698 | ||||||||||
Other intangible assets, net |
3 | 170,455,945 | 51,362,329 | |||||||||
Total non-current assets |
226,677,713 | 77,941,690 | ||||||||||
Total assets |
256,114,314 | 91,866,102 | ||||||||||
Current liabilities |
||||||||||||
Trade and other payables |
9,157,003 | 2,017,820 | ||||||||||
Deferred revenue |
1,821,445 | | ||||||||||
Borrowings |
7 | 12,658,567 | | |||||||||
Conversion option derivative |
7 | 6,163,539 | | |||||||||
Provisions |
735,929 | 29,879 | ||||||||||
Total current liabilities |
30,536,483 | 2,047,699 | ||||||||||
Non-current liabilities |
||||||||||||
Deferred tax liability |
36,877,803 | 10,122,656 | ||||||||||
Total non-current liabilities |
36,877,803 | 10,122,656 | ||||||||||
Total liabilities |
67,414,286 | 12,170,355 | ||||||||||
Net assets |
188,700,028 | 79,695,747 | ||||||||||
Equity |
||||||||||||
Issued capital |
12 | (b) | 224,897,860 | 107,883,835 | ||||||||
Reserves |
3,797,322 | 574,127 | ||||||||||
Deficit accumulated prior to development stage |
(3,813,181 | ) | (3,813,181 | ) | ||||||||
Deficit accumulated during development stage |
12 | (b) | (36,181,973 | ) | (24,949,034 | ) | ||||||
Total equity |
188,700,028 | 79,695,747 | ||||||||||
F-3
Issued capital | Foreign | Option | Employee | Accumulated | Minority | Total | ||||||||||||||||||||||
currency | premium | equity- | deficit | interest | ||||||||||||||||||||||||
translation | reserve | settled | ||||||||||||||||||||||||||
reserve | benefits | |||||||||||||||||||||||||||
reserve | ||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Balance at July 1,
2005 |
107,883,835 | (350,287 | ) | 292,828 | 631,586 | (28,762,215 | ) | | 79,695,747 | |||||||||||||||||||
Loss attributable
to members of the
parent entity |
| | | | (11,232,939 | ) | | (11,232,939 | ) | |||||||||||||||||||
Foreign currency
translation
adjustment |
| (40,456 | ) | | | | | (40,456 | ) | |||||||||||||||||||
Total recognized
income and expense |
| (40,456 | ) | | | (11,232,939 | ) | | (11,273,395 | ) | ||||||||||||||||||
Shares issued, net
of issue costs |
117,014,025 | | | | | | 117,014,025 | |||||||||||||||||||||
Warrants attached
to convertible
loan note |
| | 1,719,831 | | | | 1,719,831 | |||||||||||||||||||||
Share options and
warrants issued |
| 758,837 | 784,983 | | | 1,543,820 | ||||||||||||||||||||||
Balance at December
31, 2005 |
224,897,860 | (390,743 | ) | 2,771,496 | 1,416,569 | (39,995,154 | ) | | 188,700,028 | |||||||||||||||||||
Balance at
July 1, 2004 |
49,957,982 | | | 39,689 | (11,968,378 | ) | 1,583,200 | 39,612,493 | ||||||||||||||||||||
Loss attributable
to members of the
parent entity |
| | | | (7,330,165 | ) | | (7,330,165 | ) | |||||||||||||||||||
Foreign currency
translation
adjustment |
| (127,278 | ) | | | | 79,361 | (47,917 | ) | |||||||||||||||||||
Minority interest
share of loss |
| | | | | (399,196 | ) | (399,196 | ) | |||||||||||||||||||
Total recognized
income and expense |
| (127,278 | ) | | | (7,330,165 | ) | (319,835 | ) | (7,777,278 | ) | |||||||||||||||||
Shares issued, net
of issue costs |
57,925,853 | | | | | | 57,925,853 | |||||||||||||||||||||
Share options issued |
| | 587,454 | 35,967 | | | 623,421 | |||||||||||||||||||||
Reversal of
minority interest |
| | | | | (1,263,365 | ) | (1,263,365 | ) | |||||||||||||||||||
Balance at December
31, 2004 |
107,883,835 | (127,278 | ) | 587,454 | 75,656 | (19,298,543 | ) | | 89,121,124 | |||||||||||||||||||
F-4
Six months ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
$ | $ | |||||||
Cash flows from operating activities |
||||||||
Payments to suppliers, employees and consultants |
(4,256,428 | ) | (1,999,802 | ) | ||||
Research and development expenditure |
(5,218,473 | ) | (3,734,578 | ) | ||||
Interest received |
246,189 | 384,622 | ||||||
Other income |
42,283 | 13,880 | ||||||
Income received in advance |
493,702 | | ||||||
Net cash used in operating activities |
(8,692,727 | ) | (5,335,878 | ) | ||||
Cash flows from investing activities |
||||||||
Purchase of property, plant and equipment |
(843,746 | ) | (1,459,773 | ) | ||||
Proceeds on sale of property, plant and equipment |
21,376 | | ||||||
Net cash paid for increased interest in subsidiary |
| (4,644,966 | ) | |||||
Net cash paid for acquisitions of businesses |
(1,086,076 | ) | | |||||
Net cash used in investing activities |
(1,908,446 | ) | (6,104,739 | ) | ||||
Cash flows from financing activities |
||||||||
Proceeds from issue of ordinary shares |
5,636,102 | 3,666,500 | ||||||
Payment of share issue costs |
(468,873 | ) | (27,422 | ) | ||||
Proceeds from convertible loan note |
20,500,500 | | ||||||
Costs of convertible loan note financing |
(607,196 | ) | | |||||
Net cash provided by financing activities |
25,060,533 | 3,639,078 | ||||||
Net increase / (decrease) in cash and cash
equivalents |
14,459,360 | (7,801,539 | ) | |||||
Cash and cash equivalents at the beginning of the
period |
12,892,061 | 31,350,656 | ||||||
Effects of exchange rate changes on the balance
of cash and cash equivalents held in foreign
currencies |
331,857 | (1,548,515 | ) | |||||
Cash and cash equivalents at the end of the period |
27,683,278 | 22,000,602 | ||||||
F-5
1. | Background and summary of accounting policies | |
Background | ||
pSivida Limited, or pSivida, together with its subsidiaries, referred to as the Company, is incorporated in Perth, Australia and is committed to biomedical applications of nano-technology and has as its core focus the development and commercialization of a modified form of the silicon chip (porosified or nano-structured silicon) known as BioSilicon. BioSilicon offers multiple potential applications across the high growth healthcare sector, including controlled slow release drug delivery, brachytherapy, tissue engineering and orthopedics and the Company is currently in the development stage of assessing these potential applications. | ||
On May 18, 2001, the Company re-listed on the Australian Stock Exchange (ASX Code: PSD). pSividas shares are also listed in Germany on the Frankfurt Stock Exchange on the XETRA system (German Symbol: PSI. Securities Code (WKN) 358705), in the United Kingdom on the OFEX International Market Service (IMS) under the ticker symbol PSD and on the NASDAQ National Market under the ticker symbol PSDV. | ||
Basis of preparation | ||
The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards Board (AASB) 134 Interim Financial Reporting (AASB 134). Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS: 34 Interim Financial Reporting. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The half-year financial report shall be read in conjunction with the annual financial report for the year ended June 30, 2005 and any public announcements made by the Company during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001. | ||
In the opinion of the Companys management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended December 31, 2005 are not necessarily indicative of the results that may be expected for the year ending June 30, 2006. | ||
The financial report has been prepared on the basis of historical cost, except for derivative financial instruments, which are measured at fair value. Cost is based on the fair values of the consideration given in exchange for goods and services. | ||
The Company will adopt Australian equivalents to International Financial Reporting Standards (A-IFRS) for the first time in its financial statements for the year ending June 30, 2006, which will include comparative financial statements for the year ended June 30, 2005. AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards (AASB 1) requires that an entity develop accounting policies based on the standards and related interpretations effective at the reporting date of its first annual A-IFRS financial statements (e.g., June 30, 2006). AASB 1 also requires that those policies be applied as of the date of transition to A-IFRS (e.g., July 1, 2004) and throughout all periods presented in the first A-IFRS financial statements. The accompanying interim financial information as of December 31, 2005 and June 30, 2005 and for the six month periods ended December 31, 2005 and 2004, have been prepared in accordance with those AASB standards and Urgent Issues Group (UIG) interpretations issued and effective, or issued and early-adopted, at January 1, 2005. The AASB standards and UIG interpretations that will be applicable at June 30, 2006, including those that will be applicable on an optional basis, are not known with certainty at the time of preparing this interim financial information. As a result, the accounting policies used to prepare these financial statements are subject to change up to the reporting date of the Companys first A-IFRS financial statements. An explanation of how the transition from superseded policies to A-IFRS has affected the Companys financial position, financial performance and cash flows is discussed in Note 9. |
F-6
In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. | ||
The accounting policies set out below have been applied in preparing the financial statements for the half-year ended December 31, 2005, the comparative information presented in these financial statements, and in the preparation of the opening A-IFRS balance sheet at July 1, 2004 (as disclosed in Note 9), the Companys date of transition. | ||
The Company has not restated comparative information for financial instruments, as permitted under the first-time adoption transitional provisions. The accounting policies for financial instruments applicable to the comparative information are consistent with those adopted and disclosed in the 2005 annual financial report. The impact of changes in these accounting policies on July 1, 2005, the date of transition for financial instruments, is discussed further in Note 1(s). | ||
Significant accounting policies | ||
The following significant accounting policies have been adopted in the preparation and presentation of the half-year financial report: | ||
(a) | Principles of consolidation | |
The consolidated financial statements are prepared by consolidating the financial statements of all the entities that comprise the consolidated entity, being the parent entity and its subsidiaries as defined in Accounting Standard AASB 127 Consolidated and Separate Financial Statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. | ||
On acquisition and step acquisition (including increases in interests in controlled entities), the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. If, after reassessment, the fair value of the identifiable net assets acquired exceeds the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition. | ||
The interest of minority shareholders is stated at the minoritys proportion of the fair values of the assets and liabilities recognized. | ||
The consolidated financial statements include information and results of each subsidiary from the date on which the company obtains control and until such time as the Company ceases to control such entity. | ||
In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealized profits arising within the consolidated entity are eliminated in full. | ||
(b) | Foreign currency | |
Functional and presentation currency | ||
The functional currency of each of the subsidiaries is measured using the currency of the primary economic environment in which that entity operates. |
F-7
The parent entity, pSivida Limited, changed its functional currency from Australian dollars to United States dollars following the acquisition of pSivida Inc (formerly Control Delivery Systems Inc) effective January 1, 2006 as it was determined that the United States was the primary economic environment in which the parent entity operates as of that date. | ||
Unless otherwise noted, the consolidated financial statements are presented in Australian dollars which is the parent entitys presentation currency. | ||
Foreign currency transactions | ||
All foreign currency transactions during the financial period are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. | ||
Exchange differences are recognized in profit and loss in the period in which they arise. | ||
Foreign operations | ||
On consolidation, the assets and liabilities of the Companys 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 operation. | ||
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date. | ||
(c) | Cash and cash equivalents | |
Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments with original maturity of three months or less, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. | ||
(d) | Financial assets | |
Receivables | ||
Trade and other receivables are recorded at amortized cost less impairment. | ||
(e) | Property, plant and equipment | |
Plant and equipment and leasehold improvements are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. | ||
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period. |
F-8
Leasehold improvements
|
Lease term | |||
Plant and equipment
|
3 years |
(f) | Goodwill | |
Goodwill, representing the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognized as an asset and not amortized, but tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognized immediately in profit and loss and is not subsequently reversed. Refer also Note 1(o). | ||
(g) | Intangible assets | |
Intangible assets acquired in a business combination | ||
All potential intangible assets acquired in a business combination are identified and recognized separately from goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably. | ||
Patents and intellectual property | ||
Acquired patents and intellectual property are recorded at cost less accumulated amortization and impairment. Amortization is calculated on a straight line basis so as to write off the cost of the asset over its estimated useful life of 12 years, commencing on the date the asset is available for use. The expected useful life is reviewed at the end of each annual reporting period. | ||
In-process research and development | ||
In-process research and development (IPR&D) projects acquired in a business combination are recorded at cost, subject to any impairment write-downs. Amortization is charged over the estimated useful life once a project included in IPR&D has been successfully developed and is available for use. | ||
Research and development costs | ||
Expenditure on research activities is recognized as an expense in the period in which it is incurred. Where no internally-generated intangible asset can be recognized, development expenditure is recognized as an expense in the period as incurred. | ||
An intangible asset arising from development (or from the development phase of an internal project) is recognized 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. |
F-9
(h) | Payables | |
Trade payables and other accounts payable are recognized when the Company becomes obliged to make future payments resulting from the purchase of goods and services. | ||
(i) | Borrowings | |
Borrowings are recorded initially at fair value, net of transaction costs. | ||
Subsequent to initial recognition, borrowings are measured at amortized cost with any difference between the initial recognized amount and the redemption value being recognized in profit and loss over the period of the borrowing. | ||
(j) | Financial instruments issued by the Company | |
Debt and equity instruments | ||
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. | ||
Compound instruments | ||
The component parts of compound instruments, such as convertible debt with detachable warrants, are classified separately as liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible debt. The equity component initially brought to account is determined by deducting the amount of the liability component from the amount of the compound instrument as a whole. | ||
The Company reviews the terms of compound instruments to determine whether there are embedded derivatives, such as a holders conversion option, that may be required to be bifurcated and accounted for separately as a derivative financial instrument. Bifurcated embedded derivatives are recorded at fair value on the balance sheet and classified as an asset or liability, as appropriate. After initial recognition, subsequent changes in the fair value of the embedded derivative are charged or credited to the statement of operations in the period. | ||
The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. | ||
Transaction costs on the issue of equity instruments | ||
Transaction costs arising on the issue of equity instruments are recognized directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. | ||
Transaction costs on the issue of debt instruments | ||
Transaction costs relating to the issuance of debt are set off against the debt liability and amortized over the period of the loan, except in instances where the debt is payable or convertible on demand, whereby the transaction costs are expensed immediately. |
F-10
Interest and dividends | ||
Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments or component parts of compound instruments. | ||
(k) | Provisions | |
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. | ||
(l) | Revenue recognition | |
The Company recognizes revenue by reference to the stage of completion of a transaction involving the rendering of services at the reporting date when all the following conditions are satisfied: |
(a) | the amount of revenue can be estimated reliably; | ||
(b) | it is probable that the economic benefits associated with the transaction will flow to the entity; | ||
(c) | the stage of completion of the transaction at the reporting date can be measured reliably; and | ||
(d) | the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. |
F-11
(m) | Employee benefits | |
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. | ||
Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. | ||
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Company in respect of services provided by employees up to reporting date. | ||
Contributions to defined contribution superannuation plans are expensed when incurred. | ||
(n) | Goods and services tax | |
Revenues, expenses and assets are recognized net of the amount of goods and services tax (GST), except: |
| where the amount of GST incurred is not recoverable from the taxation authority, it is recognized as part of the cost of acquisition of an asset or as part of an item of expense; or | ||
| for receivables and payables which are recognized 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 statement of cash flows 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. | ||
(o) | Impairment of assets | |
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 suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order 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 Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. | ||
Goodwill and in-process research and development are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed. | ||
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 (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized in profit or loss immediately. | ||
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased 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 |
F-12
recognized for the asset (cash-generating unit) in prior years. A reversal of an impairment loss (other than goodwill impairment) is recognized in profit and loss immediately. | ||
(p) | Income tax | |
Current tax | ||
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax 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 comprehensive balance sheet 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 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. Furthermore, a deferred tax liability is not recognized in relation to taxable temporary differences arising from goodwill. | ||
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. | ||
Deferred tax assets relating to carry forward tax losses are recognized where it is probable that taxable profit will be available against which the carry forward tax losses can be utilized. | ||
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. | ||
Current and deferred tax for the period | ||
Current and deferred tax is recognized as an expense or as income in the statement of operations, 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. | ||
(q) | Leased assets | |
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. | ||
Operating lease payments are recognized as an expense on a straight line basis over the lease term. |
F-13
(r) | Share-based payments | |
Equity-settled share-based payments granted after November 7, 2002 that were unvested as of January 1, 2005 are measured at fair value at the date of grant (or the measurement date in the case of share-based payments granted to non-employees). Fair value is measured by use of the Black-Scholes option pricing model in most instances. Where conditions of the options make use of the Black-Scholes method inappropriate, such as where employee options have long lives, and are exercisable during the period between vesting date and the end of the options life and the exercise date cannot be reliably estimated, the entity will use another more appropriate option valuation method, such as the Binomial method. The expected life used in the Binomial model is adjusted, based on managements best estimate, for the effects of exercise restrictions and behavioral considerations. | ||
The fair value of the equity-settled share-based payments is expensed over the vesting period, based on the Companys estimate of shares that will eventually vest. | ||
(s) | Comparative information financial instruments | |
The Company has elected not to restate comparative information for financial instruments within the scope of AASB 132 Financial Instruments: Disclosure and Presentation (AASB 132) and AASB 139 Financial Instruments: Recognition and Measurement (AASB 139), as permitted on the first-time adoption of A-IFRS. The Companys review indicates that the changes in the accounting policies for financial instruments has a nil effect on the balance sheet as at July 1, 2005. | ||
2. | Property, plant and equipment |
As of | ||||||||
December 31, | June 30, | |||||||
2005 | 2005 | |||||||
$ | $ | |||||||
At cost |
5,838,668 | 4,423,767 | ||||||
Accumulated depreciation |
(1,983,687 | ) | (1,150,104 | ) | ||||
3,854,981 | 3,273,663 | |||||||
3. | Other intangible assets |
As of | ||||||||
December 31, | June 30, | |||||||
2005 | 2005 | |||||||
$ | $ | |||||||
At cost |
182,173,592 | 59,761,840 | ||||||
Accumulated amortization |
(11,717,647 | ) | (8,399,511 | ) | ||||
170,455,945 | 51,362,329 | |||||||
4. | Segment information | |
Business segment primary segment | ||
The Company operates in only one business segment, being the biotechnology sector. |
F-14
5. | Subsequent events | |
On January 11, 2006 Ms. Heather Zampatti was appointed as a Non-executive Director of the Company. The appointment of Ms. Zampatti to the pSivida board replaces Ms. Alison Ledger who stepped down after 18 months of service. | ||
The Company announced a one for eight rights issue (Rights Issue) on May 2, 2006 at an issue price of $0.60 per share. The issue price represented an approximately 18% discount to the 30 day volume weighted average closing price (VWAP) on the ASX up to May 1, 2006, being the last trading day and a 7% discount to the five day VWAP. The Company concluded the rights issue on June 13, 2006, raising a total of $6.3 million through the issue of 10,515,811 shares. | ||
The Company retains the right to issue up to another 37,865,276 shares in the form of a shortfall placement up until September 7, 2006. | ||
Capital raised from the placement of the shortfall will primarily fund the phase III clinical trials of Medidur for the treatment of Diabetic Macular Edema (DME), and phase IIa clinical trials of our lead BioSilicon product, BrachySil which is being developed for the treatment of inoperable pancreatic cancer. pSivida expects to receive a significantly greater return by funding the Medidur trials under the Co-Development Agreement to receive a profit share with Alimera Sciences rather than a straight royalty which would be payable if we did not co-fund the trials. | ||
On May 23, 2006 the Company announced that Mr. Michael Soja has been appointed Vice President, Finance and Chief Financial Officer, and Ms. Lori Freedman has been appointed Vice President, Corporate Affairs, General Counsel and Secretary. Both Mr. Soja and Ms. Freedman are based at pSividas Boston facility in the United States. | ||
6. | Acquisition | |
On October 3, 2005, the Company entered into a merger agreement with Control Delivery Systems Inc (CDS), a Boston-based company engaged in the design and development of drug delivery products. The agreement provided that a newly-formed subsidiary of pSivida would merge into CDS, with CDS surviving as a wholly-owned subsidiary of pSivida with the name of pSivida Inc. The acquisition was consummated on December 30, 2005. | ||
The primary reasons for the acquisition of CDS were: CDS commercialized products, including Vitrasert® for cytomegalovirus retinitis and the recently launched Retisert for uveitis; diversified product portfolio; existing license and development agreements, including those with Bausch & Lomb and Alimera Sciences; and extensive patent portfolio. CDS also could provide a base for the Company near Boston, Massachusetts which is a biotechnology hub that would allow the Companys further expansion into the US market. In addition, as a result of the acquisition, the Company will receive royalty income which is expected to contribute significantly to the continued development of the expanded product portfolio. These factors contributed to the purchase price that resulted in recognition of a significant amount of goodwill as further noted below. | ||
The purchase price of the acquisition of $117,956,417 consists of: |
| $114,319 cash; | ||
| 150,820,380 ordinary fully paid shares of pSivida, represented by 15,082,038 American Depositary Shares, or ADSs, with an estimated fair value of $107,082,470 ($0.71 per share, represented by US$5.169 per ADS); |
F-15
| 9,016,230 non-vested ordinary shares of pSivida, represented by 901,623 non-vested ADSs, with an estimated fair value of $4,824,502, net of earned compensation of $1,577,021; | ||
| 1,724,460 share options in pSivida, represented by 172,446 options over ADSs, with an estimated fair value of $685,977; and | ||
| direct acquisition costs of $5,249,149. |
Total fair value | ||||
$ | ||||
Cash |
228,464 | |||
Receivables |
460,351 | |||
Other |
282,588 | |||
Property, plant and equipment |
624,035 | |||
Deferred tax asset |
20,705,001 | |||
Patents |
120,000,000 | |||
In-process research and development |
2,741,706 | |||
Payables |
(3,549,399 | ) | ||
Deferred revenue |
(1,826,699 | ) | ||
Provisions |
(621,399 | ) | ||
Deferred tax liability |
(49,827,804 | ) | ||
Total |
89,216,844 | |||
Purchase price |
117,956,417 | |||
Goodwill |
28,739,573 | |||
F-16
| The patents are currently being commercialized in the form of the Retisert for Uveitis product identified above, and will be commercialized as the Medidur for DME product described above. | ||
| The patents acquired related to these products will expire from 12 to 15 years from the time of the acquisition. | ||
| Although technological progress may cause some of the existing technology to become commercially obsolete before the expiration of the related patent life, on an overall basis the Company believes that the products developed using the capitalized intellectual property will continue to be sold over the 12 years. | ||
| The patents do not require any material maintenance expenditure to obtain the expected future cash flows. |
Six months ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
$ | $ | |||||||
Revenue |
972,739 | 4,579,755 | ||||||
Loss for the period |
(17,988,985 | ) | (9,040,149 | ) | ||||
Basic and diluted loss per share |
(0.05 | ) | (0.03 | ) |
The pro forma data is based on historical information and does not necessarily reflect the actual results that would have occurred, nor is it indicative of future results of operations. | ||
7. | Issuances of securities | |
During the six months ended December 31, 2005, the Company issued 665,000 ADSs (representing 6,650,000 ordinary shares in the Company) at a price of US$6.50 ($8.48) each, raising US$4.3 million ($5.6 million) before costs through a private investment in public equity (PIPE). The Company also issued warrants over 133,000 ADSs (representing options over 1,330,000 ordinary shares) to non-employees in connection with assisting in closing the PIPE. The fair value of the warrants was determined using the Black-Scholes model and the value was recorded as a reduction of the net proceeds received in the PIPE. | ||
In November 2005, the Company issued a subordinated promissory note in the principal amount of US$15 million ($20.5 million) to an institutional investor. Interest on the note accrues at 8.0% per annum and is payable quarterly in arrears on the first day of each calendar quarter beginning January 1, 2006. The holder of the note can require repayment of the note in equal amounts of US$5 million on the 12, 18 and 24 month anniversaries of the issuance, and can convert the note into ADSs at any time in accordance with the note agreement. The note has a three year term to maturity from November 16, 2005 and the Company is required to hold a net cash balance in excess of 30% of the amount of the note outstanding. The note is currently convertible into 2,112,676 ADSs at a conversion price of US$7.10 per ADS, subject to adjustment based on certain events or circumstances, in addition to a reset provision effective 10 months after |
F-17
entering into the agreement, being August 5, 2006. The embedded conversion option was bifurcated and accounted for as a derivative financial instrument that is adjusted to fair value at each reporting date with changes in fair value reported in earnings. The Company also issued detachable warrants over 633,803 ADSs (representing options over 6,338,030 ordinary shares) as part of the convertible note agreement. The value of the detachable warrants was determined using the residual value method and was recorded as a separate component of equity. | ||
The Company issued 3,150,000 options over ordinary shares to directors and employees of the Company under its employee share option plan during the six months ended December 31, 2005. | ||
As discussed in Note 6, in consideration for the acquisition of CDS, the Company issued
15,082,038 ADSs to former holders of CDS stock, 901,623 non-vested ADSs to former holders of
CDS non-vested stock, and 172,446 options over ADSs to former holders of CDS options. The Company also issued 121,118 non-vested Company ADSs on December 30, 2005 in connection with employee retention agreements for which employee service subsequent to the consummation date of the acquisition is required in order for the shares to vest. |
||
8. | Contingencies | |
A potential lender to pSivida Inc has claimed a break-up fee as a result of the royalty advance agreement between pSivida Inc and Bausch & Lomb, entered into by pSivida Inc in June 2005. An investment banker has claimed an advisory fee in connection with that agreement as well as the acquisition of pSivida Inc by pSivida Limited. The Company intends to defend against these claims. The Company has continued to provide for the claims in the financial statements as at December 31, 2005, having provided for the claims in the completion balance sheet of pSivida Inc at acquisition. | ||
9. | Impacts of the adoption of A-IFRS | |
The Company changed its accounting policies on July 1, 2005 to comply with A-IFRS. The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1: First-time Adoption of Australian Equivalents to International Financial Reporting Standards, with July 1, 2004 as the date of transition, except for financial instruments, where the date of transition is July 1, 2005 (refer Note 1). | ||
An explanation of how the transition from superseded policies to A-IFRS has affected the Companys financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables. | ||
Effect of A-IFRS on the balance sheet as at July 1, 2004 |
Notes | Superseded | Consolidated | A-IFRS | |||||||||||
policies* | effects of | |||||||||||||
transition to | ||||||||||||||
A-IFRS | ||||||||||||||
$ | $ | $ | ||||||||||||
Current assets |
||||||||||||||
Cash and cash equivalents |
31,350,656 | | 31,350,656 | |||||||||||
Trade and other receivables |
340,482 | | 340,482 | |||||||||||
Other |
38,958 | | 38,958 | |||||||||||
Total current assets |
31,730,096 | | 31,730,096 | |||||||||||
Non-current assets |
||||||||||||||
Property, plant and
equipment |
669,699 | | 669,699 | |||||||||||
Other intangible assets |
b | 7,934,622 | 1,183,550 | 9,118,172 |
F-18
Notes | Superseded | Consolidated | A-IFRS | |||||||||||
policies* | effects of | |||||||||||||
transition to | ||||||||||||||
A-IFRS | ||||||||||||||
$ | $ | $ | ||||||||||||
Other |
32,641 | | 32,641 | |||||||||||
Total non-current assets |
8,636,962 | 1,183,550 | 9,820,512 | |||||||||||
Total assets |
40,367,058 | 1,183,550 | 41,550,608 | |||||||||||
Current liabilities |
||||||||||||||
Trade and other payables |
1,938,115 | | 1,938,115 | |||||||||||
Total current liabilities |
1,938,115 | | 1,938,115 | |||||||||||
Total liabilities |
1,938,115 | | 1,938,115 | |||||||||||
Net assets |
38,428,943 | 1,183,550 | 39,612,493 | |||||||||||
Equity |
||||||||||||||
Issued capital |
49,957,982 | | 49,957,982 | |||||||||||
Reserves |
c, d | 78,220 | (38,531 | ) | 39,689 | |||||||||
Deficit accumulated prior
to development stage |
(3,813,181 | ) | | (3,813,181 | ) | |||||||||
Deficit accumulated during
development stage |
f | (9,377,278 | ) | 1,222,081 | (8,155,197 | ) | ||||||||
Parent entity interest |
36,845,743 | 1,183,550 | 38,029,293 | |||||||||||
Total minority interest |
1,583,200 | | 1,583,200 | |||||||||||
Total equity |
38,428,943 | 1,183,550 | 39,612,493 | |||||||||||
* | Reported financial position as at June 30, 2004. |
Notes | Superseded | Consolidated | A-IFRS | |||||||||||
policies* | effects of | |||||||||||||
transition to | ||||||||||||||
A-IFRS | ||||||||||||||
$ | $ | $ | ||||||||||||
Revenue |
398,501 | | 398,501 | |||||||||||
Corporate office expenses |
b, d, e | (3,905,247 | ) | (2,403,853 | ) | (6,309,100 | ) | |||||||
Research and development |
(3,688,062 | ) | | (3,688,062 | ) | |||||||||
Loss before income tax |
(7,194,808 | ) | (2,403,853 | ) | (9,598,661 | ) | ||||||||
Income tax benefit |
a | | 1,869,300 | 1,869,300 | ||||||||||
Loss for the period |
(7,194,808 | ) | (534,553 | ) | (7,729,361 | ) | ||||||||
Loss attributable to
minority interest |
399,196 | | 399,196 | |||||||||||
Loss attributable to
members of the parent
entity |
(6,795,612 | ) | (534,553 | ) | (7,330,165 | ) | ||||||||
F-19
Notes | Superseded | Consolidated | A-IFRS | |||||||||||
policies* | effects of | |||||||||||||
transition to | ||||||||||||||
A-IFRS | ||||||||||||||
$ | $ | $ | ||||||||||||
Revenue |
828,976 | | 828,976 | |||||||||||
Corporate office expenses |
b, d, e | (7,666,765 | ) | (5,688,204 | ) | (13,354,969 | ) | |||||||
Research and development |
(8,287,930 | ) | | (8,287,930 | ) | |||||||||
Loss before income tax |
(15,125,719 | ) | (5,688,204 | ) | (20,813,923 | ) | ||||||||
Income tax benefit |
a | | 3,620,891 | 3,620,891 | ||||||||||
Loss for the period |
(15,125,719 | ) | (2,067,313 | ) | (17,193,032 | ) | ||||||||
Loss attributable to
minority interest |
399,196 | | 399,196 | |||||||||||
Loss attributable to
members of the parent
entity |
(14,726,523 | ) | (2,067,313 | ) | (16,793,836 | ) | ||||||||
* | Reported financial results under previous Australian GAAP. |
Notes | Superseded | Consolidated | A-IFRS | |||||||||||
policies* | effects of | |||||||||||||
transition to | ||||||||||||||
A-IFRS | ||||||||||||||
$ | $ | $ | ||||||||||||
Current assets |
||||||||||||||
Cash and cash equivalents |
22,000,602 | | 22,000,602 | |||||||||||
Trade and other receivables |
246,437 | | 246,437 | |||||||||||
Other |
93,310 | | 93,310 | |||||||||||
Total current assets |
22,340,349 | | 22,340,349 | |||||||||||
Non-current assets |
||||||||||||||
Property, plant and
equipment |
1,756,367 | | 1,756,367 | |||||||||||
Goodwill |
e | 9,119,459 | 14,186,239 | 23,305,698 | ||||||||||
Other intangible assets |
b | 56,642,559 | (1,627,027 | ) | 55,015,532 | |||||||||
Other |
16,587 | | 16,587 | |||||||||||
Total non-current assets |
67,534,972 | 12,559,212 | 80,094,184 | |||||||||||
Total assets |
89,875,321 | 12,559,212 | 102,434,533 | |||||||||||
Current liabilities |
||||||||||||||
Trade and other payables |
1,431,127 | | 1,431,127 | |||||||||||
Provisions |
8,034 | | 8,034 | |||||||||||
Total current liabilities |
1,439,161 | | 1,439,161 | |||||||||||
Non-current liabilities |
||||||||||||||
Deferred tax liabilities |
a | | 11,874,248 | 11,874,248 | ||||||||||
Total non-current
liabilities |
| 11,874,248 | 11,874,248 | |||||||||||
Total liabilities |
1,439,161 | 11,874,248 | 13,313,409 | |||||||||||
F-20
Net assets |
88,436,160 | 684,964 | 89,121,124 | |||||||||||
Equity |
||||||||||||||
Issued capital |
107,883,835 | | 107,883,835 | |||||||||||
Reserves |
c, d | 538,396 | (2,564 | ) | 535,832 | |||||||||
Deficit accumulated prior
to development stage |
(3,813,181 | ) | | (3,813,181 | ) | |||||||||
Deficit accumulated during
development stage |
f | (16,172,890 | ) | 687,528 | (15,485,362 | ) | ||||||||
Total equity |
88,436,160 | 684,964 | 89,121,124 | |||||||||||
* | Reported financial position under previous Australian GAAP. |
Notes | Superseded | Consolidated | A-IFRS | |||||||||||
policies* | effects of | |||||||||||||
transition to | ||||||||||||||
A-IFRS | ||||||||||||||
$ | $ | $ | ||||||||||||
Current assets |
||||||||||||||
Cash and cash equivalents |
12,892,061 | | 12,892,061 | |||||||||||
Trade and other receivables |
709,418 | | 709,418 | |||||||||||
Other |
322,933 | | 322,933 | |||||||||||
Total current assets |
13,924,412 | | 13,924,412 | |||||||||||
Non-current assets |
||||||||||||||
Property, plant and
equipment |
3,273,663 | | 3,273,663 | |||||||||||
Goodwill |
e | 8,588,228 | 14,717,470 | 23,305,698 | ||||||||||
Other intangible assets |
b | 56,249,010 | (4,886,681 | ) | 51,362,329 | |||||||||
Total non-current assets |
68,110,901 | 9,830,789 | 77,941,690 | |||||||||||
Total assets |
82,035,313 | 9,830,789 | 91,866,102 | |||||||||||
Current liabilities |
||||||||||||||
Trade and other payables |
2,017,820 | | 2,017,820 | |||||||||||
Provisions |
29,879 | | 29,879 | |||||||||||
Total current liabilities |
2,047,699 | | 2,047,699 | |||||||||||
Non-current liabilities |
||||||||||||||
Deferred tax liabilities |
a | | 10,122,656 | 10,122,656 | ||||||||||
Total non-current
liabilities |
| 10,122,656 | 10,122,656 | |||||||||||
Total liabilities |
2,047,699 | 10,122,656 | 12,170,355 | |||||||||||
Net assets |
79,987,614 | (291,867 | ) | 79,695,747 | ||||||||||
Equity |
||||||||||||||
Issued capital |
107,883,835 | | 107,883,835 | |||||||||||
Reserves |
c, d | 20,761 | 553,366 | 574,127 |
F-21
Deficit accumulated prior
to development stage |
(3,813,181 | ) | | (3,813,181 | ) | |||||||||
Deficit accumulated during
development stage |
f | (24,103,801 | ) | (845,233 | ) | (24,949,034 | ) | |||||||
Total equity |
79,987,614 | (291,867 | ) | 79,695,747 | ||||||||||
* | Reported financial position under previous Australian GAAP. |
Effect of A-IFRS on the cash flow statement | ||
There are no material differences between the cash flow statement presented under A-IFRS and the cash flow statement presented under the superseded policies. | ||
Explanatory notes to the reconciliations | ||
(a) | Deferred income tax | |
Under superseded policies, the Company adopted tax-effect accounting principles whereby income tax expense was calculated on pre-tax accounting profits after adjustment for permanent differences. The tax-effect of timing differences, which occur when items were included or allowed for income tax purposes in a period different to that for accounting purposes, were recognized at current taxation rates as deferred tax assets and deferred tax liabilities, as applicable. | ||
Under A-IFRS, deferred tax is determined using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and their corresponding tax bases. This includes temporary differences arising from business combinations, which differs from superseded policies. | ||
The effect of the deferred tax adjustments on deferred tax balances is as follows: |
July, 1 2004 | December 31, 2004 | June 30, 2005 | ||||||||||
$ | $ | $ | ||||||||||
Deferred tax assets not recognized
under previous GAAP |
2,708,039 | 4,830,630 | 5,611,096 | |||||||||
Deferred tax liabilities not
recognized under previous GAAP |
(2,708,039 | ) | (16,704,878 | ) | (15,733,752 | ) | ||||||
Net increase in deferred tax balances |
| (11,874,248 | ) | (10,122,656 | ) | |||||||
Six months | Year ended | |||||||
ended | June 30, 2005 | |||||||
December 31, | ||||||||
2004 | ||||||||
$ | $ | |||||||
Net impact on deferred tax at beginning of period |
| | ||||||
Impact on loss for period |
1,869,300 | 3,620,892 | ||||||
Deferred tax capitalized to goodwill |
(13,743,548 | ) | (13,743,548 | ) | ||||
Net impact of deferred tax at end of period |
(11,874,248 | ) | (10,122,656 | ) | ||||
F-22
(b) | Other intangible assets | |
At the date of transition to A-IFRS, the Company elected to restate all business combinations occurring from December 1, 2000, the date of the entitys re-listing on the Australian Stock Exchange. | ||
As part of this restatement, the Company has capitalized direct acquisition costs previously expensed under superseded policies on the acquisition of a controlling interest in pSiMedica Limited in May 2001 totaling $112,278, resulting in an increase to intangibles of this amount on transition (and also applicable at December 31, 2004 and June 30, 2005) and a corresponding decrease to accumulated losses. | ||
The restatement of business combinations has also resulted in an increase in other intangible assets of $3,400,552 on transition (and also applicable at December 31, 2004 and June 30, 2005) as a result of the gross-up of intangible assets resulting from changes to deferred tax balances. Amortization expense must also be charged on the additional intangible amount. This has resulted in a decrease in intangibles of $692,513 at transition, $849,293 at December 31, 2004 and $1,003,517 at June 30, 2005. A corresponding increase to accumulated losses of $692,513 on transition, and an additional amortization expense of $156,780 for the half-year ended December 31, 2004, and $311,004 for the year ended June 30, 2005 has been recorded. | ||
Further, under A-IFRS the Company has chosen to amortize its intangible assets from the date that they are available for use, which differs from superseded policies whereby the Company did not amortize intangible assets until such time as they resulted in the generation of revenue. This has resulted in a decrease in intangibles of $1,636,767 at transition, $4,290,565 at December 31, 2004 and $7,395,994 at June 30, 2005. A corresponding increase to accumulated losses of $1,636,767 on transition, and an additional amortization expense of $2,653,798 for the half-year ended December 31, 2004, and $5,759,227 for the year ended June 30, 2005 has been recorded. | ||
(c) | Cumulative exchange differences | |
At the date of transition, the Company elected to reset the foreign currency translation reserve to zero. An amount of $78,220 was reclassified from the foreign currency translation reserve to accumulated losses on transition (and also applicable at December 31, 2004 and June 30, 2005), thereby reducing the balance of reserves by this amount. | ||
(d) | Share-based payments | |
As at the date of transition to A-IFRS, the Company has recognized an increase in the employee equity-settled payments reserve and a corresponding increase in accumulated losses of $39,689. | ||
For the half-year ended December 31, 2004, share-based payments of $35,967 (of which $28,865 was included in employee expenses and $7,102 in professional fees) which were not recognized under the superseded policies were recognized under A-IFRS, with a corresponding increase in the employee equity-settled payments reserve. | ||
For the financial year ended June 30, 2005, share-based payments of $591,897 (of which $508,610 was included in employee expenses and $83,287 in professional fees) which were not recognized under the superseded policies were recognized under A-IFRS, with a corresponding increase in the employee equity-settled payments reserve. | ||
These adjustments had no material tax or deferred tax consequences. |
F-23
(e) | Goodwill | |
The Company has elected to restate all business combinations occurring from December 1, 2000, the date of the entitys re-listing on the Australian Stock Exchange. This has resulted in the recognition of goodwill of $13,743,547 for the half-year ending December 31, 2004, and an increase of $13,743,547 for the year ended June 30, 2005. | ||
Further, goodwill, which was amortized under superseded policies in the comparative period, being the half-year ended December 31, 2004, is not amortized under A-IFRS from the date of acquisition for those business combinations restated. The effect of this change is an increase in the carrying amount of goodwill by $442,692 and a decrease in net loss before tax of $442,692 for the half-year ended and as at December 31, 2004 and an increase in the carrying amount of goodwill by $973,923 and a decrease in net loss before tax of $973,923 for the financial year ended and as at June 30, 2005. There is no tax effect as deferred taxes are not recognized for temporary differences arising from goodwill from which amortization is not deductible for tax purposes. | ||
(f) | Accumulated losses | |
The effect of the above adjustments on accumulated losses is as follows: |
Notes | July 1, 2004 | December 31, 2004 | June 30, 2005 | |||||||||||
$ | $ | $ | ||||||||||||
Income tax benefit / expense |
a | 3,400,552 | 5,269,852 | 7,021,443 | ||||||||||
Direct acquisition costs
capitalized |
b | 112,278 | 112,278 | 112,278 | ||||||||||
Amortization of grossed-up
intangible |
b | (692,513 | ) | (849,293 | ) | (1,003,517 | ) | |||||||
Amortization of intangibles
previously unamortized |
b | (1,636,767 | ) | (4,290,565 | ) | (7,395,994 | ) | |||||||
Transfer from foreign
currency translation
reserve |
c | 78,220 | 78,220 | 78,220 | ||||||||||
Expensed share-based
payments |
d | (39,689 | ) | (75,656 | ) | (631,586 | ) | |||||||
Goodwill no longer amortized |
e | | 442,692 | 973,923 | ||||||||||
Total adjustment to
accumulated losses |
1,222,081 | 687,528 | (845,233 | ) | ||||||||||
Attributable to members of
the parent entity |
1,222,081 | 687,528 | (845,233 | ) | ||||||||||
Attributable to minority
interests |
| | | |||||||||||
1,222,081 | 687,528 | (845,233 | ) | |||||||||||
10. | Restatement of A-IFRS amounts | |
As a public company in Australia, the Company is required to file consolidated financial statements with the ASX and ASIC that comply with A-IFRS. In these statutory A-IFRS consolidated financial statements as of and for the six months ended December 31, 2005, (filed with the ASX and the ASIC on March 16, 2006), the balance of the convertible note was classified as current or non-current based on the repayment schedule contained in the convertible note agreement. Additionally, the transaction costs directly attributable to the |
F-24
Condensed Consolidated Statement | ||||||||
of Operations (A-IFRS) | Six months ended December 31, 2005 | |||||||
As previously | As restated | |||||||
reported | ||||||||
$ | $ | |||||||
Interest and finance expenses |
(287,613 | ) | (817,807 | ) | ||||
Loss before income tax |
(13,070,400 | ) | (13,600,594 | ) | ||||
Loss for the period |
(10,702,745 | ) | (11,232,939 | ) | ||||
Loss attributable to members of
the parent entity |
(10,702,745 | ) | (11,232,939 | ) | ||||
Loss per share basic and diluted |
(0.05 | ) | (0.05 | ) |
F-25
Condensed Consolidated Balance | ||||||||||
Sheet (A-IFRS) | As of December 31, 2005 | |||||||||
As previously | As restated | |||||||||
reported | ||||||||||
$ | $ | |||||||||
Current liabilities: |
||||||||||
Borrowings |
6,848,377 | 12,658,567 | ||||||||
Conversion option derivative |
| 6,163,539 | ||||||||
Total current liabilities |
18,562,754 | 30,536,483 | ||||||||
Non-current liabilities: |
||||||||||
Borrowings |
11,443,535 | | ||||||||
Total non-current liabilities |
(1) | 46,493,534 | 36,877,803 | |||||||
Net assets / total equity |
(1) | 189,230,222 | 188,700,028 |
(1) The as restated balance as of December 31, 2005 includes an increase in deferred tax liabilities of $1,827,804 resulting from the refined estimate of the purchase price allocation. This does not constitute a restatement as a final determination of required purchase accounting adjustments, including the allocation of the purchase price, has not yet been made. (Refer to Note 6 above.) | ||
The above restatement resulted in a $530,194 increase to the Deficit accumulated during development stage as of December 31, 2005. | ||
11. | Reconciliation to US GAAP | |
The unaudited consolidated financial statements have been prepared in accordance with A-IFRS, which differ in certain significant respects from accounting principles generally accepted in the United States (US GAAP). Following is a summary of the adjustments to net loss and total equity required when reconciling such amounts in the financial statements to the corresponding amounts in accordance with US GAAP, considering the differences between A-IFRS and US GAAP. | ||
Reconciliation of net loss | ||
The following is a reconciliation of net loss as reported in the consolidated statement of operations under A-IFRS to net loss as adjusted for the effects of the application of US GAAP as of December 31, 2005 and June 30, 2005 and for the six months ended December 31, 2005 and 2004: |
Six months ended | ||||||||||
December 31, 2005 | December 31, 2004 | |||||||||
$ | $ | |||||||||
Loss for the period in accordance
with A-IFRS |
(11,232,939 | ) | (7,729,361 | ) | ||||||
Loss attributable to minority interest |
| 399,196 | ||||||||
Loss attributable to members of the
parent entity under A-IFRS |
(11,232,939 | ) | (7,330,165 | ) | ||||||
US GAAP adjustments: |
||||||||||
Share-based compensation expense |
(a) | | (41,257 | ) | ||||||
Fair value of equity instruments
issued as consideration
amortization expense |
(b) | 21,581 | 21,581 | |||||||
In-process research and development |
(c) | (2,741,706 | ) | | ||||||
Sales of stock by subsidiaries
amortization expense |
(d) | 19,778 | 19,778 |
F-26
Deferred tax effect of US GAAP
adjustments |
(b)(c)(d) | 12,408 | 12,408 | |||||||
US GAAP adjustments attributable to
minority interest |
| (20,920 | ) | |||||||
Net loss in accordance with US GAAP |
(14,003,596 | ) | (7,421,294 | ) | ||||||
Loss per share in accordance with US
GAAP |
||||||||||
Basic and diluted loss per share |
(e) | (0.06 | ) | (0.04 | ) | |||||
Weighted average number of shares
basic and diluted |
225,327,359 | 196,480,572 |
As of | ||||||||||
December 31, 2005 | June 30, 2005 | |||||||||
Total equity in accordance with A-IFRS |
188,700,028 | 79,695,747 | ||||||||
US GAAP adjustments: |
||||||||||
Fair value of equity instruments
issued as consideration |
(b) | 33,513,232 | 8,410,076 | |||||||
In-process research and development |
(c) | (3,776,724 | ) | (1,035,018 | ) | |||||
Sales of stock by subsidiaries |
(d) | 292,557 | 312,335 | |||||||
Deferred tax impact of US GAAP
adjustments |
(b)(c)(d) | 279,605 | 267,197 | |||||||
Total equity in accordance with US GAAP |
219,008,698 | 87,650,337 | ||||||||
Six months ended | ||||||||||
December 31, 2005 | December 31, 2004 | |||||||||
Balance in accordance with US GAAP at
beginning of period |
87,650,337 | 37,794,705 | ||||||||
Issuance of shares and options in
connection with acquisitions, net of
issue costs |
137,717,687 | 62,526,881 | ||||||||
Issuance of shares in connection with
PIPE, net of issue costs |
5,167,228 | |||||||||
Issuance of shares in connection with
exercise of options |
| 3,666,500 | ||||||||
Issuance of options and non-vested shares
for services rendered |
(a) | 797,667 | 664,679 | |||||||
Warrants attached to convertible loan note |
1,719,831 | | ||||||||
Foreign currency translation adjustment |
(40,456 | ) | (127,278 | ) | ||||||
Net loss in accordance with US GAAP |
(14,003,596 | ) | (7,421,294 | ) | ||||||
Balance in accordance with US GAAP at end
of period |
219,008,698 | 97,104,193 | ||||||||
F-27
Note: The above rollforward does not include options and warrants issued as settlement of share issue costs as such issuances do have an impact on net loss or total equity. | ||
(a) | Share-based compensation expense | |
Under A-IFRS, the Company adopted AASB 2: Share-Based Payment effective July 1, 2005. In accordance with the transitional provisions of AASB 2, the standard has been applied retrospectively to all share-based payments granted or issued after November 7, 2002 and that were not yet vested as of January 1, 2005. | ||
Through June 30, 2005, the Company accounted for share-based payments granted to employees and directors under US GAAP using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25: Accounting for Stock Issued to Employees (APB 25) and related interpretations to measure employee stock compensation. Under APB 25, compensation expense was recognized to the extent that the quoted market price of the stock exceeded the exercise price of the equity instrument, if any, at the measurement date, and was charged to earnings ratably over the vesting period. For options that vest upon the achievement of performance conditions beyond the Companys control, compensation expense was recognized when the target was achieved. | ||
The following table illustrates the effect on US GAAP net loss and loss per share if the Company had applied the fair value recognition provisions of Statements of Financial Accounting Standards (SFAS) No. 123: Accounting for Stock-Based Compensation (SFAS 123) to stock-based employee compensation for the half-year ended December 31, 2004. |
Six months ended | ||||
December 31, 2004 | ||||
US GAAP net loss, as reported |
(7,421,294 | ) | ||
Add: Stock-based employee compensation expense included
in reported US GAAP net loss |
77,225 | |||
Deduct: Total stock-based employee compensation expense
determined under fair value based method |
(372,041 | ) | ||
US GAAP pro forma net loss |
(7,716,110 | ) | ||
US GAAP basic and diluted loss per share |
||||
As reported |
(0.04 | ) | ||
Pro forma |
(0.04 | ) |
F-28
compensation awards are measured based on the fair value using the Black-Scholes model. The compensation is recognized as an expense in the statement of operations over the requisite service period. Prior periods have not been restated. | ||
Total US GAAP share based compensation costs charged to the statement of operations was $797,667 and $77,225 for the half-years ended December 31, 2005 and 2004, respectively. No income tax benefits were recognized and no compensation cost was capitalized as part of property and equipment during the periods presented. | ||
The retrospective transition provisions of AASB 2 and the modified prospective transition provisions of SFAS 123R give rise to GAAP differences in share-based compensation for the six months ended December 31, 2004. There are no US GAAP reconciling items attributable to share-based compensation for the six months ended December 31, 2005 as the impact on compensation cost resulting from differences in the standards, such as the determination of the measurement date for share-based payments made to non-employees, is de minimis. | ||
(b) | Fair value of equity instruments issued as consideration | |
Under A-IFRS, the fair value of equity instruments issued as consideration in a purchase business combination is based on the quoted market price as of the date of consummation. Under US GAAP, the fair value of the equity instruments issued to effect a purchase business combination is based on the average quoted market price for a period of two days before and two days after the date the terms of the acquisition is agreed to and announced. Accordingly, for US GAAP purposes, the Company has recorded an increase to the value of identifiable intangible assets, the related deferred tax liability and goodwill, as appropriate. The increase in the value of identifiable intangible assets and the related deferred tax liability is amortized over the estimated useful life of the intangible of 12 years. | ||
(c) | In-process research and development | |
Under A-IFRS, IPR&D projects acquired in a business combination are capitalized and remain on the balance sheet, subject to any impairment write-downs. Amortization is charged over the estimated useful life from the point when the assets became available for use. Under US GAAP, such assets are recognized in the opening balance sheet but are then written off immediately to the statement of operations, as the technological feasibility of the IPR&D has not yet been established and it has no alternative future use. | ||
Under A-IFRS, deferred tax is provided for IPR&D assets acquired in a business combination. US GAAP does not provide for deferred tax on these assets, resulting in a reconciling adjustment to deferred tax and goodwill. | ||
(d) | Sales of stock by subsidiaries | |
In prior periods, certain of the Companys subsidiaries issued additional shares which resulted in a change in pSividas proportionate interest in the respective subsidiaries. Under A-IFRS, the change in pSividas proportionate interest in the respective subsidiaries due to share issuances is eliminated on consolidation and therefore is not recognized in the consolidated financial statements. Under US GAAP, the issuance of ordinary shares by a subsidiary is accounted for in accordance with Staff Accounting Bulletin No. 51, Accounting For Sales Of Stock By A Subsidiary (SAB 51) which requires the difference between the carrying amount of the parents investment in a subsidiary and the underlying net book value of the subsidiary after issuance of ordinary shares by the subsidiary be reflected as either a gain or loss in the statement of operations or reflected as an equity transaction. The Company has elected to account for SAB 51 gains and losses resulting from the sale of a subsidiarys ordinary shares as equity transactions. Accordingly, for US GAAP purposes, the Company has recorded an adjustment to the value of identifiable intangible assets, the related deferred tax liability and additional paid-in capital for the resulting SAB 51 |
F-29
gains and losses. The adjustment to the value of identifiable intangible assets and the related deferred tax liability is amortized over the estimated useful life of 12 years. | ||
(e) | Loss per share | |
Under A-IFRS, loss per share is calculated by dividing loss attributable to members of the parent entity by the weighted average number of shares on issue for the period. Methods of computing loss per share in accordance with US GAAP are documented in SFAS No. 128, Earnings per Share. | ||
For the six months ended December 31, 2005 and 2004, there were no differences in the calculation methodology of loss per share under A-IFRS and US GAAP. | ||
Basic and diluted loss per share are identical for all periods presented as potentially dilutive securities, including options, warrants and convertible debt, have been excluded from the calculation of the diluted net loss per common share because the inclusion of such securities would be antidilutive. | ||
(f) | Foreign currency translation adjustment | |
At the date of transition to A-IFRS, the Company elected to reset the foreign currency cumulative translation adjustment to zero under A-IFRS, with the offset recorded against the opening balance of accumulated deficit. US GAAP does not allow the foreign currency cumulative translation adjustment to be reset. This GAAP difference has no impact on net loss or total equity. | ||
(g) | Convertible note | |
Upon initial recognition, the proceeds received on the issue of the convertible note with detachable warrants are allocated into liability and equity components. In accordance with A-IFRS, the liability component is measured based on the fair value of a similar liability (including any embedded non-equity derivative features) that does not have an associated equity component. The equity component is then determined by deducting the liability component from the proceeds received on the issue of the notes. In accordance with US-GAAP, the proceeds are allocated based on the relative fair values of the liability and equity components. The resulting difference under these recognition methods of the convertible note is de minimis and therefore is not included in the US GAAP reconciliation. | ||
12. | Additional US GAAP Disclosures | |
(a) | Share-based payments | |
(i) | Issued by pSivida | |
The fair value of each option and warrant is estimated on the date of grant (or measurement date in the case of options and warrants issued to non-employees) using the Black-Scholes pricing model and the following assumptions: |
Six months ended | ||||
December 31, | ||||
2005 | 2004 | |||
Expected volatility |
55% | 60% | ||
Expected dividends |
0% | 0% | ||
Expected term |
3 months 3.65 years | 2 years 3.12 years | ||
Risk-free rate |
4.92% 5.35% | 5.10% 5.36% |
F-30
Six months ended December 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Number of | average exercise | Number of | average exercise | |||||||||||||
options | price | options | price | |||||||||||||
$ | $ | |||||||||||||||
Outstanding at
beginning of
period |
15,831,713 | 0.97 | 6,595,000 | 0.52 | ||||||||||||
Granted |
3,150,000 | 0.89 | 8,889,537 | 1.18 | ||||||||||||
Exercised |
| | (1,050,000 | ) | 0.30 | |||||||||||
Sold |
| | (1,650,000 | ) | 0.40 | |||||||||||
Forfeited |
(325,041 | ) | 0.92 | (29,804 | ) | 0.80 | ||||||||||
Expired |
| | | |||||||||||||
Outstanding at end
of period |
18,656,672 | 0.95 | 12,754,733 | 1.01 | ||||||||||||
Exercisable at end
of period |
13,879,672 | 0.99 | 12,354,733 | 1.02 | ||||||||||||
Six months ended December 31, | ||||||||||||||||
2005 | 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Number of | average exercise | Number of | average exercise | |||||||||||||
options | price | options | price | |||||||||||||
$ | $ | |||||||||||||||
Outstanding at
beginning of
period |
3,130,000 | 1.00 | 500,000 | 0.61 | ||||||||||||
Granted |
| | 2,275,000 | 1.10 | ||||||||||||
Forfeited |
(10,000 | ) | 1.18 | |
F-31
Outstanding at end
of period |
3,120,000 | 1.00 | 2,775,000 | 1.01 | ||||||||||||
Exercisable at end
of period |
3,070,000 | 1.00 | 2,725,000 | 1.01 | ||||||||||||
Six months ended December 31, | ||||||||
2005 | ||||||||
Weighted | ||||||||
Number of | average exercise | |||||||
warrants | price | |||||||
US$ | ||||||||
Outstanding at
beginning of period |
| | ||||||
Granted |
133,000 | 12.50 | ||||||
Outstanding at end of
period |
133,000 | 12.50 | ||||||
Exercisable at end of
period |
133,000 | 12.50 | ||||||
Six months ended December 31, | ||||||||
2005 | ||||||||
Weighted | ||||||||
Number of | average grant | |||||||
ADSs | date value | |||||||
$ | ||||||||
Outstanding at beginning
of period |
| | ||||||
Granted |
121,118 | 7.42 | ||||||
Outstanding at end of
period |
121,118 | 7.42 | ||||||
Exercisable at end of
period |
| | ||||||
F-32
As the holders of the non-vested ADSs have the rights of a normal shareholder, the grant date fair value of the non-vested ADSs is measured at the fair value of pSividas ordinary ADSs as if the non-vested ADSs were vested and issued on the grant date. | ||
Other | ||
During the six months ended December 31, 2005, the Company issued 697,507 non-vested ADSs and 172,446 warrants over ADSs as part of the consideration for the acquisition of CDS. See Note 6. | ||
During the six months ended December 31, 2004, the Company issued 638,537 options as part of the consideration for the acquisition of pSiMedica Limited. | ||
(ii) | Issued by subsidiary AION Diagnostics Limited | |
The fair value of each option and warrant issued by subsidiary AION Diagnostics Limited is estimated on the date of grant using the Black-Scholes pricing model and the following assumptions: |
Six months ended | ||
December 31, 2005 | ||
Expected volatility |
75% | |
Expected dividends |
0% | |
Expected term (in years) |
2.43 years | |
Risk-free rate |
5.25% |
Six months ended December 31, | ||||||||
2005 | ||||||||
Weighted | ||||||||
Number of | average exercise | |||||||
options | price | |||||||
$ | ||||||||
Outstanding at
beginning of period |
1,200,000 | Nil | ||||||
Granted |
| | ||||||
Outstanding at end of
period |
1,200,000 | Nil | ||||||
Exercisable at end of
period |
501,776 | Nil | ||||||
F-33
(b) | Development stage | |
The Company meets the definition of a development stage enterprise under SFAS No. 7, Accounting and Reporting by Development Stage Enterprises (SFAS 7). The following additional disclosures, prepared on an A-IFRS basis considering the AASB 1 exemptions, are required in accordance with SFAS 7: | ||
Cumulative consolidated statement of operations from the inception of the development stage (December 1, 2000) to December 31, 2005 A-IFRS basis |
Period from | ||||
inception of | ||||
development stage | ||||
(Dec 1, 2000 to | ||||
Dec 31, 2005) | ||||
$ | ||||
Revenue |
1,935,521 | |||
Research and development |
(28,997,615 | ) | ||
Employee expenses |
(5,575,887 | ) | ||
Professional fees |
(4,205,922 | ) | ||
Office expenses |
(1,466,810 | ) | ||
Depreciation and amortization expenses |
(11,945,959 | ) | ||
Interest and finance expenses |
(823,442 | ) | ||
Foreign exchange gain |
143,729 | |||
Other operating expenses |
(3,380,663 | ) | ||
Loss before income tax benefit |
(54,317,048 | ) | ||
Income tax benefit |
9,389,099 | |||
Loss for the period |
(44,927,949 | ) | ||
Loss attributable to minority interest |
8,745,976 | |||
Loss attributable to members of the parent entity |
(36,181,973 | ) | ||
F-34
Period from | ||||
inception of | ||||
development stage | ||||
(December 1, 2000 | ||||
to December 31, 2005) | ||||
$ | ||||
Cash flows from operating activities |
||||
Payments to suppliers, employees and consultants |
(13,719,990 | ) | ||
Research and development expenditure |
(26,344,846 | ) | ||
Interest received |
1,603,934 | |||
Other income |
233,551 | |||
Income received in advance |
493,702 | |||
Interest expense |
(6,782 | ) | ||
Net cash used in operating activities |
(37,740,431 | ) | ||
Cash flows from investing activities |
||||
Purchase of property, plant and equipment |
(5,681,103 | ) | ||
Proceeds on sale of property, plant and equipment |
723,930 | |||
Net cash paid for acquisitions of businesses |
(5,001,134 | ) | ||
Net cash used in investing activities |
(9,958,307 | ) | ||
Cash flows from financing activities |
||||
Proceeds from issue of ordinary shares |
52,178,889 | |||
Payment of share issue costs |
(2,850,342 | ) | ||
Proceeds from convertible loan note |
20,500,500 | |||
Costs of convertible loan note financing |
(607,196 | ) | ||
Equity contributions from minority interest |
5,508,030 | |||
Net cash provided by financing activities |
74,729,881 | |||
Net increase in cash and cash equivalents |
27,031,143 | |||
Cash and cash equivalents at the beginning of the period |
597,000 | |||
Effects of exchange rate changes on the balance of cash
held in foreign currencies |
55,135 | |||
Cash and cash equivalents at the end of the period |
27,683,278 | |||
Number of | Contributed | |||||||
shares | equity | |||||||
$ | ||||||||
Balance at inception of
development stage December 1,
2000 |
62,329,947 | 6,060,181 | ||||||
Issue of shares in connection
with placement at $0.30 per
share, net of issue costs
December 1, 2000 |
9,300,000 | 2,773,709 | ||||||
Non-cash issue of shares as
consideration for acquisition at
$0.30 per share, net of issue
costs May 10, 2001 |
10,918,535 | 3,273,959 | ||||||
Balance, June 30, 2001 |
82,548,482 | 12,107,849 | ||||||
Issue of shares in connection
with placement at $0.20 per
share, net of issue costs
November 22, 2001 |
12,300,000 | 2,332,410 | ||||||
Issue of shares in connection
with share purchase plan at
$0.22 per share, net of issue
costs May 9, 2002 |
998,500 | 209,357 | ||||||
F-35
Balance, June 30, 2002 |
95,846,982 | 14,649,616 | ||||||
Issue of shares in connection
with placement at $0.12 per
share, net of issue costs
October 10, 2002 |
7,000,000 | 792,568 | ||||||
Non-cash issue of shares in lieu
of directors fees at $0.13 per
share November 25, 2002 |
769,231 | 100,000 | ||||||
Issue of shares pursuant to
exercise of stock options at
$0.20 per share June 19, 2003 |
300,000 | 60,000 | ||||||
Balance, June 30, 2003 |
103,916,213 | 15,602,184 | ||||||
Issue of shares in connection
with share purchase plan at
$0.24 per share, net of issue
costs August 4, 2003 |
3,891,572 | 932,297 | ||||||
Issue of shares pursuant to
exercise of stock options at
$0.20 per share August 2003
to May 2004 |
8,130,000 | 1,626,000 | ||||||
Non-cash issue of shares as
consideration for acquisition at
$0.50 per share, net of issue
costs October 6, 2003 |
13,000,000 | 6,161,600 | ||||||
Issue of shares in connection
with placement at $1.09 per
share, net of issue costs
April 20, 2004 |
19,375,000 | 19,308,011 | ||||||
Issue of shares in connection
with placement at $1.16 per
share, net of issue costs
April 23, 2004 |
5,625,000 | 6,327,890 | ||||||
Balance, June 30, 2004 |
153,937,785 | 49,957,982 | ||||||
Non-cash issue of shares as
consideration for acquisition at
$1.09 per share, net of issue
costs August 5, 2004 |
49,804,381 | 54,259,353 | ||||||
Issue of shares pursuant to
exercise of stock options at
$0.20 per share July 2004 to
December 2004 |
13,070,000 | 2,614,000 | ||||||
Issue of shares pursuant to
exercise of stock options at
$0.40 per share October 2004
to December 2004 |
2,200,000 | 880,000 | ||||||
Issue of shares pursuant to
exercise of stock options at
$0.50 per share December 14,
2004 |
150,000 | 75,000 | ||||||
Issue of shares pursuant to
exercise of stock options at
$0.65 per share December 14,
2004 |
150,000 | 97,500 | ||||||
Balance, June 30, 2005 |
219,312,166 | 107,883,835 | ||||||
Issue of shares in connection
with PIPE at $0.848 per share,
net of issue costs September
5, 2005 |
6,650,000 | 5,158,165 | ||||||
Non-cash issue of shares as
consideration for acquisition at
$0.71 per share, net of issue
costs December 30, 2005 |
161,047,790 | 111,855,860 | ||||||
Balance, December 31, 2005 |
387,009,956 | 224,897,860 | ||||||
13. | US GAAP condensed financial information | |
The Securities and Exchange Commission has amended Form 20-F to provide four options for foreign private issuers that are first-time adopters of IFRS (or equivalents) and are required to provide interim financial statements in Securities Act or Exchange Act documents used after nine months from the financial year end. pSivida Limited has chosen to use the condensed financial information option, which allows foreign companies to use condensed US GAAP financial information to bridge the gap in interim financial information between previous GAAP and IFRS (or equivalents). The condensed US GAAP financial information provides a level of detail consistent with that required by Article 10 of Regulation S-X for interim financial statements. | ||
The following financial information is the unaudited US GAAP condensed financial information of pSivida Limited for the half-years ended December 31, 2005 and 2004, for the year ended June 30, 2005 and as of December 31, 2005, June 30, 2005 and December 31, 2004. |
F-36
As of | ||||||||||||
December 31, | June 30, | December 31, | ||||||||||
2005 | 2005 | 2004 | ||||||||||
$ | $ | $ | ||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
27,683,278 | 12,892,061 | 22,000,602 | |||||||||
Trade and other receivables |
1,238,335 | 709,418 | 246,437 | |||||||||
Other |
514,988 | 322,933 | 93,310 | |||||||||
Total current assets |
29,436,601 | 13,924,412 | 22,340,349 | |||||||||
Non-current assets |
||||||||||||
Property, plant and equipment, net |
3,854,981 | 3,273,663 | 1,756,367 | |||||||||
Goodwill |
84,150,327 | 31,840,423 | 31,840,424 | |||||||||
Other intangible assets, net |
167,335,328 | 51,024,779 | 54,718,665 | |||||||||
Other |
| | 16,587 | |||||||||
Total assets |
284,777,237 | 100,063,277 | 110,672,392 | |||||||||
Current liabilities |
||||||||||||
Trade and other payables |
9,157,003 | 2,017,820 | 1,431,128 | |||||||||
Deferred revenue |
1,821,445 | | | |||||||||
Borrowings |
12,658,567 | | | |||||||||
Conversion option derivative |
6,163,539 | | | |||||||||
Provisions |
735,929 | 29,879 | 8,034 | |||||||||
Total current liabilities |
30,536,483 | 2,047,699 | 1,439,162 | |||||||||
Non-current liabilities |
||||||||||||
Deferred tax liability |
35,232,056 | 10,365,240 | 12,129,037 | |||||||||
Total liabilities |
65,768,539 | 12,412,939 | 13,568,199 | |||||||||
Commitments and contingencies |
| | | |||||||||
Stockholders equity |
||||||||||||
Common stock |
| | | |||||||||
Additional paid-in capital |
263,418,932 | 117,723,693 | 118,107,148 | |||||||||
Accumulated other comprehensive
(loss) / income |
(312,523 | ) | 20,760 | (49,058 | ) | |||||||
Deficit accumulated prior to
development stage |
(3,813,181 | ) | (3,813,181 | ) | (3,813,181 | ) | ||||||
Deficit accumulated during
development stage |
(40,284,530 | ) | (26,280,934 | ) | (17,140,716 | ) | ||||||
Total stockholders equity |
219,008,698 | 87,650,338 | 97,104,193 | |||||||||
Total liabilities and
stockholders equity |
284,777,237 | 100,063,277 | 110,672,392 | |||||||||
F-37
Six months | Twelve months | Six months | ||||||||||
ended | ended | ended | ||||||||||
December 31, 2005 | June 30, 2005 | December 31, 2004 | ||||||||||
$ | $ | $ | ||||||||||
Revenue |
50,732 | 161,666 | 13,879 | |||||||||
Operating expenses: |
||||||||||||
Research and development |
9,058,338 | 14,358,160 | 6,527,591 | |||||||||
Selling, general and administrative |
4,369,570 | 5,406,091 | 2,049,308 | |||||||||
Write off of in-process research
and development |
2,741,706 | | | |||||||||
Foreign exchange (gain)/loss |
(306,841 | ) | 1,623,484 | 1,487,066 | ||||||||
Total operating expenses |
15,862,773 | 21,387,735 | 10,063,965 | |||||||||
Loss from operations |
(15,812,041 | ) | (21,226,069 | ) | (10,050,086 | ) | ||||||
Non-operating income (expense): |
||||||||||||
Interest income |
246,189 | 667,310 | 384,622 | |||||||||
Interest and finance expenses |
(817,807 | ) | (1,920 | ) | (3,406 | ) | ||||||
Loss before income tax benefit |
(16,383,659 | ) | (20,560,679 | ) | (9,668,870 | ) | ||||||
Income tax benefit |
2,380,063 | 3,620,891 | 1,869,300 | |||||||||
Loss attributable to minority interest |
| 378,276 | 378,276 | |||||||||
Net loss |
(14,003,596 | ) | (16,561,512 | ) | (7,421,294 | ) | ||||||
Loss per share (basic and diluted) |
($0.06 | ) | ($0.08 | ) | ($0.04 | ) | ||||||
Weighted average number of ordinary
shares (basic and diluted) |
225,327,359 | 207,802,540 | 196,480,572 |
F-38
| a liability owed to the company or a related body corporate; | ||
| a liability for a pecuniary penalty order or compensation order under specified provisions of the Corporations Act; or | ||
| a liability that is owed to someone other than the company or a related body corporate that did not arise out of conduct in good faith. |
| in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under Section 199A(2); or | ||
| in defending or resisting criminal proceedings in which the person is found guilty; or | ||
| in defending or resisting proceedings brought by the Australian Securities and Investments Commission (ASIC) or a liquidator for a court order if the grounds for making the order are found by the court to have been |
II-1
established (this does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order); or | |||
| in connection with proceedings for relief to the person under the Corporations Act in which the court denies the relief. |
| conduct involving a willful breach of any duty in relation to the company; or | ||
| a contravention of the officers duties under the Corporations Act not to improperly use their position or make improper use of information obtained as an officer. | ||
For the purpose of Sections 199A and 199B, an officer of a company includes: | |||
| a director or secretary; | ||
| a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the company; | ||
| a person who has the capacity to significantly affect the companys financial standing; and | ||
| a person in accordance with whose instructions or wishes the directors of the company are accustomed to act. |
Exhibit No. | Exhibit Title | |
2.1
|
Merger Agreement, dated October 3, 2005, among pSivida Limited, pSivida Inc., and Control Delivery Systems Inc. (c) | |
4.1
|
Deposit Agreement, by and among pSivida Limited, Citibank, N.A. and the Holders and Beneficial Owners of American Depositary Shares Evidenced by American Depositary Receipts Issued Thereunder (b) | |
4.2
|
Securities Purchase Agreement, dated October 5, 2005, between pSivida Limited and the investor listed on the Schedule of Buyers attached thereto (d) | |
4.3
|
Form of Subordinated Convertible Note in the principal amount of US$15,000,000 (d)(e) | |
4.4
|
Form of Warrant to Purchase ADRs for the purchase of up to 633,803 ADRs (d)(e) | |
4.5
|
Form of Registration Rights Agreement (d)(e) | |
4.6
|
Letter Agreement, dated November 15, 2005, relating to the Securities Purchase Agreement (d) | |
4.7
|
Note Amendment Agreement, dated February 22, 2006, between pSivida Limited and Castlerigg Master Investments Ltd. (f) | |
5.1
|
Legal Opinion of Blake Dawson Waldron, dated June 28, 2006 (a) | |
23.1
|
Consent of PricewaterhouseCoopers LLP, dated June 28, 2006 (a) | |
23.2
|
Consent of Deloitte Touche Tohmatsu dated, June 28, 2006 (a) | |
23.3
|
Consent of Blake Dawson Waldron (contained in the opinion filed as Exhibit 5.1 to this Registration Statement) | |
24.1
|
Power of Attorney* |
* | Previously filed. | |
(a) | Filed herewith. | |
(b) | Incorporated by reference to the registrants filing on Form F-6 (Commission file number 333-122158) filed on January 19, 2005. | |
(c) | Incorporated by reference to the registrants later filing on Form 6-K (Commission file number 000-51122) filed on October 4, 2005. The agreement filed omitted certain schedules containing immaterial information; the registrant agrees to furnish supplemental copies of any omitted schedules to the Commission upon request. | |
(d) | Incorporated by reference to the registrants filing on Form 6-K (Commission file number 000-51122) filed on November 15, 2005. |
II-2
(e) | The final versions of documents denoted as Form of have been omitted pursuant to Rule 12b-31.
pSivida Limited has entered into such agreements with the participant in the convertible note
sale. Such final versions are substantially identical in all respects except for the inclusion of
the investors and/or pSividas signature in the final versions. |
|
(f) | Incorporated by reference to the registrants earlier filing on Form 6-K (Commission file number 000-51122) filed on February 23, 2006. |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) | To include any prospectus required in Section 10(a)(3) of the Securities Act of 1933; | ||
(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and | ||
(iii) | To include any material information with respect to the Plan of Distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
(A) | Paragraphs (1)(i) and (1)(ii) of this section do not apply if the registration statement is on Form S-8, and the information required to be included in a post- effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement; and | ||
(B) | Paragraphs (1)(i), (1)(ii) and (1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424 (b) that is part of the registration statement. | ||
(C) | Provided further, however, that paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is for an offering of asset-backed securities on Form S-1 or Form S-3, and the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB. |
(2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; | ||
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; | ||
(4) | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act of 1933 |
II-3
need not be furnished, provided, that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Securities Act or Rule 3-19 if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in Form F-3; | |||
(5) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
(i) | If the registrant is relying on Rule 430B: |
(A) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and | ||
(B) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or |
(ii) | If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(6) | That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrants annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plans annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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PSIVIDA LIMITED |
||||
By: | /s/ Gavin Rezos | |||
Name: | Gavin Rezos | |||
Title: | Chief Executive Officer and Managing Director | |||
By: | /s/ Michael J. Soja | |||
Name: | Michael J. Soja | |||
Title: | Vice President, Finance and Chief Financial Officer | |||
Name | Title | |||
* |
Chairman of the Board of Directors, Non-Executive Director | |||
Name: |
Roger Brimblecombe | |||
/s/ Gavin Rezos | Chief Executive Officer and Managing Director (principal executive officer) | |||
Name: |
Gavin Rezos | |||
* |
Director | |||
Name: |
David Mazzo | |||
/s/ Michael J. Soja | Vice President, Finance and Chief Financial Officer (principal accounting officer) | |||
Name: |
Michael J. Soja | |||
* |
Director; Authorized Representative in the United States | |||
Name: |
Paul Ashton | |||
* |
Director | |||
Name: |
Stephen Lake | |||
* |
Director | |||
Name: |
Michael W. Rogers | |||
* |
Director | |||
Name: |
Heather Zampatti |
*By: | /s/ Gavin Rezos |
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EXHIBIT 5.1 BLAKE DAWSON WALDRON Level 32 Exchange Plaza LAWYERS 2 The Esplanade Perth WA 6000 - ------------------------------ www.bdw.com Tel + 61 8 9366 8000 Fax + 61 8 9366 8111 DX 169 Perth PO Box 7438 Cloisters Square Perth WA 6850 Australia PARTNER pSivida Limited Roger Davies Level 12, BGC Centre Telephone (08) 9366 8022 28 The Esplanade PERTH WA 6000 CONTACT Alan Gibson Telephone (08) 9366 8722 OUR REFERENCE DRD:AJG:09 1395 3581 28 June 2006 Dear Sirs REGISTRATION STATEMENT OF FORM F-3 (SUBORDINATED CONVERTIBLE NOTE) We have acted as Australian legal advisers to pSivida Limited (COMPANY) in connection with the Company's registration statement on Form F-3 (REGISTRATION STATEMENT), originally filed on March 28, 2006 with the Securities and Exchange Commission under the U.S. Securities Act of 1933 as amended (SECURITIES ACT). The Registration Statement relates to the sale by the selling security holder named in it of up to 57,631,650 ordinary shares of the Company represented by 5,763,165 American Depositary Shares that may be issued in connection with a subordinated convertible note and warrant issued by the Company (ISSUE). We are furnishing this opinion as exhibit 5.1 to the Registration Statement, subject to the final paragraph of this opinion. 1. DEFINITIONS In this opinion: (a) ACN means Australian Company Number. (b) ASIC means the Australian Securities and Investments Commission. (c) ASX means Australian Stock Exchange Limited ACN 008 624 691. (d) COMPANY means pSivida Limited, registered in Western Australia, ACN 009 232 026. (e) CONVERTIBLE NOTE means the subordinated convertible promissory note issued by the Company on 16 November 2005 and described in the section headed "The Offering" in the Registration Statement. (f) CORPORATIONS ACT means the Corporations Act 2001 (Cth). PERTH SYDNEY MELBOURNE BRISBANE CANBERRA LONDON PORT MORESBY JAKARTA SHANGHAI
BLAKE DAWSON WALDRON 28 June 2006 pSivida Limited Page 2 (g) RELEVANT JURISDICTION means the State of Western Australia, Australia. (h) RELEVANT LAWS means the laws of the Relevant Jurisdiction and the federal laws of Australia as they apply in the Relevant Jurisdiction. (i) SELLING SECURITY HOLDER has the same meaning as in the Registration Statement. (j) WARRANT means the warrant to purchase American Depositary Shares issued by the Company on 16 November 2005 and described in the section headed "The Offering" in the Registration Statement. In this opinion, headings are for convenience only and do not affect interpretation and references to paragraphs are to paragraphs of this opinion. 2. DOCUMENTS REVIEWED For the purposes of giving this opinion, we have examined the following documents: (a) a search of the ASIC database in respect of the Company on 28 June 2006 which shows that the Company is registered; (b) the current constitution of the Company; (c) minutes of the meetings of the board of directors of the Company held on 26 October 2005 and 14 November 2005; (d) minutes of shareholders' meeting dated 15 November 2005; and (e) the Registration Statement. 3. SCOPE This opinion relates only to the Relevant Laws in force at 9.00 am (Western Australian time) on the date of this opinion. This opinion is given on the basis that it will be construed in accordance with the Relevant Laws. 4. OPINION Subject to the assumptions and qualifications set out below, we are of the following opinion: (a) the Company has been duly incorporated and is registered as a public company limited by shares under the Corporations Act; (b) the ordinary shares underlying the American Depository Shares that may be issued:
BLAKE DAWSON WALDRON 28 June 2006 pSivida Limited Page 3 (i) on conversion of the Convertible Note; (ii) as interest on the Convertible Note; and (iii) upon exercise of the Warrant will, if issued and paid for as contemplated in the Registration Statement, be legally issued and allotted and fully paid at the time of issue. 5. ASSUMPTIONS For the purposes of this opinion, we have assumed that: (a) if we have reviewed a draft of a document rather than a signed or executed copy, the document will be executed in the form of that draft; (b) the minutes referred to in paragraphs 2(c) and 2(d) accurately reflect the business transacted at those meetings; (c) no party has contravened or will contravene Chapter 2E (Related party transactions) of the Corporations Act or ASX Listing Rule 10 (Transactions with persons in a position of influence) in connection with the Issue; (d) no party has contravened or will contravene section 260A (Financial assistance for acquiring shares) of the Corporations Act in connection with the Issue; (e) the Company was solvent at the time of and immediately after the Issue and is solvent at the date of this opinion; (f) the meetings of the Company's board of directors and shareholders to approve the issue of the Convertible Note and the Warrant (and ordinary shares that may be issued in connection with the Convertible Note and the Warrant) were properly convened and: (i) the resolutions set out in the minutes referred to in paragraphs 2(c) and 2(d) above were properly passed as valid decisions of the board of directors of the Company or the Company's shareholders (as the case may be) and have not been subsequently revoked, cancelled or varied; and (ii) the directors of the Company have properly performed their duties and all provisions relating to the declaration of interest and voting were duly observed; (g) where any obligation in connection with the Issue is to be performed in any jurisdiction other than the Relevant Jurisdiction, its performance will not be illegal or unenforceable under the laws of that jurisdiction;
BLAKE DAWSON WALDRON 28 June 2006 pSivida Limited Page 4 We have not investigated whether the assumptions in this paragraph 5 are correct. None of the assumptions is limited by reference to any other assumption. 6. QUALIFICATIONS Our opinion is subject to the following qualifications. 6.1 SEARCHES We have not made any independent investigations or searches, other than requests to ASIC for the company search referred to in paragraph 2(a) (the information disclosed in the search results rely on information lodged by the Company, and the search results may not be complete, accurate or up to date). 6.2 GENERAL QUALIFICATIONS (a) We have relied, as to certain matters of fact, on information provided by officers of the Company. (b) This opinion only relates to the laws of the Relevant Jurisdiction. We express no opinion on laws other than the Relevant Laws. None of the qualifications is limited by reference to any other qualification. 7. CONSENT We hereby consent to the use of this opinion in, and the filing hereof, as an exhibit to the Registration Statement and to the reference to our firm under the heading "Legal Matters" and elsewhere in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the Rules and Regulations of the Commission thereunder. Yours faithfully /s/ Blake Dawson Waldron
EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in this Registration Statement on Form F-3 of our report dated December 2, 2005 relating to the financial statements which appears in pSivida Limited's Form 6-K filed December 22, 2005. We also consent to the references to us under the headings "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts June 28, 2006
Exhibit 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement on Form F-3 of our report dated December 14, 2005 (January 12, 2006 as to Note 19), relating to the financial statements of pSivida Limited and subsidiaries appearing in the Annual Report on Form 20-F of pSivida Limited for the year ended June 30, 2005, and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ DELOITTE TOUCHE TOHMATSU DELOITTE TOUCHE TOHMATSU Perth, Australia June 28, 2006
CURTIS, MALLET-PREVOST, COLT & MOSLE LLP ATTORNEYS AND COUNSELLORS AT LAW 101 PARK AVE NEW YORK, NEW YORK 10178-0061 June 29, 2006 VIA EDGAR Peggy Fisher, Esq. Division of Corporation Finance Securities and Exchange Commission Mail Stop 6010 100 F Street, NE Washington, D.C. 20549 RE: PSIVIDA LIMITED AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM F-3, ORIGINALLY FILED MARCH 28, 2006 (FILE NO. 333-132777) Dear Ms. Fisher: On behalf of pSivida Limited (the "Company"), we respectfully submit this Amendment No. 1 to Registration Statement on Form F-3 (Registration No. 333-132777) registering the resale of 57,631,650 ordinary shares represented by 5,763,165 American Depositary Shares ("ADSs"). The required additional filing fee for submission of this Amendment No. 1 has been paid via lockbox and is on deposit in the Company's account at the SEC. Please note that the Company has concurrently herewith filed via EDGAR (1) Amendment No. 1 to Registration Statement on Form F-3, originally filed March 28, 2006 (File No. 333-132776); (2) a Registration Statement on Form F-3 registering the resale of 158,040,500 ordinary shares represented by 15,804,050 ADSs and (3) the Company's response to the comments of the staff of the Securities and Exchange Commission in your letter dated April 20, 2006. Please be advised that the Company anticipates making an oral request for acceleration of effectiveness of this registration statement pursuant to Rule 461 under the Securities Act of 1933 (the "Securities Act"). In that regard, this letter confirms that the Company is aware of its obligations under the Securities Act as they relate to the offering of shares described in this registration statement. Please call me at (212) 696-8880 if you have any questions about this filing. We would very much appreciate the staff's assistance in declaring this registration statement effective as soon as possible. Very truly yours, /s/Peter F. Stewart cc: Mr. Aaron Finlay (pSivida Limited) Mr. Michael J. Soja (pSivida Limited) Lori Freedman, Esq. (pSivida Limited) Mr. Peter Rupp (Deloitte Touche Tohmatsu) Lawrence Goodman, Esq.