half yearly report and milestone update

ASX Announcement 221
16 March 2006.
Half Yearly Report and Milestone Update
Virax Holdings Limited (ASX: VHL) today announced its financial results for the half year ended 31
December 2005.
Milestone Update
• Technical preparations for the conduct of Phase II trial of VIR201 HIV Treatment are on track
for lodgement of an IND (Investigational New Drug) application with the US Food and Drug
Administration in mid to late 2006. VIR201 has been produced and purified, and is expected
to be released for toxicology testing at the end of March. The “bridging” rabbit toxicology
study will focus on supporting the proposed higher vaccine dose levels for the Phase II trial.
The Company continues to explore financing alternatives to secure funding of the trial.
• Preparatory work for the commencement of Phase I/IIa trial of VIR201 HIV Treatment in South
Africa continues with the development of the data and proposals for presentation to the South
African Medicines Control Council in mid to late 2006 in parallel, the consultative process with
potential funders of the trial continues in conjunction with BHP Billiton.
• Pre-clinical work on the prostate cancer program necessary for the selection of the
development candidate has been completed. This will allow the candidate to proceed to
toxicology testing and then on to Phase I/IIa trials, subject to availability of funding.
• Work with the Arizona State University for the development of a small pox vaccine continued
during the period. Virax’s role is scheduled to conclude in the first half of 2007.
• A Non Renounceable Pro Rata Issue announced on 21 November raised $3.47 million (after
expenses). The purpose of this raising was to provide development program and general
operations funding. The working capital will fund in part certain preparatory work for clinical
trials but not fund undertaking the clinical trials themselves. The Company would like to thank
existing and new shareholders for their support.
About Virax
Headquartered in Melbourne, Virax Holdings Limited is a biotechnology company engaged in the
development of some of the world’s most promising treatments for diseases such as HIV/AIDS,
prostate cancer, hepatitis B and other infectious and autoimmune diseases.
Virax’s focus is on technology that underpins the development of immune-based therapies
(immunotherapy) – therapies that use biological signals to direct the immune system to treat
disease.
****
For further information contact:
Nerida Mossop
Hinton & Associates
Phone: (03) 9600 1979
Mob: 0437 361 433
Virax Holdings Limited ABN 56 006 569 106
Suite 220 89 High Street Kew Victoria Australia 3101 Telephone +61 (0) 3 9854 6230 Facsimile+61 (0) 3 9853 5134
www.virax.com.au email: [email protected]
ASX Appendix 4D
Virax Holdings Limited
ACN 006 569 106
Half Yearly Report
Period Ended 31 December 2005
VIRAX HOLDINGS LIMITED
Announcement to the Market
$A’000
Revenues from ordinary activities Down 42% to $279
Loss from Ordinary activities after tax
attributable to members
Up 15% to $2,233 (Loss)
Loss from extraordinary items after tax
attributable to members
to Nil
Net Loss for the Period attributable to members Up 15% to $2,233 (Loss)
Dividends (distributions) Amount per security Franked amount per security
Final dividend Nil ¢ Nil ¢
Previous corresponding period Nil ¢ Nil ¢
Earnings per share
Current period Previous corresponding
period
Basic EPS (Loss)
Diluted EPS (Loss)
( 3.31) cents
( 3.31) cents
(3.31) cents
(3.31) cents
NTA per share
Current period Previous corresponding
period
NTA Per Share 1.33 cents 2.79 cents
1
VIRAX HOLDINGS LIMITED
DIRECTORS’ REPORT
The Directors submit their report for the half year ended 31 December 2005.
Directors and Officers
The names and details of the Directors of the Company in office during the half year and at the date of this
report are:
Dr T.W. Quirk Chairman
Dr D. J. Beames Chief Executive Officer
Mr J. S. Chambers Non-executive Director
Mr J. Stonier Non-executive Director
Review and Results of Operations
Major activities of the half year included:
• Continuation of the preparatory activities for the conduct of Phase II trial of VIR201 HIV Treatment
vaccine. This included the development of data and proposals for presentation to the US Food and
Drug Administration to secure an IND (Investigational New Drug) approval. These activities are the
precursor to obtaining the necessary approvals from other regulatory entities to conduct the trials in
US and Australia. The preparatory work also includes the manufacture of the drugs for use in the trials
and bridging toxicology testing in rabbits.
• On 21 November 2005, the Company allotted 1.282m shares at 19.5 cents for a total of $250,000. This
transaction was not part of the Rights Issues, but a separate placement.
• A Non Renounceable Pro Rata Issue prospectus was lodged with the ASX on 25 November 2005.
This issue aimed to raise approximately $3.580 million, after paying capital raising expenses. The
original rights issue closing date of 21 December 2005 was extended to 17 January 2006. (See below for
details of this successful raising.). The Directors retained the right to place any shortfall. The purpose
of this raising was to provide development program and general operations funding. In this context
working capital is to fund, in part, certain preparatory work for clinical trials but not fund undertaking
the clinical trials themselves.
• Work continued on the contract for the manufacture of a proposed new smallpox vaccine. This project
is in conjunction with the Arizona State University and funded by the US National Institutes of Health
Biodefense Partnership. The five year project is for a total of US$5.5 million of which Virax’s part is
approx. US$1.0 million. Virax is continuing this work during 2006 and is scheduled to conclude in the
first half of 2007.
• Pre-clinical work has been completed in our prostate cancer program and a development candidate has
been chosen to advance to Phase I/IIa trials. Commencement of such trials is subject to availability of
funding.
• The New York Blood Centre (NYBC) completed the initial pre-clinical work on several hepatitis B
therapeutic candidates. The next stage of pre-clinical work requires evaluation in monkeys. The
Company has been advised that the NYBC is closing its monkey colony. Because Directors believe the
cost of trialing at an alternate colony is prohibitive this project has been suspended.
2
• In respect of the proposal for the conduct of the Phase II trials of VIR201 HIV Treatment vaccine, the
Company was advised by the US National Institutes of Health that the proposal put to them qualified
for funding but that they were unable to fund it. The proposal was submitted by the Company in
conjunction with the University of NSW's National Centre for HIV Epidemiology and Clinical
Research
• Preparatory work, in Southern Africa, for the commencement of Phase I/IIa trial of VIR201 HIV
Treatment vaccine continues with the development of the data and proposals for presentation to the
South African Medicines Control Council. In parallel, the consultative process with potential funders
of such a trial continues in conjunction with BHP Billiton.
• Process development continues for vector construction and trial drug production. This work is
undertaken to enable larger scale (and ultimately commercial scale) production of our drug candidates.
Revenue for the half year of $279,000 (2004: $482,000): the decrease was due to less revenue being received
from the performance of service contracts for other biopharmaceutical companies and universities.
Development Expenses and Business Development expenses were approximately $1,027,000 (2004:
$1,108,000) and Administrative and Corporate expenses were $1,484,000 (2004: $1,321,000).
Thus, the loss for the six months was $2,233,000, up from $1,947,000 for the same period in 2004.
State of Affairs
Capital Raising – Non-Renounceable Pro Rata Issue
The Non-Renounceable Pro Rata Issue offered to existing shareholders closed on 17 January 2006 and therefore
as at 31 December 2005 no shares had been allotted. As at the closing of the capital raising and after the
placement of shortfall shares, a total of $3.724 million had been contributed and 24,827,112 shares and 8,275,704
options were allotted. Expenses associated with the issue were approximately $252,000.
Directors’ Fees
As announced at the AGM in November 2005, Directors would reduce the cash component of non-executive
directors’ fees for the calendar year 2006 and accept the non-cash fee component as options. Prior to the issue of
such options shareholder approval of the issue is required at a general meeting. The date of such meeting has not
been set. Further details of this matter are contained in Note 13 to the Financial Statements.
Going Concern
The financial report has been prepared on the going-concern basis. The Board has considered factors impacting
the Company's going concern status and has determined that this basis is appropriate. Details of matters
considered by the Board are set out in "Notes to the Half Year Financial Statements for the period ended 31
December 2005" Note 1(c) (ii).
Roundings
The amounts contained in this report have been rounded to the nearest $1,000 (where rounding is applicable)
under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which
the Class Order applies.
Auditor's Independence
The Company has received the “Declaration of Independence from the Auditor” as required by Sec 307C of the
Corporations Act 2001. A copy of the declaration is included in this report.
Signed in accordance with a resolution of the Directors.
Dr Thomas W. Quirk 15 March 2006
Chairman Melbourne
3
VIRAX HOLDINGS LIMITED
CONDENSED INCOME STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Consolidated
31 December 31 December
2005 2004
Notes $ $
Continuing Operations
Revenue 2 278,553 481,767
Expenses
Research and development expenses 963,939 983,261
Business development 63,412 124,777
Administration and corporate expenses 2 1,484,243 1,320,619
Loss from continuing operations (2,233,041) (1,946,890)
Before Income Tax Expense
Income tax expense relating to - -
loss from ordinary activities
Net loss attributable to members (2,233,041) (1,946,890)
of Virax Holdings Limited
Basic earnings (loss) per share 3 (3.31) cents (3.31) cents
Diluted earnings (loss) per share 3 (3.31) cents (3.31) cents
VIRAX HOLDINGS LIMITED
CONDENSED BALANCE SHEET
AS AT 31 DECEMBER 2005
Consolidated
31 December 30 June
2005 2005
Notes $ $
ASSETS
Current assets
Cash assets 2,273,374 4,110,867
Receivables 4 52,235 26,032
Prepaid expenses 208,363 40,773
Other 5 5,121 5,121
Total current assets 2,539,093 4,182,793
Non-current assets
Plant and equipment 6 8,463 -
Total non-current assets 8,463 -
TOTAL ASSETS 2,547,556 4,182,793
LIABILITIES
Current liabilities
Payables 7 503,176 686,372
Provisions 8 316,559 301,839
Deferred income 9 444,000 364,564
Other 9a 375,112 -
Total current liabilities 1,638,847 1,352,775
TOTAL LIABILITIES 1,638,847 1,352,775
NET ASSETS 908,709 2,830,018
EQUITY
Contributed equity 10 26,194,633 25,944,729
Equity benefits reserve 147,580 85,752
Accumulated losses 11 (25,433,504) (23,200,463)
TOTAL EQUITY 908,709 2,830,018
1
VIRAX HOLDINGS LIMITED
CONDENSED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Consolidated
31 December 31 December
2005 2004
Notes $ $
Cash flows from operating activities
Payments to suppliers and employees (2,832,694) (2,526,366)
Interest received 98,338 101,563
Services income received 281,628 509,192
Other income - 226
Net cash flows from/(used in)
operating activities 12 (2,452,728) (1,915,385)
Cash flows from investing activities
(Purchase)/sale of plant and equipment (9,781) (45,675)
Net cash flows from/ (used in)
investing activities (9,781) (45,675)
Cash flows from financing activities
Proceeds from issues of ordinary shares 251,094 3,208
Issue costs (1,190) (51,463)
Other – Proceeds from Share Purchase Plan - 2,087,676
Other – Proceeds from Rights Issue 375,112 -
Net cash flows from/(used in)
financing activities 625,016 2,039,421
Net increase/(decrease) in cash held (1,837,493) 78,361
Cash and cash equivalents at beginning of period 4,110,867 3,811,996
Cash and cash equivalents at end of period 12 2,273,374 3,890,357
2
VIRAX HOLDINGS LIMITED
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
(a) Changes in equity for the half year ended 31 December 2004
Consolidated Attributable to equity holders of the parent
Issued
capital
Retained
earning
Employee
equity
benefits
reserve
Total
equity
$ $ $ $
At 1 Jul 2004 22,735,128 (19,115,885) N/A 3,619,243
Loss for the period (1,946,890) (1,946,890)
Exercise of listed options 3,208 3,208
At 31 December 2004 22,738,336 (21,062,775) N/A 1,675,561
(b) Changes in equity for the half year ended 31 December 2005
Consolidated Attributable to equity holders of the parent
Issued
capital
Retained
earning
Employee
equity
benefits
reserve
Total
equity
$ $ $ $
At 1 Jul 2005 25,944,729 (23,200,463) 85,752 2,830,018
Loss for the period (2,233,041) (2,233,041)
Share issue (net of costs) 248,811 248,811
Exercise of listed options 1,093 1,093
Cost of Share Based
Payment
61,828 61,828
At 31 December 2005 26,194,633 (25,433,504) 147,580 908,709
3
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
4
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT
The half-year financial report does not include all notes of the type normally included within the annual financial
report and therefore cannot be expected to provide as full an understanding of the financial performance, financial
position and financing and investing activities of the consolidated entity as the annual financial report.
The half-year financial report should be read in conjunction with the annual Financial Report of Virax Holdings
Limited as at 30 June 2005, which was prepared based on Australian Accounting Standards applicable before 1
January 2005 (‘AGAAP’).
This Financial Report has been prepared on the basis of Australian international financial reporting standards
(AIFRS). The Company was required to use such standards when reporting for the period commencing 1 July
2005 and thus this Financial Report, as at 31 December 2005, is prepared using such standards.
Exemptions and the impact of adopting AIFRS are shown in these Notes in paragraph (d ) and (e) (page 14)
below.
It is also recommended that the half-year financial report be considered together with any public announcements
made by Virax Holdings Limited during the half-year ended 31 December 2005 in accordance with the continuous
disclosure obligations arising under the Corporations Act 2001.
(a) Basis of accounting
The half-year financial report is a general purpose financial report, which has been prepared in accordance with
the requirements of the Corporations Act 2001, applicable Accounting Standards including AASB 134 “Interim
Financial Reporting” and other mandatory professional reporting requirements.
The half-year financial report has been prepared in accordance with the historical cost convention.
For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete
reporting period.
(b) Statement of compliance
The half-year financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (‘AIFRS’). Compliance with AIFRS ensures that the
half-year financial report, comprising the financial statements and notes thereto, complies with International
Financial Reporting Standards (“IFRS’).
This is the first half-year financial report prepared based on AIFRS and comparatives for the half-year ended 31
December 2004 and full-year ended 30 June 2005 have been restated accordingly. A summary of the significant
accounting policies of the Group under AIFRS are disclosed in Note 1(c) below.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
5
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(b) Statement of Compliance (cont.)
Reconciliations of:
- AIFRS equity (as at 1 July 2004, 31 December 2004 and 30 June 2005); and
- AIFRS loss (for the half-year 30 December 2004 and full year 30 June 2005)
to the balances reported in the 31 December 2004 half-year report and 30 June 2005 full-year financial report
prepared under AGAAP are detailed in Note 1(e) below.
(c) Summary of significant accounting policies
(i) Basis of consolidation
The consolidated financial statements comprise the financial statement of Virax Holdings Limited (The
“Company”) and its subsidiaries.
The financial data for subsidiaries are prepared for the same reporting period as the Company and
using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All inter-company balances and transactions, including unrealized profits arising from intra-group
transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be
recovered.
(ii) Inherent uncertainty – going concern
This half-year financial report has been prepared on a going concern basis, which assumes sufficient
funding from capital raising, non-equity funding of trials, completion of income generating commercial
agreements or, if necessary, reduction in the operations of the Company and of the consolidated entity or
action to realise asset value.
Further details of the assumptions used in making this assessment are set out in the following paragraphs.
In common with start-up biotechnology companies:
• the Company’s operations are subject to considerable risks due primarily to the nature of the
development and commercialisation being undertaken; and
• to allow the Company to execute its near-term and longer-term plans, it will be necessary to raise
additional capital in the future.
The non-renounceable pro rata rights issue, which was in progress as at 31 December 2005 and which was
completed prior to the date of this Financial Report, successfully raised capital that Directors believe is
sufficient to fund the current activities of the Company and of the consolidated entity, other than the
proposed and necessary clinical trials, for more than 12 months from the date of this report.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
6
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
Having regard to the current market conditions and the Company’s development programs, the Directors
have therefore implemented the following actions to provide additional funding or to form the basis for
fund raising:
• pursuing a range of options with the University of NSW’s National Centre for HIV Epidemiology
and Clinic Research and with others for the conduct of Phase II trials utilising Virax’s Co-XGeneTM
technology in a VIR201 HIV therapeutic drug.
• continuing discussions with parties (government, commercial, regulatory, academic, clinics and
medical) to undertake conduct and provide funding for additional trials in South Africa.
• continuing to seek collaborative opportunities to utilise the Company’s facilities and capability to
construct vectors and manufacture trial drugs, with the aim that this would result in revenue.
• structured the operations and development programs such that, should circumstances demand it, rescheduling
of expenditure could be made, though such restructure may be detrimental to the key
development programs.
• planning to undertake a further capital raising by way of either a placement of shares or a rights
issue or both.
The Directors cannot be certain of the Company's ability to achieve sufficient success in the above
initiatives, as these activities are dependent on future events. Thus, if fundraising activities do not raise
sufficient funds to allow the Company to continue the principal development programs, the Company and
the consolidated entity will scale back the programs and the Company’s and consolidated entity’s other
operations until further funding is obtained. If such funding remains unattainable to carry out trials, a
redirection of the Company’s and consolidated entity’s activities may be implemented.
However, the Directors currently plan to continue the Company’s and the consolidated entity’s operations
(the Group) on the basis of matters referred to above, and believe that future fund raising activities and the
value of the Group’s existing net assets will generate sufficient funds for the Group to operate in its normal
manner for a period of at least twelve months from the date of this report. In the event that such
arrangements are not entered into, there is significant uncertainty whether the Group will continue as going
concerns and, therefore, whether the Group will realise its assets and extinguish its liabilities in the normal
course of business and at the amounts stated in the financial report.
The financial statements take no account of the consequences, if any, of the effects of unsuccessful product
development or commercialisation, nor of the inability of the Company to obtain adequate funding.
Hence, the financial report does not include adjustments relating to the recoverability and classification of
recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the
Company and consolidated entity not continue as going concerns.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
7
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
(iii) Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation is provided on a straight-line basis over the estimated useful life of the asset as follows:
Years
Plant and Equipment 4-8
The carrying value of any plant or equipment is written off upon disposal or when it is recognised and no
future economic benefits are then expected to arise from its use or disposal.
Any gain or loss arising from such event is calculated as the difference between the net disposal proceeds
and the carrying amount of the item and such difference is included in the income statement for the period
in which the event occurs.
(iv) Intangible assets
Research and Development
Research costs are expensed as incurred.
An intangible asset arising from development expenditure on an internal project is recognised only when
the Company or a subsidiary can demonstrate all of the following:
• technical feasibility of completing the intangible asset so that it will be available for use or sale,
• it intends to complete the asset and use or sell it,
• its ability to use or sell the asset,
• how the asset will generate future economic benefits,
• the availability of resources to complete the development and to use or sell the asset, and
• the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
Following the initial recognition of the development expenditure as an intangible asset, the asset is required
to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure
so capitalised is amortised over the period of expected benefits from the related project.
The carrying value of an intangible asset arising from development expenditure is tested for impairment
annually when the asset is not yet available for use, or more frequently when an indication of impairment
arises during the reporting period. (See next section)
(v) Recoverable amount of assets
Assets are carried at no more than their recoverable amount.
The recoverable amount of an asset, or assets making up a cash generating unit, is the higher of its value in
use or its fair value less costs to sell.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
8
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
Impairment occurs when the amount by which the current carrying amount of an asset, or assets making up
a cash generating unit, exceeds its recoverable amount. Such difference is referred to as “impairment loss”.
At each reporting date an assessment is made as to whether there is an indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required, an
estimate of the asset’s recoverable amount is made.
The recoverable amount is determined for an individual asset, unless:
• the asset does not generate cash inflows that are largely independent of those from other assets or
groups of assets, and
• the asset's value in use cannot be estimated to be close to its fair value.
In such cases the asset is tested for impairment as part of the cash generating unit to which it belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax
discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset. Impairment losses relating to continuing operations are recognised in those expense categories
consistent with the function of the impaired asset unless the asset is carried at a revalued amount (in which
case the impairment loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the
recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been
a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss
was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount.
That increased amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is
recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is
treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods
to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining useful life.
(vi) Investments
All investments are initially recognised at cost, being the fair value of the consideration given and including
acquisition charges associated with the investment.
After initial recognition, investments, which are classified as held for trading and availabe-for-sale, are
measured at fair value. Gains or losses on investments held for trading are recognised in the income
statement.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
9
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
Gains or losses on available-for-sale investments are recognised as separate component of equity until the
investment is determined to be impaired, at which time the cumulative gain or loss previously reported in
equity is included in the income statement.
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as
held-to-maturity when the Company has the positive intention and ability to hold to maturity. Investments
intended to be held for an undefined period are not included in this classification.
(vii) Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less an allowance for any
uncollectible debts.
An estimate for doubtful debts is made when there is objective evidence that the Company will not be able
to collect the debts. Bad debts are written-off when identified.
(viii) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term
deposits which are highly liquid, readily convertible to known amounts of cash and which are subject to
an insignificant risk of change of value.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of any outstanding bank overdrafts.
(ix) Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of cash or other assets will be required to settle the
obligation and a reliable monetary estimate of the obligation can be made.
Where the Company expects some or all of a provision to be reimbursed, the reimbursement is
recognised as a separate asset only when the reimbursement is virtually certain. The expense relating to
any provision is presented in the income statement net of any reimbursement.
If the effect of the time value of money is material, then a provision is determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
10
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
(x) Share-based payment transactions
The Company provides benefits to employees, directors, contractors and advisors of the Company in the
form of share-based payment transactions, whereby persons render services in exchange for options (i.e.
rights over shares) such benefits are referred to as ‘equity-settled transations’.
There is currently one plan in place to provide these benefits - “Virax Holdings Limited Option Plan”.
The cost of an equity-settled transation is measured by reference to the fair value of the options at the date
at which the options were granted. The fair value is determined using a Black-Scholes model, a Bionominal
model or such other generally accepted model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than
conditions linked to the share price of Virax Holdings Limited.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over
the period in which the vesting conditions are fulfilled, starting on the first date of the vesting period ending
on the date on which the grantee becomes fully entitled to the options granted (‘vesting date’).
Until vesting date, the cumulative expense recognised for equity-settled transactions at each reporting date
reflects:
• the extent to which the vesting period has expired, and
• the number of options that, in the opinion of the Directors, will ultimately vest. This opinion is formed
based on the best available information at reporting date. No adjustment is made for the likelihood of
market performance conditions being met as the effect of these conditions is included in the
determinations of fair value at grant date.
No expense is recognised for grants that do not ultimately vest, except for grants where vesting is
conditional upon a market condition.
Where a grant is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not
yet recognised for the grant is recognised immediately.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation
of earnings per share. (See Note 3)
(xi) Lease
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset, are classified
as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying
amount of the leased asset and recognised over the lease term on the same bases as the lease income.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over
the lease term.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
11
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
(xii) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and
the revenue can be reliably measured. The following specific recognition criteria must also be met before
revenue is recognised:
Interest
Revenue is recognised as the interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying amount of the financial asset.
Rendering of services
Revenue from performance contracts is recognised by reference to the stage of completion of a contract.
When the contract outcome cannot be estimated reliably, revenue is recognised only to the extent of the
expenses recognised that are recoverable.
(xiii) Government Grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will
be received and all attaching conditions will be complied with.
When the grant relates to an expense item, it is recognised as income over the period necessary to match the
grant on a systematic basis to the costs that is intended to compensate.
Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to
the income statement over the useful life of the relevant asset by equal annual instalments.
(xiv) Income tax
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• where the deferred income tax liability arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit or loss nor taxable profit or loss, and
• when the taxable temporary differences are associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the foreseable future.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
12
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
Deferred income tax assets are recognised for all deductible temporary differences, carried forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry-forward of unused tax assets and unused
tax losses can be utilised except:
• when the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss, and
• when thedeductible temporary differences associated with investments in subsidiaries, associates or
interests in joint ventures, in which case deferred tax assets are only recognised to the exent that it is
probable that the temporary differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be
recovered.
Deferred income tax assets and liabilitites are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the balance sheet date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income
statement
(xv) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of
the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the balance sheet.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
13
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(c) Summary of significant accounting policies (cont.)
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority, are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
(xvi) Trade and other payables
Trade payables and other payables are carried at amortised costs and represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the
Group becomes obliged to make future payments in respect of the purchase of these goods and services.
Trade payables and other payables are carried at costs which is the fair value of the consideration to be paid
in the future for goods and services received, whether or not billed to the consolidated entity.
(xvii) Provision for employee entitlements
(i) Wages, salaries, annual leave
Liabilities, up to the reporting date, for salaries and non-monetary benefits, such as annual leave, are
recognised by a provision in respect of employee entitlements. They are measured at the amounts expected
to be paid when the liabilities are settled. Expense for sick leave is recognised when the leave is taken and is
measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee entitlements. It is measured as
the present value of expected future payments to be made in respect of services provided by employees, up
to the reporting date, using the projected unit credit method. Consideration is given to expected future wage
and salary levels, the Company’s experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date based on national government bonds with
terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.
(d) AASB 1 Transitional exemptions
The Company has made its election in relation to the transitional exemptions allowed by AASB 1 “First-time
adoption of Australian Equivalents to International Financial Reporting Standards”. Of the applicable voluntary and
mandatory exemptions available within AASB1, the only one taken by the Company was that related to Share-
Based Payments.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
14
1. BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (cont.)
(e) Impact of adopting AIFRS
The impacts of adopting AIFRS on the ‘total equity’ and ‘profit after tax’ as reported under Australian accounting
standards applicable before 1 January 2005 (‘AGAAP’) are illustrated below.
(i) Reconciliation of total equity as presented under AGAAP to that presented under AIFRS
at various dates
Consolidated
30-Jun-05 31-Dec-04 01-Jul-04
$ $ $
Total equity under AGAAP 2,830,018 1,693,561 3,637,243
Adjustments to equity:
Recognition of equity settled 85,752 - -
benefits reserve (1)
Retained earning (1) (85,752) - -
________________________________
Total equity under AIFRS 2,830,018 1,693,561 3,637,243
(1) For the financial year ended 30 June 2005, share-based payments of $85,752 were not recognised
under the then operative AGAAP standards. From 1 July 2005 under AIFRS standards such
payments are recognised (and included as an ‘Equity benefit expense’ with a corresponding increase
in the ‘Equity benefits reserve.’.
These adjustments had no deferred tax consequences..
(ii) Reconciliation of loss after tax under AGAAP to that under AIFRS
Consolidated
Year ended Half-Year ended
30-Jun-05 31-Dec-04
$ $
Loss after tax as previously reported 3,998,826 1,946,890
Recognition of employee benefit expense (1) 85,752 -
__________________________
Loss after tax under AIFRS 4,084,578 1,946,890
(1) For the financial year ended 30 June 2005, share-based payments of $85,752 were not recognised
under the then operative AGAAP standards. From 1 July 2005 under AIFRS standards such
payments are recognised (and included as an ‘Equity benefit expense’ with a corresponding increase
in the ‘Equity benefits reserve.’
These adjustments had no deferred tax consequences.
(iii) Explanation of material adjustments to the cash flow statements
There are no material differences between the cash flow statements presented under AIFRS and
those presented under AGAAP.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
15
Consolidated
31 December 31 December
2005 2004
$ $
2. REVENUE AND EXPENSES
(a) Revenues
Interest 76,360 74,349
Services 202,193 407,418
278,553 481,767
(b) Administration and Corporate Expenses
Administration 277,013 176,418
Corporate 1,205,912 1,073,421
Depreciation of plant and equipment 1,318 70,780
1,484,243 1,320,619
3. EARNINGS PER SHARE
The following reflects the income and share data used in the calculations of basic and diluted earnings per
share.
$ $
Net Loss attributable to members
used in calculating basic and
diluted earnings per share (2,233,041) (1,946,890)
No. of Shares No. of Shares
Weighted average number of ordinary
shares used in calculating basic earnings
per share: 67,391,434 58,878,807
Adjusted weighted average number of
ordinary shares used in calculating
dilutive earnings per share: 67,391,434 58,878,807
Note: The effect of dilution, due to outstanding options, is only calculated for those options when the exercise
price of such options is below the market price.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
16
Consolidated
31 December 30 June
2005 2005
$ $
4. RECEIVABLES (CURRENT)
Interest receivable 4,054 26,032
Tax refund (GST) 48,181 -
52,235 26,032
5. OTHER CURRENT ASSETS
Security deposits 5,121 5,121
6. PLANT AND EQUIPMENT
Opening balance 467,270 383,564
Purchases for the period 9,781 83,706
Disposals during the period - -
Closing Balance 477,051 467,270
Opening accumulated depreciation (467,270) (108,881)
Depreciation for period (1,318) (358,389)
Disposals during the period - -
Closing accumulated depreciation (468,588) (467,270)
Closing net plant and equipment 8,463 -
7. PAYABLES (CURRENT)
Trade and other creditors 503,177 686,372
Terms and conditions relating to the above financial instruments:
- Creditors are non-interest bearing and are normally settled on 30 day terms or in accordance with the
contract terms.
8. PROVISIONS
Employee entitlements 316,559 301,839
9. DEFERRED INCOME
Income received in advance 444,000 364,564
9a. OTHER LIABILITIES
This represents subscription moneys 375,112 -
for equity capital and such capital
had not been allotted at 31 December 2005
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
17
10. CONTRIBUTED EQUITY
31 December 2005 31 December 2004
Number of
Securities
$’000 Number of
Securities
$’000
Issued and paid up capital
Ordinary shares fully paid 68,354,532 $26,194,633 58,886,576 $22,704,873
(a) Movements in shares
Beginning of the financial year 67,069,451 25,944,729 58,877,595 22,753,128
Issued during the period
- Share Placement 1,282,050 250,000 - -
- Conversion of Options 3,031 1,093 8,981 3,208
- Less Capital Raising Expenses - (1,189) - (51,463)
End of period 68,354,532 $26,194,633 58,886,576 $22,704,873
(b) Movements in listed options
VHLO:
Beginning of the financial year 6,880,517 6,884,618
- Conversion during the period (1,343) (3,851)
- Lapsed during the period (6,879,174) -
End of period - 6,880,767
VHLOA:
Beginning of the financial year 4,244,563 4,249,818
- Conversion during the period (1,688) (5,130)
End of period 4,242,875 4,244,688
(c) Options
The following options over ordinary shares were outstanding at 31 December 2005
Number of Expiry Exercise
options date price
Listed Options:
VHLOA Total Listed Options: 4,242,875 16 January 2006 $0.2500
Unlisted Options:
Virax Holdings Limited } 1,095,000 31 December 2006 $0.9505(1)
Option Plan } 400,000 31 December 2007 $0.9505(1)
} 110,000 31 December 2007 $0.4505(1)
} 140,000 31 December 2007 $0.2500
} 168,000 1 January 2009 $0.5000
} 371,250 30 June 2009 $0.5000
} 250,000 31 December 2009 $0.5000
} 422,500 31 December 2009 $0.6500
} 250,000 31 December 2010 $0.6500
} 250,000 31 December 2011 $0.1700
} 641,333 31 December 2011 $0.1700
Total Unlisted Options 4,098,083
Total Options 8,340,958
(1) The Exercise Price has been adjusted from the Exercise Price at the time of issue, pursuant to the Option Plan Rule 5.1 and in
accordance with ASX Listing Rule 6.22.2.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
18
10. CONTRIBUTED EQUITY (contd.)
(d) Partly Paid Shares
There were no partly paid shares outstanding at the end of the current financial period.
(e) Terms and condition of contributed equity
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company,
to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts
paid up on shares held.
In accordance with the Constitution and subject to any rights and restrictions for the time being attached to
any class of shares:
i) on a show of hands at a meeting of members, each member present in person or by proxy,
attorney or Representative has one vote; and
ii) on a poll at a meeting of members, each member present in person or by proxy, attorney or
Representative has one vote for each fully paid share and a fraction of a vote for each partly
paid share. The fraction is the proportion which the amount paid on the partly paid share is of
the full issue price of such share.
For the purposes of calculating the fraction of a vote under paragraph ii), an amount paid in advance on a
partly paid share shall be ignored.
Consolidated
31 December 30 June
2005 2005
$ $
11. ACCUMULATED LOSSES
Accumulated Losses
Balance at the beginning of period 23,200,463 19,115,885
Net loss attributable to members of 2,233,041 4,084,578
Virax Holdings Limited
Balance at end of period 25,433,504 23,200,463
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
19
12. STATEMENT OF CASH FLOWS
Consolidated
31 December 2005 31 December 2004
$ $
(a) Reconciliation of the loss after tax
from ordinary activities to net
cash flows used in operations
Loss from ordinary activities after tax (2,233,041) (1,946,890)
Non-Cash Items
Depreciation of non-current assets 1,318 70,780
Equity settled benefits expenses 61,828 -
Changes in assets and liabilities
(Increase)/decrease in trade and other (193,793) (140,951)
Receivables and prepayment
Increase/(decrease) in trade, other
creditors and provision (89,040) 101,676
Net cash flow used in operating
activities (2,452,728) (1,915,385)
(b) Reconciliation of cash
Cash balance comprises:
Bank Balances 1,373,374 2,140,357
Term Deposits 900,000 1,750,000
2,273,374 3,890,357
13. CONTINGENT ASSETS
At the date of this Report there are no material contingent assets.
Since the last annual reporting date, there has been no material change of any contingent assets.
14 CONTINGENT LIABILITIES
Except as noted below, there are no material contingent liabilities.
Since the last annual reporting date, there has been no material change of any contingent liabilities.
Directors’ fees
At the AGM in November 2005 it was announced that Directors would reduce the cash component of nonexecutive
directors’ fees in anticipation of accepting a non-cash fee component in options. As stated at the AGM,
the cash component is not more than 60 per cent of the current nominal annual fee of each non-executive
director. For the calendar year 2006 Directors have made this reduction in anticipation that shareholders will
approve the issue of options at the next general meeting of the Company. The terms proposed for the granting of
such options, at the 2005 AGM, were:
• an exercise price of 25 cents, that is a price 25% above the market price current at the time of the AGM,
• an exercise period of 4 years, and
• an option value of 10 cents, used to set the number of options issued.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
20
14 CONTINGENT LIABILITIES (cont.d)
The implementation of the above results in the following:
The table shows the number of options to be issued in lieu of portion of Non-Executive Directors’ Fees which is
not paid in cash: (i.e. shown as “Non Cash Fee”).
Nominal
Director's Fee
Per Annum
2006 Cash
Director's Fee
Non Cash Fee: Being
least 40% of Nominal
Fees
No. of Options
in lieu of Non
Cash Fee
Dr T. W. Quirk $75,000 $35,000 $40,000 400,000
Mr J. S. Chambers $50,000 $30,000 $20,000 200,000
Mr J. Stonier $50,000 $30,000 $20,000 200,000
$175,000 $95,000 $80,000 800,000
Thus, the aggregate number of options for which approval is to be sought is 800,000 unlisted options with an
exercise price of 25 cents and an expiry date of 31 December 2009.
The Company has undertaken that, in the event that shareholders do not approve the grant of options as
described above, the Company will be liable to paying the nominal fees in cash and any amount foregone in
anticipation of shareholder approval shall become due and payable. At the date of this Report there is no date set
for a general meeting.
Inherent uncertainty – going concern and consequential contingent liability
In the Note to the Accounts 1(c)ii reference is made to the consequences of funding being unattainable and a
scaling back of activities or redirection of the Company. A reduction in the Company’s general operations may
crystallise liabilities (principally to employees and landlords) of up to an estimated $1.4 million.
15. SUBSEQUENT EVENTS
Capital raising
A Rights Issue offer closed on 15 February 2006 to which shareholders and investors subscribed $3.724 million
(approximately $3.472 million after expenses). No effect of this event on the Company’s equity has been
recognised at 31 December 2005.
ASX announcements
The Company has made the following announcements to the ASX since the end of the financial period. Several of
these relate to the Rights Issues described above.
10 January 2006 - Virax Exceeds Minimum Subscription for Rights Offer
12 January 2006 - Capital Rising Passes 50% Subscription
20 January 2006 - Pro Rata Share Issue Raises $3.1 million
25 January 2006 - Appendices 3Y Change of Directors’ Interests
31 January 2006 - Additional $600,000 Brings Issue Raising to $3.7 million
9 February 2006- - Appendix 3Y Change of Director’s Interest
In addition to these, announcements were made on 30 January, and 7 & 23 February 2006 about Appendix 3B
New Issue Announcements.
VIRAX HOLDINGS LIMITED
NOTES TO THE HALF -YEAR FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2005
15. SUBSEQUENT EVENTS (contd.)
Subsequent activities
As referred to in Note 1(c), the Company is:
• Seeking equity or other funding for HIV Phase II clinical trials in Australia and USA
• Seeking non-equity funding for HIV Phase II clinical trials in South Africa
• Continuing partnering activities, both in respect to licensing and collaborative partnering
• Seeking commercial opportunities to utilise the Company’s facilities and capability to construct vectors and
manufacture trial drugs.
At this time, the Directors are unable to anticipate the outcome of these activities. In addition to the proposed
Phase II HIV Treatment Trial and the Prostate Cancer Project, Virax continues to evaluate other opportunities
to add to its current product development base.
The matters discussed above are forward looking statements. Forward-looking statements regarding the
Company’s future business prospects, plans, objectives, expectations and intentions are subject to certain risks,
uncertainties and other factors that could cause actual results to differ materially from those projected or
suggested in the forward-looking statements.
16. SEGMENT REPORTING
Virax operates within one segment, being the development of biotechnology, within Australia.
17. OTHER INFORMATION
Domicile: Suite 220, 89 High Street, Kew, Victoria, Australia
Legal Form: Incorporated public company, limited by shares
Country of Incorporation: Australia
Number of Employee/Contractors
at the date of this Report: 11 (not including 3 non-executive Directors)
21
Liability limited by a scheme approved under
Professional Standards Legislation.
Auditor’s Independence Declaration to the Directors of Virax Holdings Ltd
In relation to our audit of the financial report of Virax Holdings Ltd for the period ended 31
December 2005, to the best of my knowledge and belief, there have been no contraventions of the
auditor independence requirements of the Corporations Act 2001 or any applicable code of
professional conduct.
Ernst & Young
Stuart Painter
Partner
15 March 2006
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of Virax Holdings Limited, I state that:
In the opinion of the Directors:
(a) the financial statements and notes of the consolidated entity:
(i) give a true and fair view of the financial position as at 31 December 2005 and the
performance for the half-year ended on that date of the consolidated entity, and
(ii) comply with Accounting Standards AASB 134 “Interim Financial Reporting” and the
Corporation Regulations 2001;
and
(b) there are reasonable grounds to believe that Virax Holdings Limited will be able to pay its
debts as and when they become due and payable.
On behalf of the Board
Dr Thomas W Quirk 15 March 2006
23
Chairman Melbourne
Liability limited by a scheme approved under
Professional Standards Legislation.
INDEPENDENT REVIEW REPORT
To the members of Virax Holdings Limited
Scope
The financial report and directors’ responsibility
The financial report comprises the balance sheet, income statement, cash flow statement, statement
of changes in equity and accompanying notes to the financial statements for the consolidated entity
comprising both Virax Holdings Limited (the company) and the entities it controlled during the halfyear,
and the directors’ declaration for the company, for the period ended 31 December 2005.
The directors of the company are responsible for preparing a financial report that gives a true and
fair view of the financial position and performance of the consolidated entity, and that complies with
Accounting Standard AASB 134 “Interim Financial Reporting”, in accordance with the
Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting
records and internal controls that are designed to prevent and detect fraud and error, and for the
accounting policies and accounting estimates inherent in the financial report.
Review approach
We conducted an independent review of the financial report in order to make a statement about it to
the members of the company, and in order for the company to lodge the financial report with the
Australian Stock Exchange and the Australian Securities and Investments Commission.
Our review was conducted in accordance with Australian Auditing Standards applicable to review
engagements, in order to state whether, on the basis of the procedures described, anything has come
to our attention that would indicate that the financial report is not presented fairly in accordance
with the Corporations Act 2001, Accounting Standard AASB 134 “Interim Financial Reporting”
and other mandatory financial reporting requirements in Australia, so as to present a view which is
consistent with our understanding of the consolidated entity’s financial position, and of its
performance as represented by the results of its operations and cash flows.
A review is limited primarily to inquiries of company personnel and analytical procedures applied to
the financial data. These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance is less than given in an audit. We have not performed an audit and,
accordingly, we do not express an audit opinion.
Independence
We are independent of the company, and have met the independence requirements of Australian
professional ethical pronouncements and the Corporations Act 2001. We have given to the
directors of the company a written Auditor’s Independence Declaration, a copy of which is included
in the Directors’ Report.
Statement
Based on our review, which is not an audit, we have not become aware of any matter that makes us
believe that the financial report of the consolidated entity, comprising Virax Holdings Limited and
the entities it controlled during the half-year is not in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the consolidated entity at 31
December 2005 and of its performance for the half-year ended on that date; and
(ii) complying with Accounting Standard AASB 134 “Interim Financial Reporting” and
the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
Inherent Uncertainty Regarding Continuation of Going Concern
Without qualification to the opinion expressed above, attention is drawn to the following matters.
As described in Note 1(c)(ii) Inherent Uncertainty - Going Concern, there is significant uncertainty
whether the company and consolidated entity will be able to continue as going concerns, and
therefore, whether they will be able to pay their debts as and when they fall due and realise their
assets and extinguish their liabilities in the normal course of business and at the amounts stated in
the financial report.
The financial report does not include adjustments relating to the recoverability and classification of
recorded asset amounts or to the amounts and classification of liabilities that might be necessary
should the company and consolidated entity not continue as going concerns.
Ernst & Young
Stuart Painter
Partner
Melbourne
15 March 2006
25
Summary of Issued Securities
as at 28 February 2006
The following information does not form part of this Financial Report
and is provided for the convenience of shareholders and investors
Note: This information has not been subject to review by Ernst & Young
Shares Total
number
issued
Number
quoted
Issue price per
security (cents)
Amount paid up
per security (cents)
Ordinary Shares at 1 July 2005 67,069,451 67,069,451
Changes during current period
Increases through issues
(a) Fully Paid
Fully Paid
(b) Partly Paid (Second and final payment of 7.5
cents is due 3 April 2006)
(c) Increases through conversions of Options
VHLO Fully Paid
VHLOA Fully Paid
VHLOB Fully Paid
1,282,050
11,916,729
12,910,383
1,343
3,627
4,398
1,282,050
11,916,729
12,910,383
1,343
3,627
4,398
0.195c
0.15c
0.075c
0.50c
0.25c
0.20c
0.195c
0.15c
0.075c
0.50c
0.25c
0.20c
Ordinary securities at 28 February 2006 93,187,981 93,187,981
Options
Approx
Date Issued
Number issue
by class
Number
quoted
Total
number
issued
Exercise
price
Expiry
date
Quoted Options:
ASX code: VHLOB Jan 2006 8,271,455 8,271,45 8,271,455 $0.2000 15Dec09
Unquoted Options
Outstanding at 1 July 2005: Pre 1 Jul 03 1,095,000 $0.9505 31Dec06
400,000 $0.9505 31Dec07
110,000 $0.4505 31Dec07
140,000 $0.2500 31Dec07
Aug 2004 168,000 $0.5000 1 Jan 09
Aug 2004 371,250 $0.5000 30 Jun 09
Nov 2004 250,000 $0.5000 31 Dec 09
Nov 2004 250,000 $0.6500 31 Dec 10
Feb 2005 422,500 $0.6500 31 Dec 09
3,206,750
Issued during the period Nov 2005 250,000 $0.1700 31 Dec 11
Dec 2005 641,333 $0.1700 31 Dec 11
Jan 2006 100,000 $0.1700 31 Dec 11
4,198,083 4,198,083
Total of All Options Extant at 28 February 2006 8,271,455 12,469,538