28 DIRECTORS’ REPORT Risks Related to our Securities Enforceability of civil liabilities under the federal securities laws against the Company or the Company’s officers and directors may be difficult. The Company is a public company limited by shares and is registered and operates under the Australian Corporations Act 2001. Half of the Company’s directors and officers reside outside of the United States. In addition, a substantial portion of the directly owned assets of the Company are located outside of the United States. As a result, it may be difficult or impossible for investors to effect service of process within the United States against the Company or its directors and officers or to enforce against them any of the judgments, including those obtained in original actions or in actions to enforce judgments of the U.S. courts, predicated upon the civil liability provisions of the federal or state securities laws of the United States. There is doubt as to the enforceability in the Commonwealth of Australia, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon federal or state securities laws of the U.S., especially in the case of enforcement of judgments of U.S. courts where the defendant has not been properly served in Australia. The trading price of the Company’s ordinary shares and American Depositary Shares (“ADSs”) is highly volatile. Your investment could decline in value and the Company may incur significant costs from class action litigations. The trading price of the Company’s ordinary shares and ADSs is highly volatile in response to various factors, many of which are beyond the Company’s control, including: • unacceptable toxicity findings in animals and humans; • lack of efficacy in human trials at Phase II stage or beyond; • announcements of technological innovations by the Company and its competitors; • new products introduced or announced by the Company or its competitors; • changes in financial estimates by securities analysts; • actual or anticipated variations in operating results; • expiration or termination of licenses, research contracts or other collaboration agreements; • conditions or trends in the regulatory climate in the biotechnology, pharmaceutical and genomics industries; • changes in the market values of similar companies; • changes in the broader macroeconomic environment; • the liquidity of any market for the Company’s securities; and • additional sales by the Company of its shares. In addition, equity markets in general and the market for biotechnology and life sciences companies in particular, have experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the companies traded in those markets. Further changes in economic conditions in Australia, the U.S., EU, or globally, could impact the Company’s ability to grow profitably. Adverse economic changes are outside the Company’s control and may result in material adverse effects on the Company’s business or results of operations. These broad market and industry factors may materially affect the market price of the Company’s ordinary shares and ADSs regardless of its development and operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. Such litigation, if instituted against the Company, could cause it to incur substantial costs and divert management’s attention and resources. If the market price of the Company’s ADSs falls and remains below US$5.00 per share, under stock exchange rules, the Company’s stockholders will not be able to use such ADSs as collateral for borrowing in margin accounts. This inability to use ADSs as collateral may depress demand as certain institutional investors are restricted from investing in securities priced below US$5.00 and may lead to sales of such ADSs, creating downward pressure on and increased volatility in the market price of the Company’s ordinary shares and ADSs. A decrease in the trading price of our ADSs could cause their delisting from NASDAQ. Under NASDAQ rules, companies listed on the NASDAQ Capital Market are required to maintain a share price of at least US$1.00 per share to avoid delisting of their shares. If the share price declines below US$1.00 for a period of 30 consecutive business days, then that listed company would have 180 days to regain compliance with the US$1.00 per share minimum. In the event that the Company’s share price declines below US$1.00, it may be required to take action in order to comply with the NASDAQ rules that may be in effect at the time.
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