12. SHARE CAPITAL 2022 Shares 2021 Shares 2022 $’000 2021 $’000 Issued Share Capital Ordinary shares on issue at beginning of year 128,965,676 117,608,108 167,578 145,567 Shares issued in private placement – 9,756,098 – 20,000 Share issued in Share Purchase Plan – 1,601,470 – 3,281 Share issue expenses - issue costs – – 162 (1,270) 128,965,676 128,965,676 167,740 167,578 At 31 December 2022 125,965,676 ordinary shares are quoted on the ASX, and 3,000,000 unquoted ordinary shares (31 December 2021: 3,000,000 ordinary shares) were held as treasury stock in respect of the Loan Funded Share Plan described below. Ordinary shares The ordinary shares have no par value and all ordinary shares are fully paid-up and rank equally as to dividends and liquidation, with one vote attached to each fully paid ordinary share. Share based payments During the year ended 31 December 2022 $2.0 million (31 December 2021: $0.8 million) was recognised in share-based payments expense. Loan funded shares The Company has a Loan Funded Share Plan to support the achievement of the Company’s business strategy by linking executive reward to improvements in the financial performance of the Company and aligning the interests of executives with shareholders. Under the Loan Funded Share Plan, loan funded shares may be offered to employees or consultants (“Participants”). The Company issues new ordinary shares, which are placed in a trust to hold the shares on behalf of the Participant. The trustee issues a limited-recourse, interest-free loan to the participant, which is equal to the number of shares multiplied by the issue price. A limited-recourse loan means that the repayment amount will be the lesser of the outstanding loan and the market value of the shares that are subject to the loan. The trustee continues to hold the shares on behalf of the Participant until all vesting conditions have been satisfied and the Participant chooses to settle the loan, at which point ownership of the shares is transferred from the trust to the Participant. Any dividends paid by the Company while the shares are held by the trust are applied as repayment of the loan at the after-tax value of the dividend. On request by the participant, the Company may dispose of, or buy back, vested shares and utilise the proceeds to settle the outstanding loan. The directors may apply vesting conditions to be satisfied before the shares can be transferred to the Participant. Before the loan can be given, the New Zealand Companies Act requires the Company to disclose to shareholders the provision of financial assistance to the Participant. The maximum loan term is 5 years. All loan funded shares under the plan during the year ended 31 December 2022 are subject to the following vesting conditions: i. 40% of the Loan Funded Shares shall vest on acceptance by the US Food and Drug Administration of the filing of a New Drug Application for Trofinetide; and ii. 40% of the Loan Funded Shares shall vest when the Company determines to progress NNZ-2591 to a Phase 2b or Phase 3 clinical trial following a positive Phase 2 clinical trial outcome, or executes a partnering transaction for NNZ-2591; iii. 20% of the Loan Funded Shares shall vest when the Company executes a partnering transaction for trofinetide outside North America, or submits a Marketing Authorisation Application for trofinetide in the European Union, the United Kingdom, or Japan. Each of these vesting conditions shall be tested separately from the other vesting conditions. The first vesting condition (i) was met in September 2022. The estimated fair value of the shares has been determined using the Black-Scholes valuation model. The significant inputs into the model were the share price on date of valuation, the estimated future volatility of the share price, a dividend yield of 0%, an expected life of 5 years, and an annual risk-free interest rate of 0.4%. The estimated future volatility of the share price was derived by analysing the historic volatility of the share price during the relevant period. NOTES TO THE CONSOL I DATED F I NANC I A L STATEMENTS CON T I NU E D Neuren Pharmaceuticals Limited Annual Repor t 2022 39
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