ATHE

SEC Filing Summary: Prana Biotechnology Limited (Form 6-K)

Business Context and Reporting Period

Company: Prana Biotechnology Limited (proposed name change to Alterity Therapeutics Limited)
Filing Date: March 6, 2019
Reporting Period: Notice of General Meeting scheduled for April 5, 2019.
Context: The filing serves as a Notice of General Meeting and Explanatory Memorandum seeking shareholder approval for a significant capital raising transaction with Life Biosciences LLC, a US-based biopharmaceutical investor. The transaction involves a subscription for shares and warrants, a change in company name, and the election of new directors.

Key Financial Metrics and Transaction Terms

Proposed Subscription (Life Biosciences LLC):

• Initial Investment: US$7.5 million (approx. A$10.6 million) for fully paid ordinary shares at A$0.039 per share.
• Warrants: Two free-attaching warrants per share issued, with an exercise price of A$0.045, vesting two months post-completion, and expiring December 19, 2019.
• Potential Total Raise: Up to US$24.8 million (approx. A$34.9 million) if all warrants are exercised.
• Ownership Impact: Life Biosciences would acquire a relevant interest increasing from 0% to up to 63% (or up to 64% including deemed interests in locked-up director shares).

Additional Placement (Other Investors):

• Target: Up to US$2 million total.
• Completed: US$578,547 raised via 17,710,800 shares issued in January and February 2019 at an average price of A$0.0467.
• Remaining: Approval sought for up to US$1.421 million via shares at A$0.039 with attached warrants.

Use of Funds:

Funds from the initial US$7.5 million subscription are allocated as follows:

• PBT-434 Toxicology Studies: 32% (US$2.4M)
• PBT-434 Phase 2 Planning Study: 21% (US$1.6M)
• Formulation Development/API Manufacture: 16% (US$1.2M)
• Pipeline R&D: 19% (US$1.4M)
• API Manufacture for Toxicology: 12% (US$0.9M)

Material Changes and Corporate Actions

Change of Control: The transaction results in Life Biosciences becoming a majority shareholder (potentially >50% upon warrant exercise), granting them practical control over the company and the ability to determine the outcome of ordinary resolutions.
Board Composition:

• Life Biosciences to nominate up to three directors (Dr. David Sinclair and Mr. Tristan Edwards proposed for immediate election).
• Continuing Directors: Geoffrey Kempler, Peter Marks, Brian Meltzer, Lawrence Gozlan.
• Resigning Directors: Dr. George Mihaly and Prof. Ira Shoulson.

Restrictions:

• Voluntary Escrow: Investor shares and warrants will be escrowed until registered with the US SEC to prevent trading by US persons on the ASX prior to registration.
• Lock-Up: Continuing Directors must lock up their shares and options for 90 ASX trading days post-completion.

Name Change: The company proposes changing its name to "Alterity Therapeutics Limited" contingent on the completion of the subscription.

Guidance, Outlook, and Independent Expert Opinion

Independent Expert's Report (FTI Consulting):

• Conclusion: The acquisition is NOT FAIR BUT IS REASONABLE to non-associated shareholders.
• Valuation: The fair value of a share after the transaction (minority basis) is estimated lower than the fair value before the transaction (control basis), hence "not fair."
• Reasonableness: Advantages (immediate capital injection, strategic partnership, funding for R&D) outweigh disadvantages (dilution, loss of control) given the company's urgent funding needs.

Management Outlook & Risks:

• Financial Runway: Without this funding, management projects cash resources would be depleted by mid-2019 (May/June), forcing a halt to the development of the lead compound PBT-434.
• Strategic Intent: Life Biosciences intends to continue the company's core business, has no immediate plans to change employee arrangements, and may conduct a strategic review to identify value-add opportunities.
• Risks: Significant dilution of existing shareholders (from 100% to approx. 40% if all warrants are exercised); potential reduction in share liquidity; reliance on future warrant exercise for full funding.

Key Facts for Investor Verification

• Interdependency: Resolutions 1 through 4 (Subscription, Relevant Interest, Director Elections) are interdependent; if any fail, the entire transaction is withdrawn.
• Voting Prohibitions: Life Biosciences and its associates are prohibited from voting on Resolutions 1 and 2.
• Exchange Rate Sensitivity: The exact number of shares issued and the final percentage ownership depend on the AUD/USD exchange rate at the time of completion.
• Director Conflict: Director Lawrence Gozlan is a strategic advisor to Life Biosciences and has recused himself from recommending a vote on the transaction.
• Warrant Terms: Warrants expire December 19, 2019, with an exercise price (A$0.045) higher than the initial share issue price (A$0.039).