Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

~~Large accelerated filer~~ o ~~Accelerated filer~~ oNon-accelerated filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o

International Financial Reporting Standards as issued by the International Accounting Standards Board x

Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

This Annual Report on Form 20-F is incorporated by reference into our Registration Statement on Form S-8 (File No. 333-153669) and our Registration Statements on Form F-3 (Files No. 333-173375 and 333-174278).

INTRODUCTION

Prana Biotechnology Limited was incorporated under the laws of the Commonwealth of Australia on November 11, 1997. Our mission is to develop therapeutic drugs designed to treat the underlying causes of degeneration of the brain and the eye as the aging process progresses, initially focusing on Alzheimer’s disease and we are currently also focusing on Huntington’s and Parkinson’s ~~diseases .~~diseases. Other potential applications for our therapies include certain cancers, age-related macular degeneration, Motor Neuron disease, Creutzfeldt-Jakob disease (the human variant of Mad Cow disease) and age-related cataracts.

The principal listing of our ordinary shares and listed options to purchase our ordinary shares is on the Australian Securities ~~Exchange.~~Exchange, or ASX. Since September 5, 2002, our American Depository Receipts, or ADRs, have traded on the NASDAQ Capital Market under the symbol “PRAN.” The Bank of New York, acting as depositary, issues our ADRs, each of which evidences an American Depositary Share, or ADS, which in turn represents ten of our ordinary shares. We have two wholly-owned subsidiaries, Prana Biotechnology Inc. and Prana Biotechnology UK Limited, incorporated in the United States and the United Kingdom, respectively, in August 2004, both of which are currently inactive. As used in this annual report, the terms “we,” “us,” “our” and “Prana” mean Prana Biotechnology Limited and its subsidiaries, unless otherwise indicated.

We have not obtained or applied for trademark registrations. Any trademarks and trade names appearing in this annual report are owned by their respective holders.

Our consolidated financial statements appearing in this annual report are prepared in Australian dollars and in accordance with the International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our consolidated financial statements appearing in this annual report comply with both the IFRS and Australian Accounting Standards.

In this annual report, all references to “U.S. dollars” or “US$” are to the currency of the United States of America, and all references to “Australian dollars” or “A$” are to the currency of Australia.

Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this annual report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms.

Except for the historical information contained in this annual report, the statements contained in this annual report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, as amended, with respect to our business, financial condition and results of operations. Such forward-looking statements reflect our current view with respect to future events and financial results. We urge you to consider that statements which use the terms “anticipate,” “believe,” “do not believe,” “expect,” “plan,” “intend,” “estimate,” and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release any update or revision to any forward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof. We have attempted to identify significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section that appears in Item 3.D. “Key Information-Risk Factors.”

TABLE OF CONTENTS

Page

				~~Page~~

PART I				5

ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		5
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		5
ITEM 3.	KEY INFORMATION		5
A.	A.	Selected Consolidated Financial Data		5
B.	B.	Capitalization and Indebtedness		6
C.	C.	Reasons for the Offer and Use of Proceeds		6
D.	D.	Risk Factors		7	6
ITEM 4.	INFORMATION ON THE COMPANY		15	16
A.	A.	History and Development of the Company		15	16
B.	B.	Business Overview		18	19
C.	C.	Organizational Structure		29	30
D.	D.	Property, Plants and Equipment		29	30
ITEM 4A.	UNRESOLVED STAFF COMMENTS		29	31
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		29	31
A.	A.	Operating Results		29	31
B.	B.	Liquidity and Capital Resources		37	39
C.	C.	Research and Development, Patents and Licenses		40	42
D.	D.	Trend Information		41	43
E.	E.	Off-Balance Sheet Arrangements		41	43
F.	F.	Tabular Disclosure of Contractual Obligations		41	43
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		41	44
A.	A.	Directors and Senior Management		41	44
B.	B. Compensation	~~Compensation~~		44	46
C.	C.	Board Practices		45	47
D.	D. Employees	~~Employees~~		49	51
E.	E.	Share Ownership		49	51
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		53	54
A.	A.	Major Shareholders		53	54
B.	B.	Related Party Transactions		54	56
C.	C.	Interests of Experts and Counsel		55	56
ITEM 8.	FINANCIAL INFORMATION		55	56
A.	A.	Financial Statements and Other Financial Information		55	56
B.	B.	Significant Changes		55	56
ITEM 9.	THE OFFER AND LISTING		55	57
A.	A.	Offer and Listing Details		55	57
B.	B.	Plan of Distribution		56	58
C.	C. Markets	~~Markets~~		57	58
D.	D.	Selling Shareholders		57	58
E.	E. Dilution	~~Dilution~~		57	58
F.	F.	Expenses of the Issue		57	58
ITEM 10.	ADDITIONAL INFORMATION		57	58
A.	A.	Share Capital		57	58
B.	B.	Memorandum and Articles of Association		57	58
C.	C.	Material Contracts		59	60
D.	D.	Exchange Controls		61	63
E.	E. Taxation	~~Taxation~~		62	64
F.	F.	Dividends and Paying Agents		68	71
G.	G.	Statement by Experts		68	71
H.	H.	Documents on Display		68	71
I.	I.	Subsidiary Information		69	71

iii

ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		69	71
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	72
PART II		69

~~PART II~~				71
					74
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		71	74
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		71	74
ITEM 15.	CONTROLS AND PROCEDURES		71	74
ITEM 16.	RESERVED		72	75
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		72	75
ITEM 16B.	CODE OF ETHICS		72	75
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		73	75
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		73	76
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		73	76
ITEM 16F.	CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT		73	76
ITEM 16G.	CORPORATE GOVERNANCE		74	76
ITEM 16H.	MINE SAFETY DISCLOSURE	76
ITEM 17.	FINANCIAL STATEMENTS		74	76
ITEM 18.	FINANCIAL STATEMENTS		74	76
ITEM 19.	EXHIBITS		74	77
SIGNATURES			77	80

~~PART~~ PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.

OFFER STATISTICS AND ~~EXPECTED~~EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

A.	Selected Consolidated Financial Data

We prepare our consolidated financial statements in accordance with IFRS, as issued by IASB. Our consolidated financial statements appearing in this annual report comply with both the IFRS as issued by IASB and Australian equivalents to International Financial Reporting Standards, or A-IFRS.

The following table presents our selected consolidated financial data as of the dates and for each of the periods indicated. The following selected consolidated financial data as of June 30, ~~2011~~2012 and ~~2010~~2011 and for the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009~~2010 have been derived from our audited consolidated financial statements and notes thereto included elsewhere in this annual report. The selected consolidated financial data as of June 30, 2010, 2009 ~~2008~~ and ~~2007~~2008 and for the years ended June 30, ~~2008~~2009 and ~~2007~~2008 have been derived from our audited consolidated financial statements and notes thereto which are not included in this annual report.

The selected consolidated financial data set forth below should be read in conjunction with and are qualified entirely by reference to Item 5. “Operating and Financial Review and Prospects” and our consolidated financial statements and notes thereto included elsewhere in this annual report.

Statement of Comprehensive Income:	Statement of Comprehensive Income:																Statement of Comprehensive Income:
		Year Ended June 30,
		2011			2010			2009			2008			2007				Year Ended June 30,
		(in A$, except number of shares)																2012			2011			2010			2009			2008
																		(in A$, except number of shares)
Revenue from continuing operations			156,135			215,008			428,193			490,943			507,150				186,664			156,135			215,008			428,193			490,943
Other income			6,785			–			–			170			287				2,340,851			6,785			-			-			170

Research and development expenses, net			(2,329,491	)		(87,992	)		(2,215,358	)		(5,757,168	)		(4,492,193	)			(4,228,719	)		(2,758,381	)		(666,381	)		(3,027,444	)		(6,838,477	)
Research and development expenses - related party			–			–			–			–			–
Personnel expenses			(2,394,298	)		(3,087,234	)		(3,832,804	)		(5,350,189	)		(4,554,731	)
Corporate personnel expenses																			(1,858,562	)		(1,965,408	)		(2,508,845	)		(3,020,718	)		(4,268,880	)
Intellectual property expenses			(399,237	)		(431,082	)		(1,107,534	)		(469,428	)		(600,232	)			(261,706	)		(399,237	)		(431,082	)		(1,107,534	)		(469,428	)
Auditor and accounting expenses			(157,436	)		(168,909	)		(129,998	)		(331,950	)		(260,117	)			(153,597	)		(157,436	)		(168,909	)		(129,998	)		(331,950	)
Travel expenses			(159,971	)		(234,555	)		(195,251	)		(146,651	)		(309,997	)			(91,624	)		(159,971	)		(234,555	)		(195,251	)		(146,651	)
Public relations and marketing expenses			(110,646	)		(130,090	)		(222,679	)		(141,337	)		(215,455	)			(124,970	)		(110,646	)		(130,090	)		(222,679	)		(141,337	)
Depreciation expenses			(31,577	)		(35,290	)		(34,190	)		(25,349	)		(58,582	)			(19,621	)		(31,577	)		(35,290	)		(34,190	)		(25,349	)
Other expenses			(857,281	)		(940,699	)		(978,875	)		(975,404	)		(1,008,563	)			(1,107,283	)		(857,281	)		(940,699	)		(978,875	)		(975,404	)
Foreign exchange gain (loss)			(145,377	)		(6,079	)		(6,723	)		(402,886	)		(757,578	)			45,959			(145,377	)		(6,079	)		(6,723	)		(402,886	)
Gain (loss) on fair value of financial liabilities			(8,791	)		–			772,430			(451,429	)		607,691				33,139			(8,791	)		-			772,430			(451,429	)
Net loss			(6,431,185	)		(4,906,922	)		(7,522,789	)		(13,560,678	)		(11,142,320	)			(5,239,469	)		(6,431,185	)		(4,906,922	)		(7,522,789	)		(13,560,678	)
Loss per share – basic and diluted			(0.03	)		(0.02	)		(0.04	)		(0.08	)		(0.08	)			(0.02	)		(0.03	)		(0.02	)		(0.04	)		(0.08	)
Weighted average number of ordinary shares outstanding - basic and diluted			247,578,570			227,527,388			202,357,885			174,714,146			140,754,495				287,765,812			247,578,570			227,527,388			202,357,885			174,714,146

Balance Sheet Data:
	As at June 30,
	2011			2010			2009			2008			2007			As at June 30,
	(in A$)															2012			2011			2010			2009			2008
																(in A$ )
Cash and cash equivalents		8,838,245			5,227,298			4,304,977			11,219,035			7,409,256			5,636,469			8,838,245			5,227,298			4,304,977			11,219,035
Working capital		6,852,456			5,135,625			3,643,502			9,762,015			5,564,304			5,535,484			6,852,456			5,135,625			3,643,502			9,762,015
Total assets		9,010,952			6,801,417			4,597,250			11,698,313			7,722,185			7,341,868			9,010,952			6,801,417			4,597,250			11,698,313
Net assets		6,931,202			5,229,316			3,749,816			9,866,327			5,612,195			5,623,447			6,931,202			5,229,316			3,749,816			9,866,327
Issued capital		82,340,819			75,120,164			70,188,989			69,842,303			53,988,412			86,134,077			82,340,819			75,120,164			70,188,989			69,842,303
Share based payment reserves		9,494,995			8,582,579			7,127,332			6,067,740			4,106,821			9,633,451			9,494,995			8,582,579			7,127,332			6,067,740
Accumulated deficit during development stage		(84,904,612	)		(78,473,427	)		(73,566,505	)		(66,043,716	)		(52,483,038	)		(90,144,081	)		(84,904,612	)		(78,473,427	)		(73,566,505	)		(66,043,716	)
Total equity		6,931,202			5,229,316			3,749,816			9,866,327			5,612,195			5,623,447			6,931,202			5,229,316			3,749,816			9,866,327

Exchange Rate Information

The following tables set forth, for the periods and dates indicated, certain information regarding the rates of exchange of A$1.00 into US$ based on the noon market buying rate in New York City for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York, or the noon buying rate.

Year Ended June 30,	At Period End	Average Rate	High	Low	At Period End		Average Rate		High		Low

2007	0.8488	0.7859	0.8521	0.7377
2008	0.9615	0.8965	0.9654	0.7672		0.9615		0.8965		0.9654		0.7672
2009	0.8048	0.7480	0.9849	0.6005		0.8048		0.7480		0.9849		0.6005
2010	0.8567	0.8822	0.9405	0.7723		0.8567		0.8822		0.9405		0.7723
2011	1.0597	0.9894	1.1011	0.8323		1.0597		0.9894		1.1011		0.8323
2012						1.0161		1.0327		1.1080		0.9387

Month

High

Low

April 2011 1.0977 1.0288
May 2011 1.1011 1.0440
June 2011 1.0774 1.0390
July 2011 1.1080 1.0525
August 2011 1.1064 0.9926
September 2011 1.0764 0.9621

Month	High		Low
April 2012		1.0473		1.0226
May 2012		1.0468		0.9689
June 2012		1.0256		0.9577
July 2012		1.0507		1.0099
August 2012		1.0613		1.0276
September 2012		1.0624		1.0159

The noon buying rate on ~~September 27, 2011~~October 2, 2012 was US$~~0.9757~~1.0363 = A$1.00.

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

D.	Risk Factors

Investing in our American Depositary Shares involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described below before investing in our American Depositary Shares. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect our business. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be harmed. In that case, the daily price of our depositary shares could decline, and you could lose all or part of your investment.

Risks Related To Our Business

We have incurred operating losses and may not be profitable in the future; our plans to maintain and increase liquidity may not be successful.

We have been unprofitable to date and expect to incur losses over the next several years as we expand our drug discovery and development programs and pre-clinical testing and as we conduct clinical trials of our product candidates. Our actual cash requirements may vary materially from those now planned and will depend upon numerous factors, including:

●·

the continued progress of our research and development programs;


	●·	the timing, scope, results and costs of pre-clinical studies and clinical trials;


	●·	the cost, timing and outcome of regulatory submissions and approvals;


	●·	determinations as to the commercial potential of our product candidates;


	●·	our ability to successfully expand our contract manufacturing services;


	●·	our ability to establish and maintain collaborative arrangements; and


	●·	the status and timing of competitive developments.

~~On March 25, 2011, we completed a A$6,120,000 (US$6,190,992) financing necessary to ensure that we can continue as a going concern over~~In the ~~next 12 months. We added additional working capital on~~year ended June 30, ~~2011, when Quintiles Limited subscribed for US$1,000,000~~2012, we raised A$3,789,448 from the sale of our ordinary ~~shares.~~shares pursuant to our at-the-market offering facility and in a private placement. However, to continue to meet our longer term business objectives, ~~beyond the next 12 months,~~ which would include advancement of our research and development programs, we will need to secure additional financing. We will also require additional funds to pursue regulatory clearances, defend our intellectual property rights, establish commercial scale manufacturing facilities, develop marketing and sales capabilities and fund operating expenses. We intend to seek such additional funding through public or private financings and/or through licensing of our assets or strategic alliances or other arrangements with corporate partners. The global economic climate could adversely impact our ability to obtain such funding, license our assets or enter into alliances or other arrangements with corporate partners. Any shortfall in funding could result in our having to curtail or cease our operations, including our research and development activities, which would be expected to ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations.

We have incurred losses in every period since we began operations in 1997 and reported net losses of A$5,239,469, A$6,431,185 and A$4,906,922 during the fiscal years ended June 30, 2012, 2011 and 2010, respectively. As of June 30, 2012, our accumulated deficit was A$90,144,081. We expect to continue to incur additional operating losses over at least the next several years as we expand our research and development and pre-clinical activities and commence additional clinical trials of PBT2. We may never be able to achieve or maintain profitability.

We are a development stage company at an early stage in the development of pharmaceutical products and our success is uncertain.

We are a development stage company at an early stage in the development of our pharmaceutical products which are designed to treat the underlying causes of degeneration of the brain and the eye as the aging process progresses. We have not sufficiently advanced the development of any of our products, including our current lead product candidate, PBT2, to market or generate revenues from their commercial application. Our current or any future product candidates, if successfully developed, may not generate sufficient or sustainable revenues to enable us to be profitable.

We are faced with uncertainties related to our research.

Our research programs are based on scientific hypotheses and experimental approaches that may not lead to desired results. In addition, the timeframe for obtaining proof of principle and other results may be considerably longer than originally anticipated, or may not be possible given time, resource, financial, strategic and collaborator scientific constraints. Success in one stage of testing is not necessarily an indication that the particular program will succeed in later stages of testing and development. It is not possible to predict whether any of the drugs designed for these programs will prove to be safe, effective, and suitable for human use. Each drug will require additional research and development, scale-up, formulation and extensive clinical testing in humans. Unsatisfactory results obtained from a particular study relating to a program may cause us to abandon our commitment to that program or to the lead compound or product candidate being tested. The discovery of unexpected toxicities, lack of sufficient efficacy, unacceptable pharmacology, inability to increase scale of manufacture, market attractiveness, regulatory hurdles, competition, as well as other factors, may make our targets, lead therapies or product candidates unattractive or unsuitable for human use, and we may abandon our commitment to that program, target, lead therapy or product candidate. In addition, preliminary results seen in limited human testing may not be substantiated in larger controlled clinical trials.

We may experience delays in our clinical trials that could adversely affect our business and operations.

We do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials on schedule or at all. Our ability to commence and complete clinical trials may be delayed by many factors, including:

●·

government or regulatory delays, including delays in obtaining approvals from applicable hospital ethics committees and internal review boards;


	●·	slower than expected patient recruitment;


	●·	our inability to manufacture sufficient quantities of our new proprietary compound or our other product candidates or matching controls;


	●·	unforeseen safety issues; and


	●·	lack of efficacy or unacceptable toxicity during the clinical trials.

Patient enrollment is a function of, among other things, the nature of the clinical trial protocol, the existence of competing protocols, the size and longevity of the target patient population, and the availability of patients who comply with the eligibility criteria for the clinical trial. Delays in planned patient enrollment may result in increased costs, delays or termination of clinical trials. Moreover, we rely on third parties to assist us in managing and monitoring clinical trials. Any failure by these third parties to perform under their agreements with us may cause the trials to be delayed or result in a failure to complete the trials.

Product development costs to our collaborators and us will increase if we have delays in testing or approvals or if we need to perform more, larger or more complex clinical trials than planned. Significant delays could ~~have a material adverse effect on~~adversely affect the commercial prospects of our product candidates and our business, financial condition and results of operations.

We ~~have a history of operating losses and~~ may not ~~achieve or maintain profitability in the future.~~

We have incurred losses in every period since we began operations in 1997. We expect to continue to incur additional operating losses over at least the next several years and to increase our cumulative losses substantially as we expand our research and development and pre-clinical activities and commence additional clinical trials of PBT2. We reported net losses of A$6,431,185, A$4,906,922 and A$7,522,789 during the fiscal years ended June 30, 2011, 2010 and 2009, respectively. As of June 30, 2011, our accumulated deficit was A$84,904,612. We may never be able to ~~achieve~~secure and maintain research institutions to conduct our clinical trials.

We rely on research institutions to conduct our clinical trials. Our reliance upon research institutions, including hospitals and clinics, provides us with less control over the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach agreements with suitable research institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to quickly replace the research institution with another qualified institution on acceptable terms. Furthermore, we may not be able to secure and maintain ~~profitability.~~suitable research institutions to conduct our clinical trials.

There is a substantial risk that we may not be able to complete the development of PBT2 or develop other pharmaceutical products.

We may not be able to progress with the development of our current or any future pharmaceutical product candidates to a stage that will attract a suitable collaborative partner for the development of any current or future pharmaceutical product candidates. The projects initially specified in connection with any such collaboration and any associated funding may change or be discontinued as a result of changing interests of either the collaborator or us, and any such change may change the budget for the projects under the collaboration. Additionally, our research may not lead to the discovery of additional product candidates, and any of our current and future product candidates may not be successfully developed, prove to be safe and efficacious in clinical trials, meet applicable regulatory standards and receive regulatory approval, be capable of being produced in commercial quantities at reasonable costs, or be successfully or profitably marketed, either by us or a collaborative partner. The products we develop may not be able to penetrate the potential market for a particular therapy or indication or gain market acceptance among health care providers, patients and third-party payers. We cannot predict if or when the development of PBT2 or any future pharmaceutical product will be completed or commercialized, whether funded by us, as part of a collaboration or through a grant.

If we do not obtain the necessary governmental approvals, we will be unable to commercialize our pharmaceutical products.

Our ongoing research and development activities are, and the production and marketing of our pharmaceutical product candidates derived from such activities will be, subject to regulation by numerous governmental authorities in Australia, principally the Therapeutics Goods Administration, or TGA; the Food and Drug Administration, or FDA, in the United States; the Medicines and Healthcare products Regulatory Agency, or MHRA, in the United Kingdom; the Medical Products Agency, or MPA, in Sweden; and the European Medicines Agency, or EMEA. Prior to marketing, any therapeutic product developed must undergo rigorous pre-clinical testing and clinical trials, as well as an extensive regulatory approval process mandated by the TGA and, to the extent that any of our pharmaceutical products under development are marketed abroad, by foreign regulatory agencies, including the FDA in the United States and the MHRA in the United Kingdom. These processes can take many years and require the expenditure of substantial resources. Governmental agencies may not grant regulatory approval due to matters arising from pre-clinical animal toxicology, safety pharmacology, drug formulation and purity, clinical side effects or patient risk profiles, or medical contraindications. Failure or delay in obtaining regulatory approvals would adversely affect the development and commercialization of our pharmaceutical product candidates. We may not be able to obtain the clearances and approvals necessary for clinical testing or for manufacturing and marketing our pharmaceutical product candidates.

We will not be able to commercialize ~~our PBT2 therapeutic compound for Alzheimer’s disease, Huntington’s disease~~any current or ~~other indications or any~~ future product candidates if we fail to adequately demonstrate their safety, efficacy and superiority over existing therapies.

Before obtaining regulatory approvals for the commercial sale of any of our pharmaceutical products, we must demonstrate through pre-clinical testing and clinical studies that our ~~PBT2~~ product ~~candidate is~~candidates are safe and effective for use in humans for each target indication. Conducting pre-clinical testing and clinical studies is an expensive, protracted and time-consuming process. Likewise, results from early clinical trials may not be predictive of results obtained in large-scale, later-stage clinical testing. In addition, even though a potential drug product shows promising results in clinical trials, regulatory authorities may not grant the necessary approvals without sufficient safety and efficacy data.

We may not be able to undertake further clinical trials of our ~~PBT2 compound~~current and future product candidates as ~~a therapeutic compound~~therapies for Alzheimer’s disease, Huntington’s disease, Parkinson’s disease or other indications ~~and any future product candidate (including one that may emerge from our vaccine program),~~ or to demonstrate the safety and efficacy or superiority of any of these product candidates over existing therapies or other therapies under development, or enter into any collaborative arrangement to commercialize our current or future product candidates on terms acceptable to us, or at all. For example, in April 2005, we ceased clinical trials of our PBT1 compound as a treatment for Alzheimer’s disease. Clinical trial results that show insufficient safety and efficacy could ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations.

We may need to prioritize the development of our most promising candidates at the expense of the development of other products.

We may need to prioritize the allocation of development resources and/or funds towards what we believe to be our most promising product or products. The nature of the drug development process is such that there is a constant availability of new information and data which could positively or adversely affect a product in development. We cannot predict how such new information and data may impact in the future the prioritization of the development of our current or future product candidates or that any of our products, regardless of its development stage or the investment of time and funds in its development, will continue to be funded or developed.

Our research and development efforts will be seriously jeopardized if we are unable to retain key personnel and cultivate key academic and scientific collaborations.

Our future success depends to a large extent on the continued services of our senior management and key scientific personnel. We have entered into employment or consultancy agreements with these individuals. The loss of their services could negatively affect our business. Our success is highly dependent on the continued contributions of our scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions and scientists. Competition among biotechnology and pharmaceutical companies for qualified employees is intense, and we may not be able to continue to attract and retain qualified scientific and management personnel critical to our success. We also have relationships with leading academic and scientific collaborators who conduct research at our request or assist us in formulating our research and development strategies. These academic and scientific collaborators are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, these collaborators may have arrangements with other companies to assist such companies in developing technologies that may prove competitive to ours.

If we are unable to successfully keep pace with technological change or with the advances of our competitors, our technology and products may become obsolete or non-competitive.

The biotechnology and pharmaceutical industries are subject to rapid and significant technological change. Our competitors in Australia and elsewhere are numerous and include major pharmaceutical companies, biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that are more effective than any that we are developing, or which would render our technology and products obsolete or non-competitive. Many of these competitors have greater financial and technical resources and manufacturing and marketing capabilities than we do. In addition, many of our competitors have much more experience than we do in pre-clinical testing and human clinical trials of new or improved drugs, as well as in obtaining FDA, TGA, MHRA, MPA, EMEA and other regulatory approvals.

We know that competitors are developing or manufacturing various technologies or products for the treatment of diseases that we have targeted for product development. Some of these competitive products use therapeutic approaches that compete directly with our ~~PBT2~~ product ~~candidate.~~candidates. Our ability to further develop our products may be adversely affected if any of our competitors were to succeed in obtaining regulatory approval for their competitive products sooner than us.

Acceptance of our products in the marketplace is uncertain, and failure to achieve market acceptance will negatively impact our business and operations.

Our current or future products may not achieve market acceptance even if they are approved by the TGA, FDA or any other regulatory authority. The degree of market acceptance of such products will depend on a number of factors, including:

●·

the receipt and timing of regulatory approvals for the uses that we are studying;


	●·	the establishment and demonstration to the medical community of the safety, clinical efficacy and cost-effectiveness of our product candidates and their potential advantages over existing therapeutics and technologies; and


	●·	the pricing and reimbursement policies of governments and third-party payors.

Physicians, patients, payors or the medical community in general may be unwilling to accept, use or recommend any of our products.

Our success depends upon our ability to protect our intellectual property and our proprietary technology.

Any future success will depend in large part on whether we can:

●·

obtain and maintain patents to protect our own products and technologies;


	●·	obtain licenses to the patented technologies of third parties;


	●·	operate without infringing on the proprietary rights of third parties; and


	●·	protect our trade secrets, know-how and other confidential information.

Patent matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Any of the pending or future patent applications filed by us or on our behalf may not be approved, or we may not develop additional proprietary products or processes that are patentable or that we will be able to license any other patentable products or processes.

Our commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court determines that we were infringing any third party patents, we could be required to pay damages, alter our products or processes, obtain licenses or cease certain activities. Licenses required under patents held by third parties may not be made available on terms acceptable to us or at all. To the extent that we are unable to obtain such licenses, we could be foreclosed from the development, export, manufacture or commercialization of the product requiring such license or encounter delays in product introductions while we attempt to design around such patents, and any of these circumstances could ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations.

We may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third party proprietary rights. We may have to defend the validity of our patents in order to protect or enforce our rights against a third party. Third parties may in the future assert against us infringement claims or claims that we have infringed a patent, copyright, trademark or other proprietary right belonging to them. Any infringement claim, even if not meritorious, could result in the expenditure of significant financial and managerial resources and could negatively affect our profitability. While defending our patents, the scope of the claim may be reduced in breadth and inventorship of the claimed subject matter, and proprietary interests in the claimed subject matter may be altered or reduced. Any such litigation, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or commercializing our products and could ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations.

We have limited manufacturing experience with our product candidates. Delays in manufacturing sufficient quantities of such materials to the required standards for pre-clinical and clinical trials may negatively impact our business and operations.

We may not be able to manufacture sufficient quantities of ~~PBT2 or any other development or~~our product candidates in a cost-effective or timely manner. Manufacturing includes the production, formulation and stability testing of an active pharmaceutical ingredient and its formulation into pharmaceutical products, such as capsules or tablets. Any delays in production would delay our pre-clinical and human clinical trials, which could ~~have a material adverse effect on~~adversely affect our business, financial condition and operations.

We may be required to enter into contracting arrangements with third parties to manufacture ~~PBT2 and any other development or~~our product candidates for large-scale, pre-clinical and/or clinical trials. We may not be able to make the transition from laboratory-scale to development-scale or from development-scale to commercial production. We may need to develop additional manufacturing resources, enter into collaborative arrangements with other parties who have established manufacturing capabilities, or have third parties manufacture our products on a contract basis. We may not have access on acceptable terms to the necessary and substantial financing that would be required to scale-up production and develop effective commercial manufacturing processes and technologies. We may not be able to enter into collaborative or contracting arrangements on acceptable terms with parties that will meet our requirements for quality, quantity and timeliness.

We expect that we will be required to design and develop new synthetic pathways for most, if not all, of the ~~products~~product candidates that we currently intend to develop or may develop in the future. We cannot predict the success of such efforts, the purity of the products that may be obtained or the nature of the impurities that may result from such efforts. If we are not able to obtain an acceptable purity for any product candidate or an acceptable impurity profile, pre-clinical and clinical trials would be delayed, which could ~~have a material adverse effect on~~adversely affect the priority of the development of our product candidates, our business, financial condition and results of operations. We also cannot guarantee that the active pharmaceutical ingredient, or API, will be suitable for high throughput encapsulation to produce drug product. This may adversely impact the cost of goods or feasibility of market scale manufacture.

We are dependent upon a sole manufacturer of our lead compound, PBT2, and on a sole manufacturer to encapsulate the compound and could incur significant costs and delays if we are unable to promptly find a replacement for either of them.

We typically rely on a single manufacturer to develop Good Manufacturing Practice, ~~(GMP)~~or GMP, synthetic processes for our lead compounds. Our lead compound, PBT2, was manufactured by the Institute of Drug Technology Australia Limited until early 2008. During late 2008, we transferred our PBT2 drug substance manufacturing process technology to Dr. Reddy’s Laboratories Limited, based in Hyderabad, India, to enable future and efficient large scale manufacture of PBT2 to provide drug substance for the currently planned Phase II trials in Alzheimer’s patients and Huntington’s patients. We also rely on a sole manufacturer, Patheon Inc., to encapsulate PBT2. We intend to continue this approach, subject to ongoing appraisal of our manufacturing needs and financial position. We may not be able to promptly find a replacement manufacturer, if required, without incurring material additional costs and substantial delays.

The failure to establish sales, marketing and distribution capability would materially impair our ability to successfully market and sell our pharmaceutical products.

We currently have no experience in marketing, sales or distribution of pharmaceutical products. If we develop any commercially marketable pharmaceutical products and decide to perform our own sales and marketing activities, we will require additional management, will need to hire sales and marketing personnel and will require additional capital. Qualified personnel may not be available in adequate numbers or at a reasonable cost. Further, additional financing may not be available on acceptable terms, or at all, and our sales staff may not achieve success in their marketing efforts. Alternatively, we may be required to enter into marketing arrangements with other parties who have established appropriate marketing, sales and distribution capabilities. We may not be able to enter into marketing arrangements with any marketing partner, or if such arrangements are established, our marketing partners may not be able to commercialize our products successfully. Other companies offering similar or substitute products may have well-established and well-funded marketing and sales operations in place that will allow them to market their products more successfully. Failure to establish sufficient marketing capabilities would materially impair our ability to successfully market and sell our pharmaceutical products.

If healthcare insurers and other organizations do not pay for our products, or impose limits on reimbursement, our future business may suffer.

The drugs we hope to develop may be rejected by the marketplace due to many factors, including cost. The continuing efforts of governments, insurance companies, health maintenance organizations and other payors of healthcare costs to contain or reduce healthcare costs may affect our future revenues and profitability and those of our potential customers, suppliers and collaborative partners, as well as the availability of capital. In Australia and certain foreign markets, the pricing or profitability of prescription pharmaceuticals is already subject to government control. We expect initiatives for similar government control at both the state and federal level to continue in the United States and elsewhere. The adoption of any such legislative or regulatory proposals could ~~have a material adverse effect on~~adversely affect our business and prospects.

Our ability to commercially exploit our products successfully will depend in part on the extent to which reimbursement for the cost of our products and related treatment will be available from government health administration authorities, private health coverage insurers and other organizations. Third-party payors, such as government and private health insurers, are increasingly challenging the price of medical products and services. Uncertainty exists as to the reimbursement status of newly approved health care products and in foreign markets, including the United States. If third-party coverage is not available to patients for any of the products we develop, alone or with collaborators, the market acceptance of these products may be reduced, which may adversely affect our future revenues and profitability. In addition, cost containment legislation and reductions in government insurance programs may result in lower prices for our products and could materially adversely affect our ability to operate profitably.

We may be exposed to product liability claims, which could harm our business.

The testing, marketing and sale of human health care products also entails an inherent risk of product liability. We may incur substantial liabilities or be required to limit development or commercialization of our products if we cannot successfully defend ourselves against product liability claims. We have historically obtained no fault compensation insurance for our clinical trials and intend to obtain similar coverage for future clinical trials. Such coverage may not be available in the future on acceptable terms, or at all. This may result in our inability to pursue further clinical trials or to obtain adequate protection in the event of a successful claim. We may not be able to obtain product liability insurance in the event of the commercialization of a product or such insurance may not be available on commercially reasonable terms. Even if we have adequate insurance coverage, product liability claims or recalls could result in negative publicity or force us to devote significant time, attention and financial resources to those matters.

Natural disasters, terrorist attacks or breaches of network or information technology security could have an adverse effect on our business.

Natural disasters, terrorist acts, acts of war, cyber-attacks or other breaches of network or information technology (IT) security may cause equipment failures or disrupt our systems and operations. While we maintain insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. Our inability to operate our facilities as a result of such events, even for a limited period of time, may result in significant expenses. In addition, a failure to protect employee confidential data against breaches of network or IT security could result in damage to our reputation. Any of these occurrences could adversely affect our results of operations and financial condition.

We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could ~~have a material adverse effect on~~adversely affect our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares and ADRs.

The Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and directors. Our efforts to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, governing internal control and procedures for financial reporting, which started in connection with our Annual Report on Form 20-F for the year ended June 30, 2008, have resulted in increased general and administrative expenses and a diversion of management time and attention, and we expect these efforts to require the continued commitment of significant resources. We may identify material weaknesses or significant deficiencies in our assessments of our internal control over financial reporting. Failure to maintain effective internal control over financial reporting could result in investigations or sanctions by regulatory authorities and could ~~have a material adverse effect on~~adversely affect our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares and ADRs.

Risks Relating to Our Securities

Our stock price may be volatile and the U.S. trading market for our ~~American Depositary Shares~~ADSs is limited.

The market price for our securities, like that of the securities of other pharmaceutical and biotechnology companies, has fluctuated substantially and may continue to be highly volatile in the future. During the last two fiscal years, the market price for our ordinary shares on the ~~Australian Securities Exchange, or~~ ASX has ranged from as low as A$0.11 to a high of A$0.38 and the market price of our ~~American Depositary Shares~~ADSs on the NASDAQ Capital Market has ranged from as low as US$~~1.02~~1.09 to a high of US$4.50. The market price for our securities has been affected by both broad market developments and announcements relating to actual or potential developments concerning products under development. We believe that the following factors, in addition to other risk factors described above and elsewhere in this annual report, will continue to significantly affect the market price of our ordinary shares:

●·

the results of pre-clinical testing and clinical trials by us and our competitors;

●·

developments concerning research and development, manufacturing, and marketing alliances or collaborations by us and our competitors;

●·

announcements of technological innovations or new commercial products by us and our competitors;


	●·	determinations regarding our patent applications, patents and those of others;


	●·	publicity regarding actual or potential results relating to medicinal products under development by us and our competitors;


	●·	proposed governmental regulations and developments in Australia, the United States and elsewhere;

litigation;

	●	~~litigation;~~

	●·	economic and other external factors; and


	●·	period-to-period fluctuations in our operating results.

In addition, stock markets have experienced extreme price and volume fluctuations. These fluctuations have especially affected the stock market price of many high technology and healthcare related companies, including pharmaceutical and biotechnology companies, and, in many cases, are unrelated to the operating performance of the particular companies. Market fluctuations, as well as general political and economic conditions, such as a recession, interest rate or currency rate fluctuations, could adversely affect the market price of our securities.

Your ownership interest in our company may be diluted as a result of additional financings.

We may seek to raise funds from time to time in public or private issuances of equity, and such financings may take place in the near future or over the longer term. In March 2011, we issued 27,200,000 ordinary shares and options to purchase an additional 6,800,000 ordinary shares in a private placement. In May 2011, we registered US$50,000,000 of securities for public sale pursuant to our registration statement on Form F-3 filed on May 17, 2011. During the fiscal year ended June 30, 2012, we issued a total of 22,694,035 ordinary shares, including 22,042,170 ordinary shares through our “at-the-market” facility. Without shareholder approval, we may not issue more than 15% of our outstanding ordinary shares in any ~~six~~twelve month period. On June 10, 2011, our shareholders approved the issuance of up to 100,000,000 of our ordinary shares in the following three month period to facilitate the funding of a Phase II imaging trial for PBT2 in Alzheimer’s disease patients and a Phase II trial for PBT2 in Huntington’s disease patients. We are currently offering an aggregate of 5,000,000 ADSs under such registration statement and pursuant to a prospectus supplement for an at-the-market offering of our ADSs. Sales of our ADSs in this offering will result in dilution to our shareholders. Sales of our securities offered through future equity offerings may also result in substantial dilution to the interests of our current shareholders. The sale of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

There is a substantial risk that we are a passive foreign investment company, or PFIC, which will subject our U.S. investors to adverse tax rules.

Holders of our ADRs who are U.S. residents face income tax risks. There is a substantial risk that we are a passive foreign investment company, commonly referred to as PFIC. Our treatment as a PFIC could result in a reduction in the after-tax return to the holders of our ADRs and would likely cause a reduction in the value of such ADRs. For U.S. federal income tax purposes, we will be classified as a PFIC for any taxable year in which either (i) 75% or more of our gross income is passive income, or (ii) at least 50% of the average value of all of our assets for the taxable year produce or are held for the production of passive income. For this purpose, cash is considered to be an asset that produces passive income. As a result of our substantial cash position and the decline in the value of our stock, we believe that we became a PFIC during the taxable year ended June 30, 2005, and once again qualified as a PFIC during each of the last ~~five~~six fiscal years, under a literal application of the asset test described above, which looks solely to market value. We believe that we once again will be classified as a PFIC for the taxable year ended June 30, 2012. If we are classified as a PFIC for U.S. federal income tax purposes, highly complex rules would apply to U.S. holders owning ADRs. Accordingly, you are urged to consult your tax advisors regarding the application of such rules. United States residents should carefully read “Item 10.E. Additional Information - Taxation, United States Federal Income Tax Consequences” for a more complete discussion of the U.S. federal income tax risks related to owning and disposing of our ADRs.

We do not anticipate paying dividends on our ordinary shares.

We have never declared or paid cash dividends on our ordinary shares and do not expect to do so in the foreseeable future. The declaration of dividends is subject to the discretion of our Board of Directors and will depend on various factors, including our operating results, financial condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment in our company if you require dividend income from your investment in our company. The success of your investment will likely depend entirely upon any future appreciation of the market price of our ordinary shares, which is uncertain and unpredictable. There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which you purchased your ordinary shares.

Risks Relating to our Location in Australia

It may be difficult to enforce a judgment in the United States against us and our officers and directors or to assert U.S. securities laws claims in Australia or serve process on our officers and directors.

We are incorporated in Australia. All of our executive officers and directors are non-residents of the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws in an Australian court against us or any of those persons or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to enforce civil liabilities under U.S. federal securities laws in original actions instituted in Australia.

As a foreign private issuer whose shares are listed on the NASDAQ Capital Market, we may follow certain home country corporate governance practices instead of certain NASDAQ requirements.

As a foreign private issuer whose shares are listed on the NASDAQ Capital Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules. As an Australian company listed on the NASDAQ Capital Market, we may choose to follow home country practice with regard to, among other things, the composition of the board of directors, director nomination process, compensation of officers and quorum at shareholders’ meetings. In addition, we may choose to follow Australian law instead of the NASDAQ Stock Market Rules that require that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company. A foreign private issuer that elects to follow a home country practice instead of NASDAQ requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the Securities and Exchange Commission each such requirement that it does not follow and describe the home country practice followed by the issuer instead of any such requirement. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules. As of the date of this report, we have not elected to follow any home country practice instead of NASDAQ requirements.

ITEM 4.

INFORMATION ON THE COMPANY

A.	History and Development of the Company

Our legal and commercial name is Prana Biotechnology Limited. We were incorporated under the laws of the Commonwealth of Australia on November 11, 1997 and began limited operations shortly thereafter. Our registered office is located at Suite 2, 1233 High Street, Armadale, Victoria, 3143, Australia and our telephone number is 011-61-3-9824-8166. Our principal executive office is located at Level 2, 369 Royal Parade, Parkville, Victoria 3052, Australia and our telephone number is 011-61-3-9349-4906. Our website address ~~on the Internet~~ is ~~www.pranabio.com~~www.pranabio.com.. The information in our website is not incorporated by reference into this annual report.

Our mission is to develop therapeutic drugs designed to treat the underlying causes of degeneration of the brain and the eye as the aging process progresses, ~~initially~~currently focusing on Alzheimer’s disease, ~~and we are currently also focusing on~~ Huntington’s disease and Parkinson’s’ ~~diseases~~disease. Other potential applications for our therapies include certain cancers, age-related macular degeneration, Motor Neuron disease, Creutzfeldt-Jakob disease (the human variant of Mad Cow disease) and age-related cataracts. Our technology is the outcome of many years of intense research from some of the leading scientists in the world in the area of age-related degenerative diseases.

Since completing our initial public offering and listing process of our ordinary shares on the ASX on March 28, 2000, we have concentrated our resources toward the pursuit of our disease targets. Initially we focused on clinical trials of our proof of concept compound, PBT1, as a therapeutic for the treatment of Alzheimer’s disease. On April 11, 2005, we announced that we would not proceed with the Phase II/III study as we had found unacceptably high levels of a di-iodo-8-hydroxyquinoline impurity that could potentially alter the risk of side-effects and mutagenicity. We considered methods to reduce the levels of the di-iodo impurity, however, we reached the conclusion that attempts to reduce the impurity to required levels were not likely to be successful in a timely, commercially viable manner and that further development of PBT1 for the treatment of Alzheimer’s disease was not appropriate.

On June 16, 2005, we announced that we had completed a review of our strategic development programs and we reaffirmed our commitment to PBT2, our current lead candidate for the potential treatment of Alzheimer’s disease. PBT2 was announced as a new lead metal protein attenuating compound, or MPAC, molecule for Alzheimer’s disease in early August 2003. PBT2 is the result of rational drug design. It was built “from the ground up” to fulfill very specific criteria. It was designed so that it will be orally bioavailable and cross the blood-brain barrier. PBT2 was selected from over 300 compounds that had been developed by us at such time on the basis of its significant effectiveness in both pre-clinical ~~in vitro~~ ~~and~~ ~~in vivo~~ testing. It was designed to have an improved safety and efficacy profile compared to PBT1. Phase I trials for PBT2 were completed by February 2006 in healthy young and aged volunteers and demonstrated that the drug was well tolerated and suitable for Phase II clinical development. During 2007, a Phase IIa clinical study was undertaken in elderly patients with Alzheimer’s disease over three months. The top line results were announced in February 2008, including the primary endpoints of safety and tolerability being met together with several secondary endpoints in biomarker and cognition endpoints also being met. In July 2008, the results of the Phase IIa trial were published in ~~The Lancet Neurology~~ journal. The key findings included that PBT2 was well tolerated, with the safety profile of PBT2 being similar to that of the placebo, that the level of Abeta in the cerebrospinal fluid was significantly lowered and that two measures of executive cognitive function were improved in patients on the higher dose of PBT2. Also in July 2008, the results of extensive pre-clinical research findings for PBT2 were published in the journal ~~Neuron.~~ The key findings included the demonstration that PBT2 could rapidly improve cognition in transgenic mice, prevent the formation of toxic soluble Abeta oligomers, lower the Abeta levels in the brain of transgenic mice and protect neurons from the toxic effect of Abeta at the synapses between neurons enabling improved neurotransmission. In March 2009, we published further data on the impact of PBT2 on synapses in transgenic animal models. The findings demonstrated that PBT2 could prevent the loss of synapses in these Alzheimer’s disease animal models, indicating that PBT2 has a potent neuroprotective effect on neurons, consistent with the observation that PBT2 can improve cognitive performance in impaired transgenic animals.

~~In November 2009, an erratum to the July 2008 edition of~~ ~~The Lancet Neurology~~ journal was published that corrected the original results of the neuropsychological test battery, or NTB, arising from the Phase IIa trial. The corrected results show that in addition to two measures of executive cognitive function found to be significantly improved, the overall executive function domain of the NTB, comprising five cognitive tests, was significantly improved for those patients taking 250mg of PBT2 compared to patients on placebo. In April 2010, we published an unblinded analysis of the responses of individual patients treated with PBT2 in the Phase IIa clinical trial in ~~The Journal of Alzheimer’s Disease~~. The analysis demonstrates that there was a significant probability that any patient that showed cognitive executive function improvement in the trial was being treated with 250mg of PBT2. Moreover, 81% of patients taking the 250mg dose of PBT2 responded better on the executive function of the NTB score than the best performing patient on placebo. Improvement in ADAS-cog, a measure of memory and cognition, was observed in patients treated with 250mg of PBT2, almost reaching statistical significance by 12 weeks of the Phase IIa trial. The corrected cognitive data from the Phase IIa trial together with the additional analysis provides strong evidence of the ability of PBT2 to improve cognitive executive function as measured by the NTB. In March 2011 we announced that the New York based Alzheimer’s Drug Discovery Foundation is making a $700,000 project based investment towards a Phase II study in 40 patients with prodromal or mild Alzheimer’s disease. The primary outcome measure for this trial is the burden of amyloid in the brain as measured by brain imaging techniques. For details regarding clinical trials for PBT2, our lead compound, see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.”

In late July 2008, we received the findings from a report commissioned by us from U.S.-based clinical researchers on the suitability of PBT2 for Huntington’s disease. The report detailed the relevance of animal modeling experiments done with PBT2, its demonstrated mode of action in the brains of Huntington’s disease model mice and its promising safety and efficacy findings in the recently completed Alzheimer’s disease Phase IIa study with PBT2. The report concluded that PBT2 was recommended to proceed to clinical trials in Huntington’s disease research participants. In July 2010, we presented data emerging from our research and development that the neuroprotective qualities of our lead product candidate PBT2 indicate that PBT2 may have clinical application in Huntington’s disease patients in addition to Alzheimer’s disease. At the International Conference on Alzheimer’s Disease in Hawaii, our Head of Research, Associate Professor Robert Cherny, described how PBT2 prolonged survival, increased motor strength and delayed involuntary limb clenching that otherwise presents in the transgenic mouse model of Huntington’s disease. In addition, PBT2 appears to prevent the aggregation of the hallmark toxic mutant huntingtin protein. Examination of the brains of transgenic mice revealed that PBT2 had a significant impact on preventing the degeneration of neurons, further evidencing the neuroprotective attributes of PBT2 that had been reported earlier in our work on Alzheimer’s disease. In December 2010, our management assembled a team to develop a Phase IIa clinical trial protocol for the treatment of Huntington’s disease with PBT2. The group is comprised of leading clinical researchers from Australia and the United States, including members from the Huntington Study Group based in the United States and Australia. PBT2 has previously demonstrated that it can improve cognitive executive function in a Phase IIa study in Alzheimer disease patients. The team is finalizing a Phase IIa study design most appropriate for PBT2, understanding its potential as a disease modifying approach to the treatment of this crippling disease.

In August 2009, a key patent protecting our clinical drug asset PBT2 was granted ~~in Europe~~ by the European Patent Office, or the EPO. The patent entitled ‘8-Hydroxyquinoline derivatives’ covers the composition of matter of selected families of 8-Hydroxyquinoline compounds, including PBT2, and the uses of such compounds for the treatment of neurological diseases, including Alzheimer’s disease and Huntington’s disease. The European patent has a ~~20 year~~20-year term expiring on July 16, 2023, with a possible extension of the term of up to five additional years under supplementary protection provisions. In July of 2010, we received notification from the EPO that the mandatory nine month ~~post grant~~post-grant opposition period had expired in Europe and that the patent had been entered into the European Register of Patents. Also in August 2009, we received a notice of allowance from the United States Patent and Trade Mark Office, or USPTO, for our key patent protecting our clinical drug asset PBT2. The patent was granted in November 2009. The U.S. patent, which is also entitled ‘8-Hydroxyquinoline derivatives,’ covers the composition of matter of selected families of 8-Hydroxyquinoline compounds, including PBT2. In August 2010, we announced that the USPTO granted a recalculation of such U.S. patent term to extend it by 889 days and accordingly, such patent will expire on December 21, 2025. It is possible that the patent may be further extended in the future under the pharmaceutical extension of term provisions that apply in the United States. In the same month August 2010, the nine month mandatory post-grant opposition period for the related patent case in Europe lapsed without any third party opposition. Accordingly, the patent case in Europe was placed on the Register of European Patents and the term will expire on July 16, 2023 with possible pharmaceutical extension of patent term of five years. In April 2011, we announced that the Japanese Patent Office had granted the same patent, also entitled ‘8-Hydroxyquinoline derivatives’, with the claimed subject matter encompassing compounds and pharmaceutical compositions containing PBT2 and the use of the compounds for the treatment of Alzheimer’s disease. The Japanese patent will expire on July 2023 and may be eligible for pharmaceutical extension of patent term for up to a further five years. In November 2011, we announced that we received a notice of allowance from the USPTO, for our key patent protecting our product candidate for Parkinson’s disease, PBT434. The patent is entitled ‘Neurologically Active Compounds’ and covers the composition of matter and pharmaceutical compositions of selected families of 8-hydroxy quinazolinone compounds, including PBT434.

Since inception, we have not been required to invest material amounts for capital expenditures since our development efforts have taken place at research facilities operated by institutions with which we have relationships. In the three fiscal years ended June 30, 2012, our capital expenditures have totaled A$63,121.

Alzheimer’s disease

Since completing our initial public offering and listing process of our ordinary shares on the ASX on March 28, 2000, we have concentrated our resources toward the pursuit of our disease targets and creation of a chemical library of metal protein attenuating compounds, or MPACs. PBT2 was announced as Prana’s lead MPAC for Alzheimer’s disease in early August 2003. PBT2 is the result of rational drug design and was built “from the ground up” to fulfill very specific criteria. It was designed so that it will be orally bioavailable and cross the blood-brain barrier. PBT2 was selected from over 300 MPAC compounds that had been developed by us at such time on the basis of its significant effectiveness in pre-clinical testing, both in vitro and in vivo. It was designed to have an improved safety and efficacy profile compared to the prototype MPAC, PBT1. Phase I trials for PBT2 were completed by February 2006 in healthy young and aged volunteers and demonstrated that the drug was well tolerated and suitable for Phase II clinical development.

During 2007, a Phase IIa clinical study was undertaken in elderly patients with Alzheimer’s disease over three months. The top line results were announced in February 2008, including the primary endpoints of safety and tolerability being met together with several secondary endpoints in biomarker and cognition endpoints also being met. In July 2008, the results of the Phase IIa trial were published in The Lancet Neurology journal. The key findings included that PBT2 was well tolerated, with the safety profile of PBT2 being similar to that of the placebo, that the level of Abeta in the cerebrospinal fluid was significantly lowered and that two measures of executive cognitive function were improved in patients on the higher dose of PBT2.

Also in July 2008, the results of extensive pre-clinical research findings for PBT2 were published in the journal Neuron. The key findings included the demonstration that PBT2 could rapidly improve cognition in transgenic mice, prevent the formation of toxic soluble Abeta oligomers, lower the Abeta levels in the brain of transgenic mice and protect neurons from the toxic effect of Abeta at the synapses between neurons enabling improved neurotransmission. In March 2009, we published further data on the impact of PBT2 on synapses in transgenic animal models. The findings demonstrated that PBT2 could prevent the loss of synapses in these Alzheimer’s disease animal models, indicating that PBT2 has a potent neuroprotective effect on neurons, consistent with the observation that PBT2 can improve cognitive performance in impaired transgenic animals.

In November 2009, an erratum to the July 2008 edition of The Lancet Neurology journal was published that corrected the original results of the neuropsychological test battery, or NTB, arising from the Phase IIa trial. The corrected results show that in addition to two measures of executive cognitive function found to be significantly improved, the overall executive function domain of the NTB, comprising five cognitive tests, was significantly improved for those patients taking 250mg of PBT2 compared to patients on placebo. In April 2010, we published an unblinded analysis of the responses of individual patients treated with PBT2 in the Phase IIa clinical trial in The Journal of Alzheimer’s Disease. The responder analysis demonstrated that there was a significant probability that any patient with improved cognitive executive function in the trial was being treated with 250mg of PBT2. Moreover, 81% of patients taking the 250mg dose of PBT2 responded better on the executive function of the NTB score than the best performing patient on placebo. Improvement in ADAS-cog, a measure of memory and cognition, was observed in patients treated with 250mg of PBT2, almost reaching statistical significance by 12 weeks of the Phase IIa trial. The corrected cognitive data from the Phase IIa trial together with the additional internal analysis provided strong evidence of the ability of PBT2 to improve cognitive executive function as measured by the NTB.

In March 2011, we announced that the New York-based Alzheimer’s Drug Discovery Foundation would make a $700,000 project-based investment towards a Phase II study in 40 patients with prodromal or mild Alzheimer’s disease. The primary outcome measure for this trial is the burden of amyloid in the brain as measured by brain imaging techniques. For additional details regarding the clinical trial in Alzheimer’s disease with PBT2, see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.”

Huntington’s disease. In late July 2008, we received the findings from a report commissioned by us from U.S.-based clinical researchers on the suitability of PBT2 for Huntington’s disease. The report detailed the relevance of animal modeling experiments done with PBT2, its demonstrated mode of action in the brains of Huntington’s disease model mice and its promising safety and efficacy findings in the recently completed Alzheimer’s disease Phase IIa study with PBT2. The report concluded that PBT2 was recommended to proceed to clinical trials in Huntington’s disease research participants.

In July 2010, we presented data emerging from our research and development that the neuroprotective qualities of our lead product candidate PBT2 indicate that PBT2 may have clinical application in Huntington’s disease patients in addition to Alzheimer’s disease. At the International Conference on Alzheimer’s Disease in Hawaii, our Head of Research, Associate Professor Robert Cherny, described how PBT2 prolonged survival, increased motor strength and delayed involuntary limb clenching that otherwise presents in the transgenic mouse model of Huntington’s disease. In addition, PBT2 appears to prevent the aggregation of the hallmark toxic mutant huntingtin protein. Examination of the brains of transgenic mice revealed that PBT2 had a significant impact on preventing the degeneration of neurons, further evidencing the neuroprotective attributes of PBT2 that had been reported earlier in our work on Alzheimer’s disease.

In December 2010, our management assembled a team to develop a Phase IIa clinical trial protocol for the treatment of Huntington’s disease with PBT2. The group is comprised of leading clinical researchers from Australia and the United States, including members from the Huntington Study Group based in the United States and Australia. The team designed a six month Phase IIa clinical trial testing study most appropriate for PBT2, or the Reach2HD Trial, which includes a double blind placebo controlled study of 100 patients with early to mid-stage Huntington’s Disease. On April 30, 2012, we announced that the first patient had been dosed in the Reach2HD Trial. For additional details regarding the clinical trial in Huntington’s disease with PBT2, see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.”

Brain Cancer. In September 2009, we received a report on a study conducted on PBT519, our lead brain cancer MPAC, by the Royal Melbourne Hospital. The report showed that PBT519 was able to significantly prevent the growth of the tumors of the deadly glioblastoma multiforme form of brain cancer in mouse models of the disease. Moreover, PBT519 appeared to be very well tolerated and was at least as efficacious as the current leading form of chemotherapy, temozolomide. The data indicates that PBT519 may work synergistically with temozolomide in reducing the growth of such brain tumors. The company is generating mechanistic information on the behaviour of this compound and generating other structurally related MPACs with potential anti-cancer activity. During 2012, prospective candidate compounds have been submitted to the National Institutes for Cancer in the National Institutes of Health and the Department of Health and Human Services based in Bethesda, Maryland. See Item 4.B “Business Overview – Platform Technology and Research Programs – Brain ~~Cancer”.~~Cancer.”

Parkinson's disease. In September 2010, we announced that we have selected a new novel lead drug candidate with potential to be developed as a disease modifying treatment for Parkinson’s disease, PBT434. Over the past year, substantial mechanistic information of PBT434 has been generated and the company was awarded a grant of $206,000 from the New York based Michael J. Fox Foundation to initiate pre-clinical development of the compound. See Item 4.B “Business Overview - Platform Technology and Research Programs - ~~Parkinson’s~~Parkinson's Disease.”

B.	Business Overview

Prana’s Background

Medical science has made a significant number of breakthroughs over the past century. The average life span in western cultures has substantially increased. The diseases associated with aging have, however, yet to be fully understood or effectively treated. It is now believed that a number of age-related diseases may be capable of being treated.

The protein believed to be involved in the toxicity associated with Alzheimer’s disease is beta amyloid. Very little was known about beta-amyloid protein until 1984 when Professors Colin Masters, Konrad Beyreuther and the late Dr. George Glenner sequenced the chemistry of the protein which has since become the dominant focus of Alzheimer’s disease research world-wide.

In 1987, Professors Masters, Beyreuther and Rudi Tanzi of Harvard Medical School discovered how beta-amyloid was produced and in 1994, Professor Ashley Bush of Harvard Medical School discovered that the interaction between metals and beta-amyloid is associated with the toxicity seen in Alzheimer’s disease, hopefully paving the way for the development of therapeutic drugs to treat the disease.

Our intellectual property has been developed over an extended period through the collaborative efforts of highly regarded scientists and research institutions in this field.

Research Institutions

The intellectual property owned by our company has been developed at several internationally recognized institutional research facilities, listed below, and through a team of scientists employed or engaged by our company who are based at the University of Melbourne:

	·	The Massachusetts General Hospital, Genetics and Aging Unit in Boston. Massachusetts General Hospital is the largest teaching hospital for Harvard Medical School;

	·	The University of Melbourne, Department of Pathology;

	·	The Mental Health Research Institute in Melbourne; and

The Biomolecular Research Institute in Melbourne.

Work conducted at the first three of these institutions demonstrated that clioquinol, codenamed PBT1, had potential efficacy for the treatment of Alzheimer’s disease. Our research efforts led to the development of a novel MPAC within the same chemical class as PBT1, PBT2, a low molecular weight chemical entity that demonstrates a significant pre-clinical improvement over PBT1, and currently a library of ~~approximately~~over 800 MPAC molecules in total (approximately 200 of which are of the same chemical class as PBT1 with the remaining MPACs of other chemical classes). Our research program aims to find further and potentially more effective preferred compounds for the treatment of Alzheimer’s disease as well as for our other major disease indications (such as Huntington’s disease, Parkinson’s disease, certain cancers and age-related macular degeneration).

Platform Technology and Research Programs

We regard our intellectual property as a “platform technology” since we believe that it addresses the causes of a broad spectrum of age-related diseases based on the interrelationship of metals and proteins. To date, the majority of our research efforts have been directed at research into potential therapeutics for the treatment of Alzheimer’s disease, as well as Huntington’s disease and Parkinson’s disease. Published data together with our initial findings have provided strong indications that the pathology for other certain age-related and degenerative disorders may also be based on the inter-relationship between certain metals and proteins, and we believe that the platform technology may also be applicable for: certain cancers; age-related macular degeneration; Motor Neuron disease; Creutzfeldt-Jakob disease; age-related cataracts; and other neurodegenerative diseases.

Alzheimer’s disease. Research is ongoing to increase our understanding of the neuropathology of Alzheimer’s disease. Our research continues to focus on the structure and function of beta-amyloid and its precursor, and protein structural studies specifically around the sites of interaction between metals, metal complexes, our MPACs and the significant proteins in Alzheimer’s disease, such as Amyloid Precusor Protein and beta-amyloid. PBT2, our lead compound from our MPAC library for Alzheimer’s disease, has been extensively tested in both in vitro and in vivo animal models for its ability to reduce both the amount of Abeta and its toxic effects in the brain. Results of the research, which were published in the journal Neuron in July 2008, demonstrate that PBT2 can rapidly improve cognition in transgenic mice, prevent the formation of toxic soluble Abeta oligomers, lower the Abeta levels in the brain of transgenic mice and protect neurons from the toxic effect of Abeta at the synapses (the space) between neurons, enabling improved neurotransmission. Experimental work during 2008 and 2009 has shown that PBT2 can also prevent the loss of neuronal synapses, a feature of the brain degeneration associated with Alzheimer’s disease.

During 2009 and 2010, our scientists further examined the apparent link between aging and disease related defects due to metal imbalances in the brain. In February 2010, we reported in The Journal of Neuroscience on the loss of synaptic zinc uptake mechanisms in aged animal models and how this correlated with cognitive impairment. Our scientists also investigated the molecular basis for the neuroprotective qualities of PBT2 in animal models of Alzheimer’s disease. They found that several important intracellular signaling pathways required for neuronal function were stimulated when animals were treated with PBT2. In March 2011, we reported in the scientific journal PLoS ONE that in the same Alzheimer’s animal model where PBT2 is able to significantly improve cognition, ~~there were~~it also caused changes in the brain anatomy. Specifically, it was observed that PBT2 treatment had significantly increased the numbers of spines on the branches (or dendrites) of neurons in the hippocampus, a memory centre ~~specifically~~ affected in Alzheimer’s disease. Increasing the number of spines permits many more neurons to interconnect with any particular neuron thereby increasing the brain’s capacity to carry out learning and memory functions. These findings provide an insight into how PBT2 helps preserve and protect neurons in Alzheimer’s disease and also in animal models of Huntington’s disease. ~~For a description~~

In September 2011, new data was published on how the ability of PBT2 to transport and deliver zinc and copper in the brain contributes to mechanisms related to its anti-toxic effects of Alzehimer disease, including inhibition of beta-amyloid aggregation and promotion of the ~~history and development~~activation of GSK3 protein, an important brain protein suggested to be involved in Alzheimer disease. In addition, one of our ~~lead MPAC,~~research scientists, Dr Paul Adlard, received an Australian National Health and Medical Research Council (NHMRC) grant to study the benefits of PBT2 and other compounds in age-related cognitive impairment in a program entitled, "The role of metals in healthy brain aging: identification of novel compounds to prevent age-related cognitive decline.” The grant will provide an opportunity to explore the importance of metal distribution imbalances in the brain to both cognitive deficits with ageing and Alzheimer disease. Also in October 2011, our scientist and co-inventor of PBT2, Dr. Kevin Barnham, was awarded a NMHRC grant to explore how PBT2's copper binding and transport activity can inhibit brain excitotoxicity, which is the overstimulation of certain chemical neurotransmitter receptors on neurons (NMDA receptors). Excitotoxicty is a common feature in the brains of patients affected by neurodegenerative disorders such as ~~a therapeutic for~~Alzheimer’s disease and Huntington’s disease. In March 2012, our newly appointed Chief Scientific Advisor, Professor Rudolph E. Tanzi, published an important body of work on the ~~treatment~~role of brain metals in the etiology of Alzheimer’s disease, ~~see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.”~~supporting Prana’s therapeutic strategy. The paper was entitled, ‘The Zinc Dyshomeostasis Hypothesis of Alzheimer’s Disease’ published in PLoS ONE in March 2012.

Our research into the interaction of metals with Abeta protein has resulted in the identification of agents which can block the metal binding site on Abeta thereby preventing the downstream toxicity of Abeta protein on neurons. This therapeutic approach to Alzheimer’s disease is an alternative and complimentary drug strategy to our MPACs, which directly compete with Abeta protein by binding metals such as copper and zinc. Results from several proof-of-concept compounds were published in the Proceedings of the National Academy of Sciences Journal in May 2008. In addition to their use as Alzheimer disease therapeutics, these amyloid binding compounds may also have potential as novel imaging agents, binding Abeta in the brain. Our discovery program is generating novel forms of this alternative anti-amyloid class of compounds for testing in animal models as either therapeutic or diagnostic agents.

1920

Metals, in particular copper, may cause Abeta protein to form specific toxic oligomers that inhibit normal neurotransmission in the brain. Accordingly, these toxic oligomers present a novel immunological target for vaccine research. Since 2004, we have undertaken a program to create a monoclonal antibody that only recognizes specific forms of the toxic Abeta oligomers and not other forms of Abeta protein. A candidate monoclonal antibody has been identified and will be tested for its efficacy and safety in a prospective mouse passive vaccine trial. However, initiation of the trial has been indefinitely delayed due to difficulties in the scale up and purification of the monoclonal antibody.

~~Huntington’s~~Huntington's Disease. Huntington’s disease is a crippling genetic neurodegenerative disorder of the central nervous system caused by a mutation in a gene which encodes the huntingtin protein. The disease results in progressive deterioration of physical, cognitive and emotional abilities that lead to severe incapacitation and eventually death, generally 15-25 years after the onset of the disease. Huntington’s disease primarily affects adults, usually between the ages of 30 and 50.

U.S.-based researchers have presented the effects of clioquinol in an animal model of Huntington’s disease, showing evidence of improved behavior, motor skills and inhibition of the abnormal form of the huntingtin protein. Based on these findings, we have tested several proprietary MPACs in collaboration with researchers based at the Veterans Affairs Medical Center and the Department of Neurology, University of California, San Francisco, under a collaborative research agreement. PBT2 has shown good efficacy in the R6/2 mouse model of Huntington’s disease.

In late July 2008, we received the findings from a report commissioned by us from U.S.-based clinical researchers on the suitability of PBT2 for Huntington’s ~~disease. The report detailed the relevance of animal modeling experiments done with PBT2, its demonstrated mode of action in the brains of Huntington’s~~ disease, ~~model mice and its promising safety and efficacy findings in the recently completed Alzheimer’s disease Phase IIa study with PBT2. The report concluded~~concluding that PBT2 was recommended to proceed to clinical trials in Huntington’s disease research participants. Further work undertaken by our scientists during ~~2009,2010~~2009, 2010 and 2011 on the neuroprotective qualities of PBT2 provides further evidence that PBT2 may be considered for clinical application in Huntington’s disease. Others scientists have previously published data that demonstrates that the levels of copper in the brains of Huntington’s disease animals, such as the R6/2 mouse model, have elevated levels of copper relative to normal mice and that copper promotes the aggregation of the mutant Huntington protein formed in the brains of affected animals. Our scientists hypothesize that PBT2 may benefit Huntington’s patients by preventing the aggregation of the huntingtin protein and through its neuroprotective properties, help to maintain normal neuronal function. This hypothesis is further supported by the findings of other ~~workers~~researchers that the mutant huntingtin protein has a copper binding site and that the formation of oligomers or aggregates of the mutant protein that are toxic to neurons appears to be a ~~metal dependent~~metal-dependent process. The role of brain metals in the etiology of Huntington’s disease was described in the Archives of Neurology paper entitled, ‘Alterations in Brain Transition Metals in HD’ authored by Professor Diana Rosas of the Center for Neuroimaging of Aging and Neurodegenerative disease at Massachusetts General Hospital in Boston. This important paper describes how the rise in levels of iron in the brains of people carrying the mutant huntingtin gene correlates with the severity of symptoms and also predicts the time of disease onset. Professor Rosas is the co-Principal Investigator of the company’s Phase IIa clinical trial in Huntington’s disease patients. Her work suggests that targeting the brain metals that accumulate in the Huntington’s disease brain could offer an alternative therapeutic strategy.

~~Parkinson’s~~Parkinson's Disease. Parkinson’s disease, another crippling disease of the aging population, causes a progressive slowing of movement, tremors and the loss of fine motor control due to the death of substantia nigra cells in the brain. The substantia nigra cells produce the neurotransmitter dopamine in the brain, which is required for normal motor coordination. Increasingly, dementia is also being recognized as a significant component of Parkinson’s disease. Existing therapies, such as dopaminergic agents, may provide some short-term symptomatic relief, but do not address the underlying cause of the disease. We believe that our platform technology may affect the aggregation of the proteins concerned and may provide a pathway for reversing the disease. Parkinson’s disease ranks among the most common late life neurodegenerative diseases.

During 2005, we entered into a contractual arrangement with the Integrative Neuroscience Facility based at the Howard Florey Institute in Melbourne to assist in the examination of the effect of MPACs administered to the 6-hydroxydopamine (PD) mouse model of the disease, which concluded with positive results. In addition, groups unrelated to us have published data that demonstrates the usefulness of clioquinol in treating the symptoms of Parkinson’s disease generated in the alternative MPTP (1-methyl-4-phenyl-1,2,3,6-tetrahydropyridine) mouse model of the disease. These two mouse models mimic the disease by using these toxins to destroy over time the cells of the substantia nigra, the area of the brain affected in Parkinson’s disease, leading to motor function loss. Based on these positive results with clioquinol in such two mouse models, we began investigating the efficacy of other selected MPACs in these two models to screen for possible MPAC candidates as treatment candidates for Parkinson’s disease. Currently, we have identified six potential compound leads that demonstrate the ability to rescue the substantia nigra neuronal cells in both models of Parkinson’s disease, that otherwise perish over time as the disease progresses. During 2009 and 2010, a lead Parkinson’s disease treatment candidate emerged, PBT434. PBT434 ~~which~~ demonstrated significant ability to protect substantia nigra cells from the toxic effects of the two toxins, 6-hydroxydopamine and MPTP, when administered in the two models of Parkinson’s ~~disease, and motor~~disease. Motor function and coordination ~~was~~were also markedly improved in both models. This neuroprotection and motor improvement was observed when the candidate compound was administered after toxins had destroyed significant amounts of substantia nigra tissue, indicating that the compound can restore and maintain normal neuronal function. In September 2010, we announced that we ~~have~~ selected PBT434 as a new novel lead drug candidate with potential to be developed as a disease modifying treatment for Parkinson’s disease. During 2011, further mechanistic characterisation work was undertaken, and it was demonstrated that PBT434 reduces the accumulation of the target protein in Parkinson’s disease and alpha-synuclein, and elevates the levels of the neuroprotective protein, , DJ-1, which helps to modulate and reduce oxidative stress in neurons. In August 2011, the New ~~York based~~York-based Michael J. Fox Foundation awarded us a grant entitled, ‘PBT434, a Novel Neuroprotective Drug For Parkinson’s Disease; Completion of Pre-Clinical Studies to Enable Human Clinical ~~Trials’. This grant will be used~~Trials.’ In August 2012, we announced that PBT434 had achieved all of its milestones to ~~initiate several~~date in preclinical toxicology studies, ~~which will assess the suitability of~~genotoxicity and safety pharmacology - allowing the compound to be positioned for ~~development as a drug for administration~~larger scale animal toxicology studies prior to ~~humans.~~commencing clinical trials.

Brain Cancer. We have initiated a program of research into the potential use of selected MPACs from our library for use in the treatment of brain cancer, in particular the most prevalent and deadly form of the disease, Glioblastoma ~~multiforme,~~Multiforme, or GBM. Patients with GBM have a very poor prognosis upon diagnosis with an estimated median survival of approximately 12 months. The most commonly prescribed treatments are chemotoxic agents together with radiation therapy, which confer a median survival increase of several months. There is an increasing body of published evidence that there are elevated levels of copper in tumors leading to increased cellular oxidative stress. Several of our MPACs that demonstrate potent toxicity against human gliomablastoma cell lines and yet remain untoxic to normal brain cells are being tested in mouse models of GBM. We believe that MPACs with a strong ability to deliver copper into tumor cells will promote their death, and we are currently investigating this in vivo.

In September 2009, we received a report on a study conducted on PBT519, our lead brain cancer MPAC, by the Royal Melbourne Hospital. The report showed that PBT519 was able to significantly prevent the growth of the tumors of the deadly GBM form of brain cancer in mouse models of the disease. Moreover, PBT519 appeared to be very well tolerated and was at least as efficacious as the current leading form of chemotherapy, temozolomide. The data indicates that PBT519 may work synergistically with temozolomide in reducing the growth of such brain tumors. During 2010 and 2011, our discovery team have been creating variants of PBT519 to further understand its mechanism of action. PBT519 and related compounds have been submitted to the United States National Cancer Institute for in vitro profiling against a large range of tumour cell lines to test for anti-tumour potency.

Clinical Trials for Our Lead Compound

In February 2005, we were awarded a research and development START grant of A$1.35 million to take PBT2 through safety testing and Phase I clinical trials for Alzheimer’s disease. Formal pre-clinical toxicology testing for PBT2 was completed and in March 2005, we commenced a series of Phase I clinical trials at a facility associated with the Utrecht University Hospital in Utrecht, the Netherlands. On November 7, 2005, we announced the successful completion of the first Phase I trial for PBT2, a double blind, placebo-controlled single dose escalation study, conducted on 55 healthy male volunteers between the ages of 18 and 50, which was designed to evaluate the safety, tolerability and pharmacokinetics of PBT2. Data from the study shows that PBT2 was well tolerated with little difference in the incidence of adverse events between those receiving PBT2 and those receiving the placebo. Additionally, the pharmacokinetic analysis demonstrated that the drug exposure increased/decreased predictably and in a linear manner, both of which are desirable characteristics for a central nervous system drug. ~~Concurrent findings in a pre-clinical mouse model indicate that PBT2 passes into the brain more extensively than its predecessor, PBT1.~~ On February 7, 2006 we announced the completion of the second Phase I safety clinical trial for PBT2. This trial was a multi-dose escalation trial of PBT2 conducted in elderly, healthy male and female volunteers completed in December 2005. Volunteers were dosed at a selected dose for seven days; the dose range was from 200mg to 800mg per day. Both Phase I trials demonstrated that PBT2 was well tolerated and suitable for progression to Phase II trials in patients with Alzheimer’s disease.

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In ~~parallel to such clinical studies,~~the third calendar quarter of 2006, chronic pre-clinical animal toxicology studies and the development work for GMP manufacture of PBT2 required for Phase II clinical studies was conducted and ~~completed by the third calendar quarter of 2006.~~completed. On July 20, 2006, while preparations for the Phase IIa clinical trial were underway, we announced key pre-clinical efficacy findings with PBT2 demonstrating that PBT2 could rapidly enhance memory function within five days of dosing in an Alzheimer’s disease mouse model, improve synaptic function and significantly reduce soluble beta-amyloid protein levels in mouse models of Alzheimer’s disease in acute 24 hour experiments. On October 5, 2006, we announced the grant of approval from the Swedish Medical Products Agency (a Swedish regulatory authority) to undertake a Phase IIa clinical trial in elderly patients with mild Alzheimer’s disease in Sweden. ~~On December 19, 2006, we announced that dosing had commenced in the Phase IIa clinical trial.~~ The Phase IIa trial was a three month double-blind, placebo-controlled safety and tolerability study of PBT2 in 80 elderly male and female patients with mild forms of Alzheimer’s disease. Tolerability, safety, cerebrospinal fluid and plasma biomarker and cognition endpoints were measured. On August 6, 2007, we announced that 55 patients (of the planned 80) had been randomized to participate in the Phase IIa clinical trial, of which 30 patients had completed the trial, and that the independent Data Safety Monitoring Board, or DSMB, appointed by us upon the recommendation of Dr. Craig Ritchie and Quintiles, for the Phase IIa clinical trial of PBT2 had reviewed the data of over 50 patients and concluded there have been no treatment-related serious adverse events or withdrawals and that the trial was safe to continue in accordance with the original protocol. ~~On September 24, 2007, we announced that~~The DSMB is an independent group of experts who review the ~~enrollment for~~accumulated safety data in ongoing clinical trials in order to safeguard the ~~Phase IIa trial had been completed~~interests and ~~that we expected to report results during the first calendar quarter~~safety of ~~2008.~~participating and future patients. On November 29, 2007, we announced that the DSMB had completed its cycle of safety review meetings and reported to us that of the 59 patients included in the review at that time, there had been no treatment-related serious adverse events or withdrawals. The DSMB confirmed that the trial was safe to continue. Patient dosing was completed on December 18, 2007, and we announced the formal completion of the study on January 2, 2008. On February 26, 2008, we publicly released the top line trial results and announced that the trial primary endpoints of safety and tolerability were met. We also announced that with respect to the secondary endpoints, namely biomarker, cognition and behavioral changes, several significant and promising changes were observed. Specifically, that in the cerebrospinal fluid (CSF), PBT2 treatment at a 250mg dose resulted in a significant decrease in the target Abeta 42 protein. In addition, at the 250mg dose, while no significant effect was observed with the ADAS-cog, two of the five NTB tests for improvement in executive function were significantly improved. In July 2008, the results of the Phase IIa trial were published in The Lancet Neurology journal. The key findings included the demonstration that PBT2 could rapidly improve cognition in transgenic mice, prevent the formation of toxic soluble Abeta oligomers, lower the Abeta levels in the brain of transgenic mice and protect neurons from the toxic effect of Abeta at the synapses between neurons enabling improved neurotransmission. Also in July 2008, the results of extensive pre-clinical research findings for PBT2 were published in the journal Neuron. The key findings included the demonstration that PBT2 could rapidly improve cognition in transgenic mice, prevent the formation of toxic soluble Abeta oligomers, lower the Abeta levels in the brain of transgenic mice and protect neurons from the toxic effect of Abeta at the synapses between neurons enabling improved neurotransmission.

In November 2009, an erratum to the July 2008 edition of The Lancet Neurology journal was published that corrected the original results of the NTB cognitive findings arising from the Phase IIa trial. The corrected results show that in addition to the two measures of executive cognitive function found to be significantly improved, the overall executive function domain of the NTB, comprising five cognitive tests, was significantly improved for those patients taking 250mg of PBT2 compared to patients on placebo. In April 2010, we published an analysis of the responses of individual patients treated with PBT2 in the Phase IIa clinical trial in the Journal of Alzheimer’s Disease. The analysis demonstrated that there was a significant probability that any patient that showed cognitive executive function improvement in the trial was being treated with 250mg of PBT2. Moreover, 81% of patients on the 250mg dose of PBT2 responded better on the executive function of the NTB score than the best performing patient on placebo. Improvement in ADAS-cog, a measure of memory and cognition, was observed with patients treated with 250mg of PBT2, almost reaching statistical significance by 12 weeks of the Phase IIa trial. The corrected cognitive data from the Phase IIa trial together with the additional analysis provides strong evidence of the ability of PBT2 to improve cognitive executive function as measured by the NTB. Also in November 2009, Prana presented its pre-clinical and clinical information package on PBT2 to the FDA in accordance with the Pre-Investigational New Drug, ~~(IND)~~or IND, Consultation Program. The meeting provided useful guidance on possible steps to take to open an IND Application with the FDA to undertake clinical trials in the United States in Alzheimer’s disease or Huntington’s disease. The meeting provided us with important information to help form our regulatory strategy for the development of PBT2 in these neurological indications.

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During the first half of 2010, we developed a Phase IIb trial protocol to test PBT2 in a Phase II trial in patients with Alzheimer’s disease under the guidance of an international protocol steering committee. The protocol provides for a substantial trial measuring the effects of PBT2 on cognition and functional abilities in patients with mild to moderate Alzheimer’s disease. We have not yet scheduled a Phase IIb trial in patients with Alzheimer’s disease, which will require significant funding. In ~~early~~November 2011, we ~~obtained support~~announced the approval from the ~~New York~~Austin Health Research Ethics Committee based ~~Alzheimer’s Drug Discovery Foundation (ADDF)~~at the Austin Hospital Melbourne, to ~~conduct~~commence a 12 month Phase II imaging ~~study~~trial with PBT2 in patients with prodromal or mild ~~Alzheimer’s~~Alzheimer disease. The ~~ADDF~~study is ~~making~~being supported in part by a ~~$700,000 project~~grant of US$700,000 from the New York based ~~investment to enable the study in~~Alzheimer's Drug Discovery Foundation, or ADDF. The trial will entail forty patients ~~to be conducted in Melbourne, Australia.~~treated for twelve months with either 250mg PBT2 or a placebo. The ~~planned~~ trial design will investigate the effect of PBT2 on a patient’s amyloid burden in the brain as measured by Positron Emission Tomography imaging (PET)., brain metabolic activity as measured by F-18-fluorodeoxyglucose, FDG - PET and brain volume by Magnetic Resonance Imaging, or MRI. As the Phase IIa trial demonstrated significant changes in cognitive executive function in twelve weeks, this trial will look at such cognitive domains over a twelve month period in this patient group. In December 2011, patient screening commenced for the imaging trial and was given the study name "IMAGINE.” The first patient was enrolled in March 2012 and the trial is currently in its recruitment phase. In September 2012, we announced that the DSMB had held its first meeting and assessed that the trial may proceed as planned.

In addition to the current activities to initiate an imaging trial in Alzheimer’s patients, we ~~have been finalizing~~finalized a protocol to test PBT2 in a Phase II trial in patients with Huntington’s disease. In April of 2011 the company announced its plans for a Phase IIa study in Huntington’s ~~disease to be~~disease. The trial is being undertaken under an open IND application through the FDA and is being conducted in ~~Australia and~~clinical sites across the United States. Huntington’s disease is a neurodegenerative inherited disease which we believe shares many pathological feature in common with Alzheimer’s disease. As an orphan indication, there is a reduced clinical development timeline.States and Australia. The Phase IIa ~~plans entail~~trial design entails a double blind placebo controlled study ~~in approximately a hundred patient’s investigating~~of 100 patients with early to mid-stage Huntington Disease and has the study name “Reach2HD.” The trial will investigate the effect of PBT2 on cognition, behaviour, functional capacity, motor effects and safety and tolerability measures. In addition, an exploratory arm of the study, under the guidance of the co-Principal Investigator of the study, Professor Diana Rosas, will involve MRI brain imaging to undertake iron mapping in a patient’s brain. Professor Rosas has published that iron and other metals change in concentration and distribution in the brain with increasing severity of the condition. In April 2012, the company announced that the first patient was enrolled into the study, which is currently in its recruitment phase.

Rational Drug Design

Rational drug design employs experiment-based models, which target the molecular composition of various substances (in the case of Alzheimer’s disease the beta-amyloid protein) to allow the design of new chemical entities with the propensity to influence targeted substances and processes. In the case of MPACs, the targeted substances believed important are proteins and metals and the process of specific interest is believed to be metal-mediated oxyradical formation which leads to neurodegenerative changes.

Our medicinal chemistry program, previously based at laboratories leased from The University of Melbourne, was transferred in October 2009 to a laboratory leased from The University of Melbourne’s Bio21 Molecular Science and Biotechnology Institute, which is a multidisciplinary research ~~centre~~center that specializes in medical, agricultural and environmental biotechnology. Accommodating more than 500 research scientists, students and industry participants, the Bio21 Institute is one of the largest biotechnology research centers in Australia.

To date, our scientists have developed a pipeline of compounds across multiple chemical classes that target the interaction of specific metals and certain aggregating proteins such as beta-amyloid. Compounds continue to be designed, synthesized and undergo the required early phase pre-clinical screening before they are available for human testing. Based on the results of initial screening, our medicinal chemists continue to develop new chemical entities with novel design features and we believe that rational ~~drug~~drug design w~~ill~~will provide new and specifically designed drugs which will display efficacy in disaggregating aggregation-prone proteins such as beta-amyloid, α-synuclein and huntingtin, paving the way for future therapeutics.

A series of in vitro assays have been established to screen compounds developed by our medicinal chemistry group. From early 2002, a program was initiated by our medicinal chemistry group to undertake preliminary in vivo pharmacology and kinetic studies of the new compounds demonstrating activity in the in vitro screens. We perform in vivo modeling for our lead compound candidates for Alzheimer’s disease with transgenic mice expressing a similar phenotype to human Alzheimer’s disease. Similarly, a transgenic mouse carrying a mutated Huntingtin gene is used to model Huntington’s disease and mice treated with neuronal toxins to produce the Parkinson’s phenotype are used to model Parkinson’s disease. Based on the results of these studies, lead compounds are selected by our medicinal chemistry group for formal pre-clinical studies. Data generated by these in vitro and in vivo screens are incorporated into our medicinal chemistry program to further refine development strategies for new compounds.

PBT2, our current Alzheimer’s disease lead MPAC product candidate ~~was~~and PBT434 our candidate lead compound for Parkinson’s disease were selected from this “rationally designed” ~~pipeline in 2003 and is the first such new and specifically designed compound to move into formal development. It has~~pipeline. Both compounds have been built “from the ground up” to fulfill very specific ~~criteria. It was designed so that it will be orally bioavailable~~criteria such as oral bioavailability and ability to cross the blood-brain barrier. PBT2 ~~was~~and PBT434 were selected from several hundred compounds ~~that had been developed by us at such time. It has been designed to~~and have ~~an improved safety and pharmacokinetic profile and has~~ demonstrated significant effectiveness in both pre-clinical in vitro and in vivo testing. For details regarding our PBT2 clinical trials see above in this Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.”

MPACs from different chemical classes to those of PBT1 and PBT2, with different structural characteristics have shown differential behavior in screens for neurological disorders other than Alzheimer’s disease. For example, over the last few years we have generated a series of MPACs differentiated for their ability to be efficacious in animal models of Parkinson’s disease and brain cancer.

Patents and Licenses

Patent Matters

Patent matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Statutory differences in patentable subject matter may limit the protection we can obtain on some or all of our inventions outside Australia or prevent us from obtaining patent protection outside Australia, either of which could ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations. For example, methods of treating humans are not patentable in many countries outside Australia and the United States. Moreover, since patent applications are not published until at least 18 months from their first filing date and the publication of discoveries in the scientific literature often lags behind actual discoveries, we cannot be certain that we or any of our licensors were the first creator of inventions covered by pending patent applications or that we or our licensors were the first to file patent applications for such inventions. Additionally, the grant and enforceability of a patent is dependent on a number of factors that may vary between jurisdictions. These factors may include the novelty of the invention, the requirement that the invention not be obvious in the light of prior art (including prior use or publication of the invention), the utility of the invention, and the extent to which the patent clearly describes the best method of working the invention.

While we intend to seek patent protection for our therapeutic products and technologies, we cannot be certain that any of the pending or future patent applications filed by us or on our behalf will be approved, or that we will develop additional proprietary products or processes that are patentable or that we will be able to license any other patentable products or processes. We also cannot be certain that others will not independently develop similar products or processes, duplicate any of the products or processes developed or being developed by us or licensed to us, or design around the patents owned or licensed by us, or that any patents owned or licensed by us will provide us with competitive advantages. Furthermore, we cannot be certain that patents held by third parties will not prevent the commercialization of products incorporating the technology developed by us or licensed to us, or that third parties will not challenge or seek to narrow, invalidate or circumvent any of the issued, pending or future patents owned or licensed by us.

Our commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court of competent jurisdiction determines that we were infringing any third party patents, we could be required to pay damages, alter our products or processes, obtain licenses or cease certain activities. We cannot be certain that the licenses required under patents held by third parties would be made available on terms acceptable to us or at all. To the extent that we are unable to obtain such licenses, we could be foreclosed from the development, export, manufacture or commercialization of the product requiring such license or encounter delays in product introductions while we attempt to design around such patents, and any of these circumstances could ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations.

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We may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third party proprietary rights. Such litigation could result in substantial costs and diversion of effort by us. We may have to participate in opposition proceedings before the Australian Patent and Trademark Office or another foreign patent office, or in interference proceedings declared by the United States Patent and Trademark Office, to determine the priority of invention for patent applications filed by competitors. Any such litigation, interference or opposition proceeding, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or commercializing our products and could ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations.

In addition to patent protection, we rely on unpatented trade secrets, know-how and other confidential information as well as proprietary technological innovation and expertise that are protected in part by confidentiality and invention assignment agreements with our employees, advisors and consultants.

Patent Portfolio

The following table presents our portfolio of patent and patents applications, including their status and a brief description of the respective inventions.

Patent	Status	Invention
“Beta amyloid peptide inhibitors” ~~Filed: July 21, 2000~~ ~~Applicant: Biomolecular Research Institute and University of Melbourne~~ ~~Assigned to Prana Biotechnology Limited~~	Patents have been granted in the USA, Canada and Australia.	The invention encompasses claims to specific classes of metallocomplex agents capable of inhibiting binding of specified metal ions to the N-terminus of beta-amyloid and the use of these agents in the treatment of amyloid related conditions including Alzheimer’s Disease.
~~“Neurotoxic Oligomers”~~ Filed: ~~June 28,~~July 21, 2000 ~~Applicants:~~
Applicant: Biomolecular Research Institute and University of Melbourne
Assigned to Prana Biotechnology Limited ~~and The General Hospital Corporation~~
“Neurotoxic Oligomers”	Patents have been ~~granted~~Granted in Australia, ~~and~~ New Zealand and the ~~USA.~~USA (2). Applications are under examination in ~~the USA (divisional),~~ Canada, China and ~~Japan~~Japan. A case has been Granted in Europe and ~~Europe.~~is undergoing Validation in separate countries.	The invention is directed to an immunotherapy strategy using or targeting tyrosine cross-linked protein aggregates. The approach may be used in the treatment of Alzheimer’s Disease and other amyloid related conditions.
~~“8-Hydroxyquinoline Derivatives”~~ Filed: ~~July 16, 2003~~ ~~Applicant:~~June 28, 2000
Applicants: Prana Biotechnology Limited and The General Hospital Corporation

“8-Hydroxyquinoline Derivatives”	Patents in Europe, the USA, New Zealand, Canada, Japan, Russia, Singapore, South Korea, Australia, Mexico and South Africa have been ~~granted.~~Granted. A patent in Hong Kong has been registered. Applications in India, Brazil, ~~South Korea,~~USA (Divisional), Israel and China are under examination.	The invention is directed to chemical scaffolds of the 8-Hydroxyquinoline MPAC class and their utility in the treatment of neurological conditions.
~~“Neurologically-Active Compounds”~~ Filed: ~~October 3 ,~~July 16, 2003
Applicant: Prana Biotechnology Limited
“Neurologically-Active Compounds”	Patents in the USA, New Zealand, Canada, Japan, Mexico, India, Australia, South Korea, South Africa and Singapore have been Granted. Applications in China, Europe, ~~South Korea,~~the USA (divisional), Brazil, Japan and Israel are under examination. A patent in Hong Kong has been ~~processed. Divisional applications have been filed in Europe and the USA.~~registered.	The invention is directed to alternative MPAC chemical structures and their utility in the treatment of neurological conditions.

~~Patent~~	~~Status~~	~~Invention~~Filed: October 3, 2003
~~“Neurologically- Active Compounds”~~ ~~Filed: April 1, 2005~~ Applicant: Prana Biotechnology Limited
“Neurologically- Active Compounds”	Patents have been Granted in Singapore, Japan, Mexico, Russia, Australia, the USA, India, New Zealand and South Africa. ~~An application in Russia has been Accepted.~~ Applications in ~~India,~~ Israel, ~~Japan,~~ Europe, ~~the USA~~China, Canada and ~~China~~South Korea are under examination. Examination has been requested in ~~Brazil, Canada and Korea.~~Brazil. A patent in Hong Kong has been ~~processed.~~registered.	The invention is directed to ‘F4’ MPAC chemical structures and their utility in the treatment of neurological conditions and includes Parkinson’s Disease lead compounds.
Filed: April 1, 2005
Applicant: Prana Biotechnology Limited
“Use of Clioquinol for the treatment of Alzheimer’s Disease” ~~Filed: February 13, 1998~~ ~~Applicant: Prana Biotechnology Limited~~	A Patent has been Granted in the USA.	This invention is directed to the use of clioquinol for the treatment of Alzheimer’s Disease.
Filed: February 13, 1998
Applicant: Prana Biotechnology Limited
“Pharmaceutical compositions of Clioquinol with B12 for therapeutic use” ~~Filed: February 13, 1998~~ ~~Applicant: Prana Biotechnology Limited.~~	~~Patent~~A patent has been Granted in the USA.	This invention is directed to clioquinol pharmaceutical compositions comprising B12.
Filed: February 13, 1998
Applicant: Prana Biotechnology Limited.
“Use of Clioquinol for the treatment of Parkinson’s Disease” ~~Filed: February 13, 1998~~ ~~Applicant: Prana Biotechnology Limited.~~	~~Patent~~A patent has been Granted in the USA.	This invention is directed to the use of clioquinol for the treatment of Parkinson’s Disease.
Filed: February 13, 1998
Applicant: Prana Biotechnology Limited.
“Method of treatment and prophylaxis and agents useful for ~~same”~~ ~~Filed: April 13, 2007~~ ~~Applicant: Prana Biotechnology Limited~~ same"	~~A patent has~~Patents have been Granted in ~~Singapore.~~Singapore and New Zealand. An application has been Accepted in South Africa. Applications are under examination in Australia, Israel, ~~and New Zealand are being examined.~~ ~~Applications have been filed in,~~ Canada, China, Europe, the USA, South Korea, Japan, India and Brazil. Divisional applications have been filed in Australia, Israel, New Zealand, Canada, China, Europe, the USA, South Korea, Japan, India and ~~Brazil.~~ Brazil, with patents Granted in EU and New Zealand.	This invention was originally filed to claim the use of MPAC compounds for the treatment of Age related Macular Degeneration. The case has since been divided into two separate applications that each contain composition of matter claims on two different chemical scaffolds.
Filed: April 13, 2007
Applicant: Prana Biotechnology Limited

“A method of prophylaxis or treatment and agents for same”. ~~Filed: June 22, 2007~~ ~~Applicant: Prana Biotechnology Limited~~	A patent has been Granted in the USA. Applications ~~have been filed~~are under examination in Australia, Canada, China, Europe ~~the USA~~ and Japan. ~~An application in Australia is under examination.~~	This invention is directed to novel MPAC compounds and compounds for treating certain brain cancers.
Filed: June 22, 2007
Applicant: Prana Biotechnology Limited
“Compounds for therapy and diagnosis” ~~Filed: December 5, 2008~~ ~~Applicant: Prana Biotechnology Limited~~	A patent has been Granted in New ~~Zealand.~~Zealand, USA and Australia. Remaining applications in ~~Australia,~~ Canada, Europe ~~USA~~ and Japan ~~have been filed.~~are under examination.	This invention is directed to anti-amyloid (metallocomplexes) compounds for the treatment of Alzheimer’s Disease.
Filed: December 5, 2008
Applicant: Prana Biotechnology Limited
“Processes for the preparation of 8-Hydroxyquinoline Derivatives” ~~Filed: 11 December 2008~~ ~~Applicant: Prana Biotechnology Limited~~	An Australian provisional application has been filed.	This invention is directed to synthetic routes for 8-Hydroxyquinoline Derivatives.
~~“Quinazolinone compounds”~~ Filed: 2411 December 2008
Applicant: Prana Biotechnology Limited
“Quinazolinone compounds”	~~National Phase of the international (PCT) application was entered~~Applications in Australia, Europe, Japan and the ~~USA.~~USA are being examined.	This invention is directed to novel MPAC compounds and to selected ~~MPAC’s~~MPACs used in the treatment of Parkinson’s Disease.
Filed: 24 December 2008
Applicant: Prana Biotechnology Limited

Patents and License Agreements

On February 8, 2000, we entered into a patent assignment and intellectual property licensing agreement with The Biomolecular Research Institute, or BRI, under which two patent applications were assigned to us. One is an international patent application (PCT application) entitled ‘Beta-Amyloid Peptide Inhibitors’ which is granted in Australia, Canada and in the United States and in prosecution in Europe and Japan. The invention is directed to compounds which block the metal binding site on Beta-Amyloid. The technologies or products that may arise from this invention include metallo-based compounds as therapeutics or preventative treatments for Alzheimer’s disease. The other patent entitled ‘Method of Screening for inhibitors of Alzheimer’s Disease,’ an Australian provisional application that matured into a patent application in the United States, was allowed to lapse in the second half of 2009. In consideration of the assignment of the patents, we are required to pay BRI a royalty of 1.5% on the net invoiced price of products sold utilizing such patents. In addition, we must also pay the lesser of 1.5% of the net invoice price of products sold or 10% of royalties received from any licensee or sub-licensee we appoint to utilize such patents, or a minimum of A$2,000 a year. If the patent rights are assigned before a total of A$20,000 has been paid as royalties, the difference between the royalties paid and A$20,000 must be paid to BRI. To date, we paid a total of $350,000 under the agreement, all of which amount was paid in 2000. On September 10, 2007, we, BRI and the Commonwealth Scientific and Industrial Research Organization, or CSIRO, executed an Assignment and Novation Deed under which BRI assigned to CSIRO all of its rights and obligations under the patent assignment agreement, including entitlement to royalties.

On January 1, 2001, we entered into a license agreement with the General Hospital Corporation, or GHC, at Massachusetts General Hospital, under which we licensed from GHC certain patents. The agreement was subsequently amended on August 8, 2001 and March 15, 2004. Under the agreement, as amended, the license for a particular patent expires at the end of the term of the patent rights under the respective patent. In general, the anticipated patent expiration date is 20 years from the filing date of the respective patent application. Under the agreement, we agreed to pay GHC a total of U.S.$166,590 in monthly installments over a 30 month period beginning January 1, 2001 and U.S.$182,000 in monthly installments over a 30 month period beginning August 1, 2001 for the right to use the results of research under the license agreement. Such obligations have been satisfied by us in full, and we hold the rights under the license. We currently retain a license under the agreement with GHC for the patent ‘Neurotoxic Oligomers.’ This international patent application (PCT application) was filed on June 28, 2000 and matured into national phase prosecution in Canada, China, Europe, Japan and the United States. Patents have been granted in Europe, Australia and New Zealand to both active vaccines and the use of antibodies as a passive vaccine for Alzheimer’s disease. A patent has also been granted in the United States containing claims to an active vaccine and a further divisional patent has been ~~filed~~allowed in the United States that contains claims to antibodies as a passive vaccine for Alzheimer’s disease. The patent is expected to expire on June 28, 2020. The invention is directed to a novel target for an Alzheimer’s disease vaccine. The technologies or products that may arise from this invention include toxic dimerized full length or fragments of beta-amyloid as active vaccines for Alzheimer’s disease or antibodies to these beta-amyloid fragments as passive vaccines for Alzheimer’s disease. The license provides for potential payments to GHC of an aggregate U.S.$1.5 million, in accordance with the following milestones: (i) U.S.$500,000 upon the submission of a registration dossier in the United States or Europe; and (ii) U.S.$1.0 million upon the first approval of a product arising from the invention. The milestones have not been met to date.

Competition

We believe that we will face competition in differing levels of intensity in all of the areas in which we are conducting research. Our competitors, ~~in Australia and elsewhere~~which are located worldwide, are numerous and include, among others, major pharmaceutical companies, biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that are more effective than any that we are developing, or which would render our technology and products obsolete or non-competitive. Many of these competitors have greater financial, research and screening capabilities, technical resources and manufacturing and marketing capabilities than we do. In addition, many of our competitors have much more experience than we do in pre-clinical testing and human clinical trials of new or improved drugs, as well as in obtaining FDA, TGA and other regulatory approvals.

Regulatory Considerations

Our ongoing research and development activities are, and the production and marketing of our pharmaceutical product candidates derived from those activities will be, subject to regulation by human research ethics committees and institutional research boards, as well as numerous governmental authorities in Australia, principally the TGA, ~~(Therapeutic Goods Administration),~~ the FDA ~~(the Food and Drug Administration)~~ in the United States, the MHRA ~~(Medicines Control Agency)~~ in the United Kingdom and the ~~EMEA (European Medicines Evaluation Authority).~~EMEA. Prior to marketing, any therapeutic product developed must undergo rigorous pre-clinical testing and clinical trials, as well as an extensive regulatory approval process mandated by the TGA and, to the extent that any of our pharmaceutical products under development are marketed abroad, by foreign regulatory agencies, including the FDA, EMEA and MHRA.

Clinical trials are conducted in three sequential phases, but the phases may overlap. Pre-clinical studies involve laboratory evaluation of product characteristics and animal studies to assess the initial efficacy and safety of the product. Clinical trials involve the administration of the investigational product to humans under the supervision of a qualified principal investigator. Phase I clinical trials may be performed in healthy human subjects or, depending on the disease, in patients. The goal of Phase I clinical trials is to establish initial data about the safety, tolerance and pharmacokinetics of the product in humans. In Phase II clinical trials, in addition to safety, the efficacy of the product is evaluated in limited patients with the target disease. Phase III trials typically involve additional testing for safety and clinical efficacy in expanded, large-scale, multi-center studies of patients with the target disease.

Clinical trials can take many years to complete and require the expenditure of substantial resources. The length of time varies substantially according to the type, complexity, novelty and intended use of the product candidate. Delays in obtaining regulatory approvals could adversely affect the development and commercialization of our pharmaceutical product candidates and could have a material adverse impact on our business, financial condition and results of operations.

~~For details regarding clinical trials for our lead compound PBT2, see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.”~~ We cannot ~~make any assurances that we will be able to enter into a collaborative arrangement with a large pharmaceutical or biotechnology company to commercialize PBT2. Nor can we~~ make any assurances that once clinical trials are completed by us or a collaborative partner, we will be able to submit as scheduled a marketing approval request to the applicable governmental regulatory authority, or that such request and application will be reviewed and cleared by such governmental authority in a timely manner, or at all. Although we intend to make use of fast-track and abbreviated regulatory approval programs when possible and commercially appropriate, we cannot be certain that we will be able to obtain the clearances and approvals necessary for clinical testing or for manufacturing and marketing our pharmaceutical products candidates. Delays in obtaining regulatory approvals could adversely affect the development and commercialization of our pharmaceutical product candidates and could adversely impact our business, financial condition and results of operations.

During the course of clinical trials and toxicology studies, product candidates may exhibit unforeseen and unacceptable drug-related toxicities or side effects. If any unacceptable toxicities or side effects were to occur, we may, or regulatory authorities may require us to, interrupt, limit, delay or abort the development of our potential products. In addition, unacceptable toxicities could ultimately prevent the clearance of our product candidates by human research ethics committees, institutional research boards, the TGA, EMEA, FDA or other regulatory authority for any or all targeted indications. Even after being cleared by a regulatory authority, any of our products may later be shown to be unsafe or not to have its purported effect, thereby preventing widespread use or requiring withdrawal from the market. We cannot make any assurances that PBT2, PBT434 or any other development or product candidate will be safe or effective when administered to patients.

Manufacturing and Raw Materials

Our lead compound, PBT2, was manufactured by the Institute of Drug Technology Australia Limited until early 2008. During late 2008, we transferred our PBT2 drug substance manufacturing process technology to Dr. Reddy’s Laboratories Limited, based in Hyderabad, India, to enable future and efficient large scale manufacture of PBT2 to provide drug substance for the currently planned Phase II trials in Alzheimer’s patients and Huntington’s patients. We ~~have used third party manufacturers~~also rely on a sole manufacturer, Patheon Inc., to ~~produce the primary drug product (API)~~encapsulate PBT2. We intend to continue this approach, subject to ongoing appraisal of our manufacturing needs and ~~secondary drug forms for our large-scale, pre-clinical and clinical PBT2 trials, and we expect that we will use third party manufacturers for any future product candidates.~~ financial position.

We cannot make any assurances that we will be able to manufacture sufficient quantities of PBT2 or any other development or product candidate in a cost-effective or timely manner. Any delays in production would delay our pre-clinical and human clinical trials, which could ~~have a material adverse effect on~~adversely affect our business, financial condition and results of operations. We also cannot make any assurances that we will be able to enter into collaborative or contracting arrangements on acceptable terms with third party manufacturers that will meet our requirements for quality, quantity and timeliness.

We expect that we will be required to design and develop new synthetic pathways for most, if not all, of the products that we currently intend to develop or may develop in the future. We cannot predict the success of such efforts, the purity of the products that may be obtained or the nature of the impurities that may result from such efforts. If we are not able to obtain an acceptable purity for any product candidate or an acceptable impurity profile, pre-clinical and clinical trials would be delayed, which could ~~have a material adverse effect on~~adversely affect the priority of the development of our product candidates, our business, financial condition and results of operations. We cannot guarantee that it will be possible to scale up new synthetic processes to provide sufficient API for clinical drug trials, which could indefinitely delay the initiation of clinical trials utilizing API. We also cannot guarantee that the API will be suitable for high throughput encapsulation to produce drug product. This may adversely impact the cost of goods or feasibility of market scale manufacture.

C.	Organizational Structure

~~Our~~We have two ~~wholly owned~~wholly-owned subsidiaries, Prana Biotechnology Inc., and Prana Biotechnology UK Limited, incorporated in the United States and ~~Prana Biotechnology UK plc, incorporated in~~ the United Kingdom, respectively, both of which are currently inactive.

D.	Property, Plants and Equipment

Our executive offices are located at 369 Royal Parade, Parkville, Victoria 3052, Australia, where we occupy approximately 3,800 square feet. The lease for the ~~office space,~~facility, which expires on October 31, ~~2011,~~2012, has ~~an annual rental of approximately A$99,064 for the period through October 31, 2011. We intend to exercise our option to extend the term of our lease for an additional 12 months, at~~ an annual rent of ~~approximately~~ A$~~112,930.~~135,180.

~~We own computer equipment, office furniture and laboratory equipment.~~

ITEM 4A.

~~ITEM 4A.~~

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis includes certain forward-looking statements with respect to the business, financial condition and results of operations of our company. The words ~~“estimate,” “project,~~"estimate," "project,” “intend,~~” “expect”~~" "expect" and similar expressions are intended to identify forward-looking statements within the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements, including those risk factors contained in Item 3.D. of this annual report. You should read the following discussion and analysis in conjunction with our consolidated financial statements and the notes thereto included in this annual report.

A.	Operating Results

Background

We were incorporated under the laws of the Commonwealth of Australia on November 11, 1997. ~~Our mission is to develop therapeutic drugs designed to treat the underlying cause of degeneration of the brain and the eye as the aging process progresses.~~ The principal listing of our ordinary shares and listed options to purchase our ordinary shares is on the ASX. Since September 5, 2002, our ADRs have traded on the NASDAQ Capital Market under the symbol “PRAN.” We have two wholly-owned subsidiaries, Prana Biotechnology Inc. and Prana Biotechnology UK Limited, incorporated in the United States and the United Kingdom, respectively, in August 2004, both of which are currently inactive.

Our consolidated financial statements appearing in this annual report are prepared in Australian dollars and in accordance with IFRS as issued by IASB. Our consolidated financial statements appearing in this annual report comply with both IFRS as issued by IASB and A-IFRS. In this annual report, all references to “U.S. dollars” or “US$” are to the currency of the United States of America, and all references to “Australian dollars” or “A$” are to the currency of Australia.

All of our revenues are generated in Australian dollars, except for interest earned on foreign currency bank accounts, and the majority of our expenses are incurred in Australian dollars.

Overview

We are a development stage enterprise at an early stage in the development of our pharmaceutical products that are designed to treat the underlying causes of degeneration of the brain and the eye as aging progresses. We have incurred net losses since inception and expect to incur substantial and increasing losses for the next several years as we expand our research and development activities and move our product candidates into later stages of development. All of our product candidates are in early stages of development and we face the risks of failure inherent in developing drugs based on new technologies. The process of carrying out the development of our products to later stages of development may require significant additional research and development expenditures, including pre-clinical testing and clinical trials, as well as for obtaining regulatory approval. To date, we have funded our operations primarily through the sale of equity securities, proceeds from the exercise of options, government grants, licensing and research collaborations and interest income.

Since completing our initial public offering and listing process on the ASX on March 28, 2000, we have concentrated our resources toward the pursuit of our disease targets. Initially we focused on clinical trials of our PBT1 compound as a therapeutic for the treatment of Alzheimer’s disease, which we ceased in April 2005 due to an unacceptably high level of an impurity found in the compound. In early August 2003, our PBT2 compound was announced as a new lead ~~metal protein attenuating compound, or~~ MPAC molecule for Alzheimer’s disease. We have completed two Phase I studies of PBT2 and a Phase IIa clinical trial for PBT2 in patients with Alzheimer’s disease. We are currently ~~in the planning phase to initiate a~~recruiting for our “IMAGINE” Phase II imaging trial in Alzheimer’s disease and recruiting for our “Reach2HD” Phase IIa trial in Huntington’s disease. For details regarding clinical trials for our lead compound PBT2, see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.”

Critical Accounting Policies

We prepare our financial statements in accordance with IFRS as issued by IASB. As such, we are required to make certain estimates, judgments, and assumptions that management believes are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies listed in Note 1 to the consolidated financial statements that management believes are the most critical to aid in fully understanding and evaluating our financial condition and results of operations under IFRS are discussed below.

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. Fair value is measured by use of the Black-Scholes model (for options without market conditions) or the Barrier Pricing model (for options with market conditions). The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The date used to value share-based payments for non-employees may be different to the grant date used to value employee share-based payments where service conditions apply. The fair value of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period for each tranche of equity, based on our estimate of equity that will eventually vest.

Revenue recognition from ~~continuing operations~~ordinary activities. We recognize revenue from continuing operations to the extent that it is probable that the economic benefits will flow to us and the revenue from continuing operations can be reliably measured. To date our revenue from continuing operations has consisted of interest income, which is recognized as earned when ~~collectibility~~the amount of revenue can be measured with reliability, it is ~~reasonably assured.~~probable that future economic benefits will flow to the entity, the stage of completion of the transaction at the end of the reporting period can be measured reliably and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Grants. We recognize a grant when there is reasonable assurance that the grant will be received and all grant conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is expected to compensate.

Other income recognition. We recognize other income to the extent that it is probable that the economic benefits will flow to us and the other income can be reliably measured. Reimbursements of expenses are recognized as an offset of the expense (see Note 4a to the consolidated financial statements).

Recoverable amount of non-current assets. Each reporting period, our Board of Directors assesses the recoverable amount of all non-current assets to ensure its carrying value does not exceed its recoverable amount. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is revalued down to its recoverable amount. 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.

Significant Costs and Expenses

Research and development expenses, net. Our research and development expenses consist primarily of expenses for contracted research and development activities conducted by third parties on our behalf. Research and development expenses also include costs associated with the acquisition, development of patents and salaries and fees paid to employees and consultants involved in research and development ~~of patents.~~activities.

~~Personnel~~Corporate personnel expenses. Our personnel expenses consist of directors’ fees, ~~consultancy fees paid to clinicians and scientists,~~ salaries and benefits paid to employees and officers and equity-based payments awarded to directors, officers and employees. ~~Personnel expenses include salaries and fees paid to employees and consultants involved in research and development activities.~~

Intellectual property expenses. Our intellectual property expenses consist of fees paid to our outside counsel for legal fees associated with patent applications and for the defense of patents.

Auditor and accounting expenses. Our auditor and accounting expenses consist of the fees paid to our auditors for services related to annual reports and interim reports filed or submitted in Australia and the United States and fees paid to other accounting firms in respect of tax and other accounting advice.

Travel expenses. Our travel expenses consist primarily of expenses associated with air travel, accommodation and associated consumables both locally and overseas by directors, employees and consultants.

Public relations and marketing expenses. Our public relations and marketing expenses consist of fees paid to outside consultants for services related to ASX and NASDAQ announcements and presentations.

Depreciation expense. Depreciation of property and equipment is provided on a straight-line basis over the estimated useful lives of three to 20 years.

●	· Furniture and fittings:	~~5-33~~	%5-33%
●	· Computer equipment:	33	%33%
●	· Laboratory equipment:	~~10-33~~	%10-33%
●	· Leasehold improvements:	33	%33%

Other expenses. Other expenses consist of corporate compliance, insurance, computer and overhead expenses.

Foreign exchange gain (loss). Foreign exchange gain (loss) includes the net unrealized gain or loss on cash balances held in foreign currencies (primarily U.S. dollars, British Pounds and Euros) as well as net realized gains and losses on foreign currency transactions.

Gain (loss) on fair value of financial liabilities. Each reporting period we are required to revalue financial liabilities. We recorded financial liabilities attributable to warrants that were issued to the investors in our private placement in the United States in June 2004 and with respect to options issued in a private placement to investors in February 2011. The warrants which were issued in 2004 expired on June 4, 2009, permitted the investors to purchase an aggregate 3,000,000 ADRs at an exercise price of US$8.00 per ADR. Because the warrants were exercisable in a currency that is not the functional currency of our company, they were required to be classified as a financial liability. These warrants expired without being exercised. The 2011 options, which expire on February 25, 2016, permit the investors to purchase an aggregate 612,397 ordinary shares at an exercise price of A$0.17 per share. When the fair value of the outstanding 2011 options increase or decrease, the difference is recorded as a gain or loss, as applicable, on the fair value of financial liabilities.

Results of Operations

Year ended June 30, 2012 compared to year ended June 30, 2011

Revenue from ordinary activities

Revenue from continuing operations (consisting of interest income only) increased to A$186,664 for the year ended June 30, 2012 from A$156,135 for the year ended June 30, 2011, an increase of A$30,529, or 19.55%. The increase in revenue from continuing operations in the 2012 fiscal year is primarily attributable to interest on an R&D tax refund we received in the current financial year from the Australian Taxation Office, relating to the 2010 financial year. Increase in interest income was offset by lower cash and cash equivalents throughout the year and lower prevailing interest rates.

Other Income

We had other income of A$2,340,851 for the year ended June 30, 2012 relating to eligible research and development activities, on which we are entitled to a 45% refundable tax offset under an Australian Government tax incentive, introduced on July 1, 2011. We had other income of A$6,785 for the year ended June 30, 2011 relating to donations received by the Company from unrelated third parties.

Research and development expenses, net

Our net research and development expenses (including research and development expenses paid to related parties) increased to A$4,228,719 for the year ended June 30, 2012 from A$2,758,381 for the year ended June 30, 2011, an increase of A$1,470,338, or 53.30%. The increase in research and development expenses in the year ended June 30, 2012 is primarily attributable to pre-trial start up activities and the commencement of two clinical trials, the “Reach2HD” Phase IIa trial in Huntington’s patients and the IMAGINE” Phase II trial in Alzheimer’s Disease patients. We anticipate that in fiscal year 2013, our research and development expenditure will be primarily directed to the conduct of these studies. In addition, we also intend to investigate our lead MPAC candidate compounds for Parkinson’s disease and brain cancer models.

Corporate personnel expenses

Corporate ppersonnel expenses decreased to A$1,858,562 for the year ended June 30, 2012 from A$1,965,408 for the year ended June 30, 2011, a decrease of A$106,846, or 5.44%. The decrease in corporate personnel expenses in the 2012 fiscal year is primarily attributable to lower amounts of lump-sum payments made to key management personnel as well as a reduction in the number of employees. The decrease in corporate personnel expenses was offset by an increase in equity-based compensation in the form of options and shares issued to directors, employees and consultants. In the 2012 fiscal year, we expensed A$309,691 in respect of equity-based payments to directors, consultants and employees compared to A$101,464 in the 2011 fiscal year. Corporate ppersonnel expenses in the 2012 and 2011 fiscal years include a portion of the total fair value of options granted to our directors and employees in the previous two fiscal years of A$47,148 and A$41,298, respectively.

Intellectual property expenses

Intellectual property expenses, which include patent portfolio costs and intellectual property related legal costs, decreased to A$261,706 for the year ended June 30, 2012 from A$399,237 for the year ended June 30, 2011, a decrease of A$137,531, or 34.45%. The decrease in intellectual property expenses in the 2012 fiscal year was primarily due to the completion of substantial prosecution of a key international patent application.

Auditor and accounting expenses

Auditor and accounting expenses decreased to A$153,597 for the year ended June 30, 2012 from A$157,436 for the year ended June 30, 2011, a decrease of A$3,839, or 2.44%. The decrease in auditor and accounting expenses in the 2012 fiscal year is primarily attributable to decreased costs for services provided in connection with filings made with the Securities and Exchange Commission.

Travel expenses

Travel expenses decreased to A$91,624 for the year ended June 30, 2012 from A$159,971 for the year ended June 30, 2011, a decrease of A$68,347, or 42.72%. The decrease in travel expenses in the 2012 fiscal year is primarily attributable to a lower amount of overseas travel by executives and consultants for company business meetings.

Public relations and marketing expenses

Public relations and marketing expenses increased to A$124,970 for the year ended June 30, 2012 from A$110,646 for the year ended June 30, 2011, an increase of A$14,324, or 12.95%. Our public relations and marketing expenses consist primarily of costs relating to our U.S.-based investor relations consultants. The increase in public relations and marketing expenses in the 2012 fiscal year is primarily attributable to increased announcements relating to the successful progression of PBT2 into two clinical trials. The increase in public relations and marketing expenses was also attributable to the depreciation of the Australian dollar against the U.S. dollar during the twelve months ended June 30, 2012, which increased the Australian dollar cost of such U.S. dollar denominated expenses.

Depreciation expenses

Depreciation expenses decreased to A$19,621 for the year ended June 30, 2012 from A$31,577 for the year ended June 30, 2011, a decrease of A$11,956, or 37.86%. The decrease in depreciation expenses in the 2012 fiscal year is primarily attributable to a A$21,841 write-off of computer equipment in the 2012 fiscal year. Additional plant and computer equipment in the aggregate amount of A$26,000 was purchased during the 2012 fiscal year.

Other expenses

Other expenses from ordinary activities increased to A$1,107,283 for the year ended June 30, 2012 from A$857,281 for the year ended June 30, 2011, an increase of A$250,002, or 29.16%. The increase in other expenses in the 2012 fiscal year is primarily attributable to an increase in professional taxation fees associated with the lodgement of an R&D tax incentive application with the Australian Government. The increase is also attributable to costs associated with the assembly of an extraordinary shareholder meeting held in the 2012 fiscal year.

Foreign exchange gain (loss)

We recorded a foreign exchange gain of A$45,959 for the year ended June 30, 2012 compared to a foreign exchange loss of A$145,377 for the year ended June 30, 2011. Foreign exchange gain (loss) reflects the impact of changes in foreign currency exchange rates on cash that we hold in U.S. dollars, Great British Pounds and Euros. In the 2012 fiscal year, the Australian dollar depreciated against the U.S. dollar, which had a favorable impact on the Australian dollar value of our cash held in U.S. dollars. In the 2011 fiscal year, the Australian dollar appreciated against the U.S. dollar, which had an adverse impact on the Australian dollar value of our cash held in U.S. dollars. In the two fiscal years ended June 30, 2012, the Australian dollar appreciated against the Euro, which had an adverse impact on the Australian dollar value of our cash held in Euros. In the 2012 fiscal year, we incurred a foreign exchange gain of A$72,059 attributable to the cash balances that we held in U.S. dollars, a foreign exchange gain of A$207 attributable to the cash balances that were held in British Pounds, a foreign exchange loss of A$23,396 attributable to cash balances that were held in Euros and a foreign exchange gain of A$2,911 attributable to foreign currency transactions. In the 2011 fiscal year, we incurred a foreign exchange loss of A$132,230 attributable to the cash balances that we held in U.S. dollars, a foreign exchange loss of A$125 attributable to the cash balances that were held in British Pounds, a foreign exchange loss of A$17,176 attributable to cash balances that were held in Euros and a foreign exchange gain of A$4,154 attributable to foreign currency transactions.

Gain (loss) on fair value of financial liabilities

We recorded a gain on fair value of financial liabilities of A$33,139 for the year ended June 30, 2012 compared to a loss on fair value of financial liabilities of A$8,791 for the year ended June 30, 2011. The gain in 2012 and loss in 2011 are attributable to the change in value of warrants that were issued in connection with an agreement signed with the ADDF. The Company issued warrants to purchase 612,397 of our ordinary shares to the ADDF, representing 30% of the value of the first tranche of a grant of US$350,000 received from the ADDF during the fiscal year. The warrants have an exercise price of A$0.17 and expire on February 25, 2016. The gain and loss on fair value of financial liabilities is also attributable to the changes in the market price of our ADRs and the volatility of the ADR market price.

Year ended June 30, 2011 compared to year ended June 30, 2010

Revenue from ~~continuing operations~~ordinary activities

Revenue from continuing operations (consisting of interest income only) decreased to A$156,135 for the year ended June 30, 2011 from A$215,008 for the year ended June 30, 2010, a decrease of A$58,873, or 27.38%. The decrease in revenue from continuing operations in the 2011 fiscal year is primarily attributable to lower cash and cash equivalents throughout the year and lower prevailing interest rates.

Other Income

We had other income of A$6,785 for the year ended June 30, 2011 relating to donations received by the ~~Company~~company from unrelated third parties. We did not have other income for the year ended June 30, 2010.

Research and development expenses, net

Our net research and development expenses (including research and development expenses paid to related parties) increased to A$~~2,329,491~~2,758,381 for the year ended June 30, 2011 from A$~~87,992~~666,381 for the year ended June 30, 2010, aan increase of A$~~2,241,499,~~2,092,000, or ~~2,547.39%~~313.93%. The increase in research and development expenses in the year ended June 30, 2011 is primarily attributable to substantial expenses for the scale up manufacturing of our PBT2 active pharmaceutical ingredient, or API, and the engagement of a clinical research organization to initiate pre-trial activities for a Phase II trial of PBT2 in Alzheimer’s disease. In the year ended June 30, 2010, our research and development expenses were offset by A$2,252,385 cash reimbursement that we received under a research and development contract. We anticipate that in fiscal year 2012, our research and development expenditure will be primarily directed at a Phase II imaging trial for PBT2 in Alzheimer’s disease patients and a Phase II trial for PBT2 in Huntington’s disease patients that we intend to initiate in the fourth calendar quarter of 2011. In addition, we also intend to investigate lead MPAC candidate compounds for Parkinson’s disease and brain cancer models.

~~Personnel~~Corporate personnel expenses

~~Personnel~~Corporate ppersonnel expenses decreased to A$~~2,394,298~~1,965,408 for the year ended June 30, 2011 from A$~~3,087,234~~2,508,845 for the year ended June 30, 2010, a decrease of A$~~692,936,~~543,437, or ~~22.45%~~21.66%. The decrease in personnel expenses in the 2011 fiscal year is primarily attributable to decreased equity-based compensation in the form of options and shares issued to directors, employees and consultants. In the 2011 fiscal year, we expensed A$101,464 in respect of equity-based payments to directors, consultants and employees compared to A$730,480 in the 2010 fiscal year. Personnel expenses in the 2011 and 2010 fiscal years include a portion of the total fair value of options granted to our directors and employees in the previous fiscal years of A$41,298 and A$214,951, respectively.

Intellectual property expenses

Intellectual property expenses, which include patent portfolio costs and intellectual property related legal costs, decreased to A$399,237 for the year ended June 30, 2011 from A$431,082 for the year ended June 30, 2010, a decrease of A$31,845, or 7.39%. The decrease in intellectual property expenses in the 2011 fiscal year was primarily due to the completion of substantial prosecution of a key international patent application and reducing the size of the portfolio.

Auditor and accounting expenses

Auditor and accounting expenses decreased to A$157,436 for the year ended June 30, 2011 from A$168,909 for the year ended June 30, 2010, a decrease of A$11,473, or 6.79%. The decrease in auditor and accounting expenses in the 2011 fiscal year is primarily attributable to a decrease in auditor fees resulting from decreased costs associated with preparation for the expected auditor attestation report on our internal control over financial reporting, which requirement does not apply to our company.

Travel expenses

Travel expenses decreased to A$159,971 for the year ended June 30, 2011 from A$234,555 for the year ended June 30, 2010, a decrease of A$74,584, or 31.80%. The decrease in travel expenses in the 2011 fiscal year is primarily attributable to decreased overseas business travel by executives and ~~consultants for company business meetings.~~consultants.

Public relations and marketing expenses

Public relations and marketing expenses decreased to A$110,646 for the year ended June 30, 2011 from A$130,090 for the year ended June 30, 2010, a decrease of A$19,444, or 14.95%. Our public relations and marketing expenses consist primarily of costs relating to our U.S.-based investor relations consultants. The decrease in public relations and marketing expenses in the 2011 fiscal year is primarily attributable to the appreciation of the Australian dollar against the U.S. dollar during the twelve months ended June 30, 2011, which decreased the Australian dollar value of ~~such~~ U.S. dollar denominated expenses.

Depreciation expenses

Depreciation expenses decreased to A$31,577 for the year ended June 30, 2011 from A$35,290 for the year ended June 30, 2010, a decrease of A$3,713, or 10.52%. The decrease in depreciation expenses in the 2011 fiscal year is primarily attributable to a A$5,437 write-off of computer equipment in the 2011 fiscal year. Additional plant and computer equipment in the aggregate amount of A$13,961 was purchased during the 2011 fiscal year.

Other expenses

Other expenses from ordinary activities decreased to A$857,281 for the year ended June 30, 2011 from A$940,699 for the year ended June 30, 2010, a decrease of A$83,418, or 8.87%. The decrease in other expenses in the 2011 fiscal year is primarily attributable to a decrease in insurance, legal and office costs.

Foreign exchange gain (loss)

We recorded a foreign exchange loss of A$145,377 for the year ended June 30, 2011 compared to a foreign exchange loss of A$6,079 for the year ended June 30, 2010. Foreign exchange gain (loss) reflects the impact of changes in foreign currency exchange rates on cash that we hold in U.S. dollars, Great British Pounds and Euro. In the 2011 and 2010 fiscal years, the Australian dollar appreciated against the U.S. dollar, which had an adverse impact on the Australian dollar value of our cash held in U.S. dollars. In fiscal 2011, we incurred a foreign exchange loss of A$132,230 attributable to the cash balances that we held in U.S. dollars, a foreign exchange loss of A$125 attributable to the cash balances that were held in British Pounds, a foreign exchange loss of A$17,176 attributable to cash balances that were held in Euros and a foreign exchange gain of A$4,154 attributable to foreign currency transactions. In fiscal 2010, we incurred a foreign exchange gain of A$38,584 attributable to the cash balances that we held in U.S. dollars, a foreign exchange loss of A$108 attributable to the cash balances that were held in British Pounds, a foreign exchange loss of A$40,492 attributable to cash balances that were held in Euros and a foreign exchange loss of A$4,063 attributable to foreign currency transactions.

Gain (loss) on fair value of financial liabilities

We recorded a loss on fair value of financial liabilities of A$8,791 for the year ended June 30, 2011, attributable to the warrants that were issued in connection with an agreement signed with the ~~Alzheimer’s Drug Discovery Foundation (ADDF). The Company~~ADDF. We issued warrants to purchase 612,397 ~~warrants over~~of our ordinary shares to the ADDF, representing 30% of the value of the first tranche of a grant of US$350,000 received during the ~~financial~~fiscal year. The warrants ~~issued~~ have an exercise price of A$0.17 and expire on February 25, 2016. The gain and loss on fair value of financial liabilities is attributable to the changes in the market price of our ADRs and the volatility of the ADR market price. We did not record a gain or loss on fair valuation of financial liabilities ~~for the 2010 fiscal year.~~

~~Year ended June 30, 2010 compared to year ended June 30, 2009~~

~~Revenue from continuing operations~~

Revenue from continuing operations decreased to A$215,008 for the year ended June 30, 2010 from A$428,193 for the year ended June 30, 2009, a decrease of A$213,185, or 49.79%. Revenue from continuing operations consisted of A$215,008 and A$428,154 in interest income for the years ended June 30, 2010 and 2009, respectively. The decrease in revenue from continuing operations in the 2010 ~~fiscal year is primarily attributable to lower interest income as a result of a reduction in cash and cash equivalents and lower prevailing interest rates.~~

~~Other Income~~

~~We did not have other income for the years ended June 30, 2010 and 2009.~~

~~Research and development expenses, net~~

Our net research and development expenses (including research and development expenses paid to related parties) decreased to A$87,992 for the year ended June 30, 2010 from A$2,215,358 for the year ended June 30, 2009, a decrease of A$2,127,366, or 96.03%. For the year ended June 30, 2010, we incurred research and development expenses of A$2,340,377 (including research and development expenses paid to related parties), which amount was offset by a A$2,252,385 cash reimbursement that we received under a research and development contract.

~~Personnel expenses~~

Personnel expenses decreased to A$3,087,234 for the year ended June 30, 2010 from A$3,832,804 for the year ended June 30, 2009, a decrease of A$745,570, or 19.45%. The decrease in personnel expenses in the 2010 fiscal year is primarily attributable to decreased equity-based compensation in the form of options and shares issued to directors, employees and consultants. In the 2010 fiscal year, we expensed A$730,480 in respect of equity-based payments to directors, consultants and employees compared to A$1,305,471 in the 2009 fiscal year. Personnel expenses in the 2010 and 2009 fiscal years include a portion of the total fair value of options granted to our directors and employees in the previous fiscal years of A$214,952 and A$516,432, respectively. The decrease in personnel expense in the 2010 fiscal year is also due to a decrease in consulting and director fees for such period.

~~Intellectual property expenses~~

Intellectual property expenses, which include patent portfolio costs and intellectual property related legal costs, decreased to A$431,082 for the year ended June 30, 2010 from A$1,107,534 for the year ended June 30, 2009, a decrease of A$676,452, or 61.08%. The decrease in intellectual property expenses in the 2010 fiscal year was primarily due to substantially reduced intellectual licensing activity in such period. In addition, patent portfolio costs decreased to A$426,105 in the 2010 fiscal year from A$628,865 in the 2009 fiscal year, primarily due to the completion of prosecution of key patents in Europe and Japan during the 2009 fiscal year.

3437

~~Auditor and accounting expenses~~

Auditor and accounting expenses increased to A$168,909 for the year ended June 30, 2010 from A$129,998 for the year ended June 30, 2009, an increase of A$38,911, or 29.93%. The increase in auditor and accounting expenses in the 2010 fiscal year is primarily attributable to an increase in auditor fees resulting from increased market rates and costs associated with preparation for the expected auditor attestation report on our internal control over financial reporting, which requirements no longer applies to our company .

~~Travel expenses~~

Travel expenses increased to A$234,555 for the year ended June 30, 2010 from A$195,251 for the year ended June 30, 2009, an increase of A$39,304, or 20.13%. The increase in travel expenses in the 2010 fiscal year is primarily attributable to increased overseas travel by executives and consultants for activities associated with Phase II studies for PBT2.

~~Public relations and marketing expenses~~

Public relations and marketing expenses decreased to A$130,090 for the year ended June 30, 2010 from A$222,679 for the year ended June 30, 2009, a decrease of A$92,589, or 41.58%. Our public relations and marketing expenses consist primarily of costs relating to our U.S.-based investor relations consultants. The decrease in public relations and marketing expenses in the 2010 fiscal year is primarily attributable to a decrease in public relations consultant fees, together with the appreciation of the Australian dollar against the U.S. dollar during the 2010 fiscal year, which decreased the Australian dollar value of such U.S. dollar denominated expenses.

~~Depreciation expenses~~

Depreciation expenses increased to A$35,290 for the year ended June 30, 2010 from A$34,190 for the year ended June 30, 2009, an increase of A$1,100, or 3.2%. The increase in depreciation expenses in the 2010 fiscal year is primarily attributable to additional plant and computer equipment in the aggregate amount of A$22,665 that we purchased during the 2010 fiscal year.

~~Other expenses~~

Other expenses decreased to A$940,699 for the year ended June 30, 2010 from A$978,875 for the year ended June 30, 2009, a decrease of A$38,176, or 3.9%. The decrease in other expenses in the 2010 fiscal year is primarily attributable to a decrease in insurance and office costs.

~~Foreign exchange gain (loss)~~

We recorded a foreign exchange loss of A$6,079 for the year ended June 30, 2010 compared to a foreign exchange loss of A$6,723 for the year ended June 30, 2009. Foreign exchange gain (loss) reflects the impact of changes in foreign currency exchange rates on cash that we hold in U.S. dollars, Great British Pounds and Euro. In the 2010 fiscal year, the Australian dollar appreciated against the U.S. dollar, while in the 2009 fiscal year the Australian dollar depreciated against the U.S. dollar. In fiscal 2010, we incurred a foreign exchange gain of A$38,584 attributable to the cash balances that we held in U.S. dollars, a foreign exchange loss of A$108 attributable to the cash balances that were held in British Pounds, a foreign exchange loss of A$40,492 attributable to cash balances that were held in Euros and a foreign exchange loss of A$4,063 attributable to foreign currency transactions. In fiscal 2009, we incurred a foreign exchange gain of A$5,536 attributable to the cash balances that we held in U.S. dollars, a foreign exchange gain of A$5,893 attributable to the cash balances that were held in British Pounds, a foreign exchange gain of A$4,072 attributable to cash balances that were held in Euros and a foreign exchange loss of A$22,224 attributable to foreign currency transactions.

~~Gain (loss) on fair value of financial liabilities~~

We did not record a gain or loss on fair valuation of financial liabilities for 2010 fiscal year. We recorded a gain on fair value of financial liabilities of A$772,430 for the year ended June 30, 2009 attributable to the warrants that were issued in connection with our private placement of securities in the United States in June 2004 that expired on June 4, 2009. The gain and loss on fair value of financial liabilities is attributable to the changes in the market price of our ADRs and the volatility of the ADR market price.

Inflation and Seasonality

Management believes inflation has not had a material impact on our company’s operations or financial condition and that our operations are not currently subject to seasonal influences.

Conditions in Australia

We are incorporated under the laws of, and our principal offices and research and development facilities are located in, the Commonwealth of Australia. Therefore, we are directly affected by political and economic conditions in Australia.

Recently Issued International Accounting Standards and Pronouncements

Certain new Australian accounting standards and interpretations ~~(and~~(and their equivalent IASB standards) have been published that are not mandatory for June 30, ~~2011~~2012 reporting periods. Our assessment of the impact of these new standards and interpretations is described below.

~~AASB 124 Related Party Disclosures (effective January 1, 2011)~~

The revised AASB 124 changed the definition of a “related party”, by clarifying its meaning and eliminating inconsistencies from the definition, including: (a) the definition now identifies a subsidiary and an associate with the same investor as related parties of each other; (b) entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer considered related parties of each other; and (c) the definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other. A partial exemption is also provided from the disclosure requirements for government-related entities. Entities that are related by virtue of being controlled by the same government can provide reduced related party disclosures. We intend to apply the amendment from July 1, 2011, and it is not expected to have any impact on our financial statements.

AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (effective January 1, 2013)[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023, & 1038 and interpretations 2, 5, 10, 12, 19 & 127].

The requirements for classifying and measuring financial liabilities were added to AASB 9. The existing requirements for the classification of financial liabilities and the ability to use the fair value option have been retained. However, where the fair value option is used for financial liabilities the change in fair value is accounted for as follows: (a) The change attributable to changes in credit risk are presented in other comprehensive income (OCI); (b) The remaining change is presented in profit or loss. If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss.

(i) New and amended Accounting Standards and Interpretations issued and effective

There are no IFRS interpretations that are effective for the first time for the financial year beginning on or after June 30, 2012 that would be expected to have a material impact on our Company.

(ii) Accounting Standards issued by not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for June 30, 2012 reporting periods. Our assessment of the impact of these new standards and interpretations is set out below. Initial application of the following Standards and Interpretations will not affect any of the amounts recognized in the financial statements, but may change the disclosures in this report:

·IFRS 9 Financial Instruments, or IFRS 9, (effective from January 1, 2015)

IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until January 1, 2015 but is available for early adoption. When adopted, the standard will affect our accounting for the available-for-sale financial assets, since IFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments will therefore have to be recognized directly in profit or loss. There will be no impact on our accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and we do not have any such liabilities. The derecognition rules have been transferred from IAS 139 Financial Instruments: Recognition and Measurement and have not been changed. We have not yet decided when to adopt IFRS 9.

·IFRS 10 Consolidated Financial Statements, or IFRS 10, IFRS 12 Disclosure of Interests in Other Entities, or IFRS 12, and IAS 28 Investments in Associates and Joint Ventures, or IAS 28, (effective January 1, 2013)

IFRS 10 replaces all of the guidance on control and consolidation in IAS 27Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent-principal relationships. We do not expect the new standard to have a significant impact on our Company.

IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10 and IFRS 11, and replaces the disclosure requirements currently found in IAS 28. Application of this standard will not affect any of the amounts recognized in our financial ~~report,~~statements, but may ~~change~~impact the ~~presentation~~type of ~~the disclosures presently made:~~

information disclosed in relation to our investments.

3638

	~~AASB 9~~ ~~Financial Instruments~~We do not expect to adopt the new standards before their operative date. They would therefore be first applied in our financial statements for the annual reporting period ending June 30, 2014. ·IFRS 13 Fair Value Measurement, or IFRS 13, (effective January 1, 2013) IFRS 13 was released in May 2011. It explains how to measure fair value and aims to enhance fair value disclosures. We do not use fair value measurements extensively. It is therefore unlikely that the new rules will have a significant impact on any of the amounts recognized in our financial statements. However, application of the new standard will impact the type of information disclosed in the annual report and the notes to the financial statements. We do not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending June 30, 2014. ·Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) and Disclosures-Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) (effective January 1, 2014 and January 1, 2013, respectively) In December 2011, the IASB made amendments to the application guidance in IAS 32 Financial Instruments: Presentation, to clarify some of the requirements for offsetting financial assets and financial liabilities in the balance sheet. These amendments are effective from January 1, 2014. They are unlikely to affect the accounting for any of our current offsetting arrangements. However, the IASB has also introduced more extensive disclosure requirements into IFRS 7 which will apply from January 1, 2013. We will have to provide a number of additional disclosures in relation to our offsetting arrangements and intend to apply the new rules for the first time in the financial year commencing July 1, 2013. ~~and AASB 2009-11~~ ~~Amendments to Australian Accounting Standards arising from AASB 9~~		~~Effective January 1, 2013~~
	~~Revised AASB 124~~ ~~Related Party Disclosures~~ ~~and AASB 2009-12~~ ~~Amendments to Australian Accounting Standards~~		~~Effective January 1, 2011~~
	~~AASB 2010-4~~ ~~Further amendments to Australian Accounting Standards arising from the Annual Improvements Process~~		~~Effective January 1, 2011~~
	~~AASB 2010-5~~ ~~Amendments to Australian Accounting Standards~~		~~Effective January 1, 2011~~
	~~Revised AASB 9~~ ~~Financial Instruments~~ ~~and AASB 2010-7~~ ~~Amendments to Australian Accounting Standards arising from AASB 9~~		~~Effective January 1, 2013~~
	~~IFRS 10~~ ~~Consolidated financial statements, IFRS 11~~ ~~Joint Arrangements, IFRS 12~~ ~~Disclosure of interests in other entities~~ ~~and revised IAS~~ 27 ~~Separate financial statements~~ ~~and IAS 28~~ ~~Investments in Associates and Joint Ventures~~		~~Effective January 1, 2013~~
	~~IFRS 13~~ ~~Fair value measurement~~		~~Effective January 1, 2013~~
	~~Revised IAS 1~~ ~~Presentation of Financial Statements~~		~~Effective July 1, 2012~~
	~~AASB 2011-4~~ ~~Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure~~ ~~Requirements~~		~~Effective July 1, 2013~~

B.	Liquidity and Capital Resources

We are a development stage company and have had no sales income to date, and as of June 30, ~~2011~~2012 our accumulated deficit totaled A$~~84,904,612.~~90,144,081. From inception until our initial public offering in March 2000 we financed our operations primarily through borrowings from two of our then directors, which were repaid from the proceeds of such offering. Since our initial public offering we have financed our operations primarily through sales of equity securities, proceeds from the exercise of options, government grants, licensing and research collaborations and interest earned on investments. During the period from 2001 to 2006, we were awarded government grants in the aggregate amount of A$3.3 ~~million, but we have not received any government grants since 2006.~~million.

In December 2008, we raised A$114,000 (before costs) from the exercise of options previously granted to a consultant. The options were exercised at A$0.285 per ordinary share (approximately US$4.43 per ADR).

In September 2009, we raised A$6.0 million before costs (approximately A$5.7 million net of costs) in a private placement to one of our institutional shareholders in the United States of 30 million ordinary shares (equivalent to three million ADRs) at a price of A$0.20 per share (A$2.0 per ADR). We also agreed to grant the investor, subject to shareholder approval, options to purchase 10 million ordinary shares (equivalent to one million ADRs) at an exercise price of A$0.30 per share (A$3.0 per ADR) that will expire four years after the date of the issuance of the shares in the private ~~placement. Shareholder approval for the issuance of the shares and option grant was obtained in November 2009.~~placement (September 2013). We also ~~agreed to issue~~issued to the investor, up to an additional 3,000,000 ordinary shares, or 300,000 ADRs, if the daily closing price of our ordinary shares on the ASX on any day from the date of the private placement until five days after the date on which the registration statement for the ordinary shares issued in the private placement is declared effective, declines below A$0.19, based on ~~a formula set forth in the agreement. The foregoing condition was met and based on the~~an agreed upon formula, ~~we issued to the investor~~ an additional 750,000 ordinary shares pursuant to the approval of our shareholders obtained in November 2009. For additional information, see Item 10.C. “Additional Information - Material Contracts.”

In July 2010, we raised A$1.15 million (US$1.0 million) ~~(before costs)~~before costs in a private placement of 7.065 million of our ordinary shares (equivalent to 0.7 million ADRs) to Quintiles, at a price of A$0.1624 per ordinary share (US$1.624 per ADR). For additional information, see Item 10.C. “Additional Information - Material Contracts.”

On February 21, 2011, the ~~Alzheimer’s Drug Discovery Foundation, or~~ ADDF, awarded us a grant of US$700,000, to be provided in two equal instalments over two ~~years, of which $350,000 was already provided.~~years. The ADDF is based in New York and functions on a venture philanthropy model. We issued to ADDF a convertible promissory note in the principal amount of the grant and a five-year warrant to purchase 612,397 ordinary shares of our company at a price per share of A$0.17 (equivalent to US$0.169), being the closing pricing of our ordinary shares on the ASX on the date of our agreement with ADDF. We have also agreed to issue an additional five-year warrant to purchase US$105,000 of ordinary shares of our company at a price per share equal to the closing price of our ordinary shares on the ASX on the date ~~of the receipt of~~on which we will receive the second instalment of US$350,000. The note will become due and payable on February 25, 2014, unless converted earlier. We may, under certain conditions, elect to issue our ordinary shares to satisfy our repayment obligation at a price per shares equal to 80% of the then prevailing volume weighted average price of our ordinary shares on the ASX during the five trading days prior to the issuance. Under the terms of the convertible note, the ADDF may elect, at its discretion, to convert the promissory note into ordinary shares of our company following the consummation by us of a debt or equity financing to third party investors resulting in gross proceeds to our company of at least US$1.0 million, or upon a sale of our company. Following the completion of the private placement described in the following paragraph, the ADDF is now entitled to convert the note under the same terms as such private placement, or under the same terms as any subsequent financing that we may complete prior to the conversion or repayment of the note. The purpose of the grants is to support a Phase II imaging trial with PBT2 to investigate the effect of PBT2 on the deposition of beta-amyloid in the brains of patients with mild Alzheimer’s disease.

On March 28, 2011, we completed a private placement of our securities to institutional investors for aggregate gross proceeds of approximately A$6.12 million (US$6.19 million). Under the terms of the offering, we sold an aggregate of approximately 27,200,000 ordinary shares (equivalent to 2,720,000 ADRs) at a price of A$0.225 per share (A$2.25 per ADR). We also granted to the investors options to purchase up to an aggregate of approximately 6,800,000 ordinary shares (equivalent to 680,000 ADRs) at an exercise price of A$0.225 per share (A$2.25 per ADR). The options are exercisable for a term of four years, and the exercise price is subject to future adjustment for various events, such as stock splits or dividend distributions.

On June 30, 2011, we completed a private placement of 5.69 million of our ordinary shares to institutional investors and Quintiles Limited, at a price of A$0.225 per share, for aggregate gross process of approximately A$1.28 million (US$1.4 million). We also granted the investors options to purchase 1.42 million ordinary shares at an exercise price of A$0.225 per share that will expire March 24, 2015.

On July 13, 2011, we entered into an At-The-Market Issuance Sales Agreement with McNicoll, Lewis & Vlak LLC, or MLV, under which we may sell ~~American Depositary Shares, or~~ ADSs, each representing ten ordinary shares, from time to time through MLV, as our agent for the offer and sale of the ADSs. ~~The~~Until such time as we qualify as an accelerated filer, as defined by the SEC, the aggregate ~~offering price for the~~ ordinary shares represented by ADSs which we may sell in any one year period may not exceed ~~the aggregate amount that can be sold under the registration statement that we filed on May 17, 2011, which amount, as~~one-third of ~~the date of this annual report, is US$50 million. We currently have prospectus outstanding permitting the sale of up to 50 million ordinary shares or 5 million ADSs.~~our public float. The ADSs are evidenced by ADRs. We ~~will~~ pay MLV a commission equal to 3% of the gross proceeds of the sales price of all ADSs sold through it as sales agent under the sales agreement. ~~Because there is no minimum offering amount required as a condition to closing this offering, the~~The actual total public offering amount, commissions and proceeds to us, if any, are not determinable at this time. As of June 30, 2012, we issued a total amount of 2,204,217 ADSs under this At-The-Market Issuance Sales Agreement for gross proceeds of A$3.79 million (US$3.92 million). For additional information regarding the agreement, see Item 10 “Additional Information - Material Contracts.”

From inception to June 30, ~~2011,~~2012, our capital expenditures have totaled A$~~527,722~~553,722 (including A$200,000 of noncash expenditures), consisting of computer equipment, furniture and fixtures, fit-out costs and laboratory equipment that is being used in connection with our research at the University of Melbourne. Capital expenditures for equipment are depreciated on a straight-line basis over the estimated useful lives of three to 20 years, with a net balance at June 30, ~~2011~~2012 of A$~~40,909.~~48,051. We currently do not have significant capital spending requirements, but we expect to continue to engage in capital spending consistent with anticipated growth in our operations and personnel.

We had A$~~8,838,245~~5,636,469 of cash and cash equivalents at June 30, ~~2011,~~2012, compared to A$~~5,227,298~~8,838,245 at June 30, ~~2010.~~2011. For the years ended June 30, 2012 and 2011, we incurred an operating loss of A$5.2 million and A$6.4 million, respectively, and an operating cash outflow of A$6.8 million and A$4.6 million, respectively.

~~Our directors~~We believe that Australian Government tax incentive scheme relating to eligible research and development activities, introduced on July 1, 2011, will provide us with significant benefits in future years. Such eligible R&D activities include but are not limited to:

Core activities, which are experimental activities whose outcome cannot be known or determined in advance, but can only be determined by applying a systematic progression of work;

Core activities conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved processes and materials); or

Supporting activities that are directly related and designed to support the above).

Under the ~~going concern basis of preparation of our financial statements~~research and development incentive scheme, entities with an aggregated turnover for the ~~fiscal~~income year of less than A$20 million will be entitled to a 45% refundable tax offset. In the year ended June 30, 2012, we recorded A$1,550,000 in other income with respect to funds we will receive in relation to the 2012 financial year under the 2011 research and development incentive scheme.

Commencing October 2011, we entered into research and development agreements that support and service the Phase II clinical trials in Huntington disease and Alzheimer’s disease that are currently enrolling patients. The Company has budgeted approximately A$7.5 million expenditure for the Huntington’s disease trial and A$0.7 million for the Alzheimer’s disease trial, which is ~~appropriate given~~otherwise supported by a grant from the ADDF. Of these amounts, approximately A$1 million has been incurred in the period ended June 30, 2012. The agreements can be terminated at any time with 30 days’ notice and without penalty. The successful completion of these trials is dependent on the Company raising the necessary additional funding. See “Item 5F Tabular Disclosure of Contractual Obligations” for additional information on our ~~cash position.~~R&D contractual commitments.

~~In addition, on July 14, 2011,~~On October 1, 2012, we announced that we ~~had filed~~raised approximately A$6.0 million through a ~~prospectus supplement~~private placement of 32,500,000 ordinary fully paid shares (equivalent to ~~sell up~~3.25 million ADRs) at a price of A$0.185 per share. The capital was raised in order to ~~an aggregate 50,000,000 ordinary shares, represented by 5,000,000 American Depositary Receipts (ADRs) through an “at-the-market” (ATM) facility. If utilised,~~support our two ongoing Phase II clinical trials, the ~~ADRs would~~IMAGINE trial and Reach2HD trial.

In the event the we will not be ~~offered through McNicoll, Lewis & Vlak LLC (MLV) as sales agent who, at~~able to raise the required funding for our discretion and instruction, will use its commercially reasonable efforts to sell the ADRs at market prices from time to time, including sales made by means of ordinary brokers’ transactions on the NASDAQ Capital Market. We are also continuing to pursue raising additional funds through alternative funding structures. In addition,planned expenditure, we have the ability to ~~scale down~~further reduce expenses around our ~~operations~~current commitments. We retain the ability to curtail other planned, but not committed expenditure, in order to ensure we continue to have adequate funds to pay all liabilities as and ~~prioritise our~~when they fall due.

Management remains confident that we will be successful in raising the additional funding required to complete the planned research and development ~~programs in neurology should~~activities and accordingly have prepared the ~~need arise to conserve cash.~~financial statements on a going concern basis.

At this time, our directors are of the opinion that no asset is likely to be realized for an amount less than the amount at which it is recorded in the Statement of Financial Position as of June 30, ~~2011.~~2012. Therefore, no adjustments have been made to our consolidated financial statements relating to the recoverability and classification of the asset carrying amounts or the classification of liabilities that might be necessary should we not continue as a going concern.

Cash Flows

The following table summarizes our cash flows for the periods presented:

	Year ended June 30,
	2012			2011			2010
	(A$)
Net cash used in operating activities		(6,845,906	)		(4,558,147	)		(4,708,939	)
Net cash used in investing activities		(26,763	)		(16,632	)		(22,667	)
Net cash provided by financing activities		3,622,023			8,335,258			5,655,944
Net increase (decrease) in cash and cash equivalents		(3,250,646	)		3,760,479			924,338
Cash and cash equivalents at beginning of period		8,838,245			5,227,298			4,304,977
Exchange rate adjustments on cash held in foreign currencies		48,870			(149,532	)		(2,017	)
Cash and cash equivalents at end of period		5,636,469			8,838,245			5,227,298

Year ended June 30,
2011 2010 2009
(A$)

Net cash used in operating activities (4,558,415 ) (4,708,939 ) (6,994,174 )
Net cash used in investing activities (16,364 ) (22,667 ) (36,192 )
Net cash provided by financing activities 8,335,258 5,655,944 100,807
Net increase (decrease) in cash and cash equivalents 3,760,479 924,338 (6,929,559 )
Cash and cash equivalents at beginning of period 5,227,298 4,304,977 11,219,035
Exchange rate adjustments on cash held in foreign currencies (149,532 ) (2,017 ) 15,501
Cash and cash equivalents at end of period 8,838,245 5,227,298 4,304,977

Net cash used in operating activities was A$~~4,558,415,~~6,845,906, A$~~4,708,939~~4,558,147 and A$~~6,994,174~~4,708,939 during the years ended June 30, ~~2011,~~2012 ,2011 and 2010, ~~and 2009,~~ respectively. Our payments to suppliers and employees during the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009~~2010 were A$~~4,714,771,~~7,874,010, A$4,714,503 and A$4,923,648, ~~and~~respectively. The A$~~7,511,372, respectively.~~2,287,759 increase in net cash used in operating activities in the year ended June 30, 2012 compared to the year ended June 30, 2011 reflects the Company’s progression into two Phase II clinical trials with PBT2. The A$208,877 decrease from the year ended June 30, 2010 to the year ended June 30, 2011 was not significant and reflects the Company’s continued maintenance of its research and development programs. The decrease from the year ended June 30, 2009 to the year ended June 30, 2010 was primarily due to a decrease in research and development expenditure. During the year ended June 30, 2010, our research and development expenditure was offset by a A$2,252,385, cash reimbursement under a research and development contract. During the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009,~~2010, our payments to suppliers and employees was offset by interest income of A$186,794, A$156,366 and A$214,709, ~~and A$517,198,~~ respectively.

Net cash used in investing activities was A$~~16,364,~~26,763, A$~~22,667~~16,632 and A$~~36,192~~22,667 during the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009,~~2010, respectively. Cash flows used for investing activities was primarily attributable to payments for the purchase of property and equipment for the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009.~~2010.

Net cash provided by financing activities was A$3,622,023, A$8,335,258 ~~A$5,655,944~~ and A$~~100,807~~5,655,944 for the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009.~~2010. Cash flows provided by financing activities during the year ended June 30, 2012 is primarily attributable to funds raised under our At-The-Market facility of A$4.57 million (US$4.74 million). Cash flows provided by financing activities during the year ended June 30, 2011 is primarily attributable to a A$6.12 million (US$6.19 million) private placement of our securities to institutional investors in March 2011, as well as private placements of our ordinary shares to Quintiles in July 2010 and June 2011 and grants awarded to us by the ADDF. Cash flows provided by financing activities during the year ended June 30, 2010 are attributable to a private placement of our ordinary shares to an institutional investor in the United States in September 2009. ~~Cash flows provided by financing activities during~~

We realized a foreign exchange gain of A$48,870 for the year ended June 30, ~~2009 are attributable~~2012 compared to ~~a consultant exercising options to purchase 400,000 ordinary shares at an exercise price of A$0.285 per share (after costs).~~

~~We realized~~ a foreign exchange loss of A$149,532 for the year ended June 30, 2011 ~~compared to~~and a foreign exchange ~~loss~~gain of A$2,017 for the year ended June 30, ~~2010 and a foreign exchange gain of A$15,501 for~~2010. In 2012, the ~~year ended June 30, 2009.~~Australian dollar depreciated against the U.S. dollar by 4%. In ~~2010 and~~ 2011, the Australian dollar appreciated against the U.S. dollar by ~~5% and~~ 20%, ~~respectively,~~ while in ~~2009,~~2010, the Australian dollar ~~depreciated~~appreciated against the U.S. dollar by ~~16%~~5%.

C.	Research and Development, Patents and Licenses

Early in our company’s history, our activities were primarily focused on the acquisition and development of patents to enable the research and development of our core technology. In January 2001, we entered into an exclusive license agreement with the General Hospital Corporation to access patented technologies that could be of assistance in the discovery and characterization of lead compounds (see Item 4.B. “Information on the Company - Business Overview - Patents and License Agreements”). ~~This license also provided us access to PBT1 (clioquinol) for drug development in Alzheimer’s disease.~~ To build a cost effective research and development company, in December 2000 we entered into an agreement with the University of Melbourne to conduct on our behalf certain research programs in Alzheimer’s disease and other neurological disorders, to undertake basic mechanistic research on our compounds and conduct screens to assess therapeutic utility of our compounds (see Item 10 “Additional Information - Material Contracts”). In recent years, we increased our practice of building valuable research collaborations with institutes based in Australia, the United States, the United Kingdom and other countries to enable us to investigate a variety of therapeutic indications including Huntington’s disease, cancers, Parkinson’s disease and age-related macular degeneration. These collaborative arrangements ensure that we work with well-respected laboratories with specific expertise in screening and animal modeling of relevance to the particular indication, without incurring ongoing administrative and personnel costs. We maintain in-house patent counsel and research and development project expertise to coordinate these research collaborations.

When a lead compound is identified as suitable for clinical development, we establish a project team to coordinate all pre-clinical and clinical development and manufacturing activities. Typically, we engage a clinical research organization to manage patient recruitment, data management and trial conduct and reporting, as was the case with the development of our lead compound PBT2 through Phase I and Phase II development. All clinical, pre-clinical, clinical development and manufacturing of our compounds is performed in compliance with the appropriate governing authorities and standards (for example, the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use).

Research and development expenses, net amounted to A$~~2,329,491,~~4,228,719, A$~~87,992~~2,758,381 and A$~~2,215,358~~666,381 during the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009,~~2010, respectively. Costs associated with patent applications and defense of patent applications are classified as intellectual property expenses and amounted to A$261,706, A$399,237 ~~A$431,082~~ and A$~~1,107,534~~431,082 during the years ended June 30, 2012, 2011 ~~2010~~ and ~~2009,~~2010, respectively.

Our research and development expenses consist primarily of expenses for contracted research and development activities conducted by third parties on our behalf, including personnel, testing facilities and other payments in accordance with our research and clinical agreements. Research and development expenses also include costs associated with the acquisition and development of patents. We do not maintain accounting systems to accurately track research and development costs on an individual project basis because a significant portion of our historic research and development expenses benefited our two major research and development projects, and therefore were not tracked individually by project; rather, we tracked these costs by the type of costs incurred. Such costs are charged to operations as incurred. See Note 4 to the consolidated financial statements. Due to the numerous variables and the uncertain nature of the development of a clinical compound, we are not able to reasonably estimate the nature, timing and costs of the future expenditures necessary to complete our research and development projects, the anticipated completion dates of each project and when material net cash flows from our research and development programs will commence.

D.	Trend Information

We are a development stage company and while we believe that our technology will offer novel therapeutic strategies into an expanding market, it is not possible for us to predict with any degree of accuracy the outcome of our research or commercialization efforts.

E.	Off-Balance Sheet Arrangements

We are not a party to any material off-balance sheet arrangements. In addition, we have no unconsolidated special purpose financing or partnership entities that are likely to create material contingent obligations.

F.	Tabular Disclosure of Contractual Obligations

The following table summarizes our minimum contractual obligations as of June 30, ~~2011.~~2012. The majority of our contracts for research and development programs have a termination notice period of 30 days. In addition, we have the ability to scale down our operations and prioritize our research and development programs in neurology to reduce expenditures as discussed in Item 5B. Liquidity and Capital Resources.

Contractual Obligations	Payments due by period										Payments due by period
	Total		less than 1 year		1-3 years		3-5 Years		more than 5 years
											Total		less than 1 year		1-3 years		3-5 Years		more than 5 years
Operating lease obligations		33,021		33,021		–		–		–		60,900		49,284		11,616		-		-
Purchase obligations*		855,061		801,663		53,398		–		–		6,593,567		4,508,762		2,084,805		-		-
Total		888,082		834,684		53,398		–		–		6,654,467		4,558,046		2,096,421		-		-

_____________________

* Purchase obligations relate solely to our patents and license agreements described under Item 4.B. “Information on the Company - Business Overview - Patents and License Agreements.” and our research and development agreement described under Item 10 “Additional Information - Material Contracts.” Purchase obligations exclude obligations under our employment agreements with Mr. Geoffrey Kempler, our Chief Executive Officer, and Ms. Dianne Angus, our Chief Operating Officer (see Item 6.C. “Operating and Financial Review and Prospects - Compensation”) and our consulting agreement with Professor Ashley Bush (see Item 10. “Additional Information - Material Contracts”). See Note 17 to our consolidated financial statements.

ITEM 6.

DIRECTORS, SENIOR ~~MANAGEMENT~~MANAGEMENT AND EMPLOYEES

A.	Directors and Senior Management

Our directors and executive officers are as follows:

Name	Age		Position

Geoffrey P. Kempler	5657		Chairman of the Board of Directors and Chief Executive Officer

Richard Revelins	4950		Chief Financial Officer and Secretary

Dianne Angus	5152		Chief Operating Officer
Peter A. Marks(1)	56
~~Peter Marks(1)~~	55	Director

Brian D. Meltzer(1)(2)	57	~~Director~~
58		Director
George W. Mihaly(1)(2)	58	~~Director~~
59		Director
Lawrence Gozlan	3233		Director

_________________________

(1) Member of the Audit Committee

	~~(1)~~	~~Member of the Audit Committee~~
	~~(2)~~	(2) Member of the Remuneration Committee, Share Plan Committee and Nominations Committee

Geoffrey Paul Kempler has served as the Chairman of our Board of Directors since November 1997, between November 1997 and August 2004 he served as our Chief Executive Officer, and in June 2005 he again assumed the position of Chief Executive Officer. Mr. Kempler is one of the founders of our company. Mr. Kempler is a qualified psychologist. Mr. Kempler, who has extensive experience in investment and business development, has been responsible for the implementation of our strategic plan and the commercialization of our technology. Mr. Kempler holds a B.Sc degree in science from Monash University and a Grad. Dip. App. Soc. Psych. degree from Swinburne University.

Richard Revelins has served as our Company Secretary since February 2000 and was appointed Chief Financial Officer of our company in June 2004. Mr. Revelins is an executive director and principal of Peregrine Corporate Limited, an Australian-based investment bank, and Managing Director at Cappello Group Inc., a Santa Monica, Los Angeles based investment bank. Mr. Revelins has held senior positions in international merchant banks and is currently a director of Mining Project Group Limited, which is listed on the ASX as well as of a number of private companies. Mr. Revelins holds a Bachelor of Economics degree from Monash University, Melbourne. Mr. Revelins serves as our Chief Financial Officer on a part-time basis and devotes approximately one to two work days a week to such position.

Dianne Angus has served as our Chief Operating Office since May 2007. Ms. Angus joined our company in August 2002, initially serving as our Vice President of Intellectual Property and Licensing, she was promoted to Senior Vice President of Business Development, Intellectual Property and Research in July 2004 and served in that position until being promoted to her current position in May 2007. From 1992 to 2000, MsMs. Angus managed the intellectual property, licensing and biotechnology product development assets of two Australian companies, AMRAD Corporation Limited and Florigene Limited. At Florigene, Ms. Angus was the joint venture alliance manager with Suntory for three years. From June 2000 to August 2002, MsMs. Angus was Director of Dianne Angus and Associates Pty. Ltd. providing strategic business development, technology evaluation and intellectual property consulting services to biotechnology companies. Ms. Angus has worked in the commercial biotechnology sector for over 18 years directing product valuation, acquisition and product licensing. During her career, Ms. Angus has managed large and diverse intellectual property portfolios, contract rights and enforcement. MsMs. Angus has negotiated and executed many commercial licenses and research and product development agreements with entities ranging from large pharmaceutical companies to numerous global research institutes. Ms. Angus has also undertaken due diligence assessments on several Australian biotechnology companies for investment brokers. Ms. Angus holds a Bachelor of Science (Education) and Bachelor of Science (Honours) degree from the University of Melbourne, a Master’s degree in Biotechnology from Monash University, a Graduate Diploma in Intellectual Property Law from Monash University, a Diploma in Intellectual Property Practice from the Institute of Patent and Trademark Attorneys of Australia and is a registered Australian Patent and Trade Mark Attorney.

Peter Marks has served as a director of our company since July 2005. For the period November 21, 2006 to October 20, 2010, Mr. Marks has also served as Executive Chairman of iSonea Ltd, formally KarmelSonix Ltd, a medical devices company listed on the ASX that is focused on developing and commercializing a range of devices in the respiratory and medicine space. Mr. Marks is currently also a director if Peregrine Corporate Limited, an Australian-based investment bank, and Watermark Global Plc, an AIM listed company, which commercializes the treatment and recycling of acid mine drainage water from South African mines. From September 1998 until March 2001, Mr. Marks was employed by KPMG Corporate Finance Ltd (Australia), where he rose to Director and was responsible for heading up the equity capital markets group in Melbourne. From January 1992 until July 1994, Mr. Marks served as Head of the Melbourne Companies Department at the ASX and was founding Director of Momentum Funds Management Pty Ltd, an Australian venture capital firm. From December 1990 until December 1991, Mr. Marks served as Director of Corporate Finance at Burdett Buckeridge & Young Ltd in their Melbourne offices, from August 1988 until November 1990, he held senior corporate finance position at Barings Securities Ltd, and from July 1985 until July 1988, he served as an Associate Director of Mclntosh Securities, now Merrill Lynch Australia. In his roles with these various financial institutions, Mr. Marks was responsible for advising a substantial number of listed and unlisted companies on issues ranging from corporate and company structure, to valuation, business strategies, acquisitions and international opportunities. Mr. Marks holds a Bachelor of Economics degree, a Bachelor of Law degree and Graduate Diploma in Commercial Law from Monash University in Melbourne, Australia, and an MBA degree from the Scottish School of Business at the University of Edinburgh.

Brian Derek Meltzer has served as a director of our company since December 1999. Mr. Meltzer has over 30 years of experience in economics, finance and investment banking. Mr. Meltzer is a director of Momentum Ventures Limited, licensed by the government as an Innovation Investment Fund with venture capital investments including biotechnology. Mr. Meltzer is a non-executive director on the board of directors of a number of private companies. Mr. Meltzer is also a director on the board of ~~directors of~~ the Australian-Israel Chamber of Commerce and is Deputy Chairman of Independence ~~Australia.~~Australia (previously Paraquad). Mr. Meltzer is Chairman of our Audit Committee, Remuneration Committee and Nomination Committee. Mr. Meltzer holds a Bachelor of Commerce degree from the University of Auckland and a Master of Economics degree from Monash University.

Dr. George William Mihaly has served as director of our company since December 1999. Dr. Mihaly also serves as a director of Waide Pty Ltd., a private company. Dr. Mihaly has had an extensive and successful career spanning the research and commercial facets of the pharmaceutical industry. During the period from mid-1994 to early 2000, Dr. Mihaly was the founding executive Chairman and Managing Director of Synermedica Pty Ltd, or Synermedica, one of Australia’s leading independent consultant research organizations to the pharmaceutical industry. Synermedica merged with the global consultant research organization Kendle International Inc. in April 2000 and Dr. Mihaly continued as Managing Director of the merged entity in Australia (now called Kendle Pty Ltd) until December 2004. Over the course of the last 35 years in academia and industry, Dr. Mihaly has amassed extensive experience in both the science and logistics of setting up, monitoring, managing and evaluating results from Phase I, II, III and IV clinical trials. Dr. Mihaly holds a B.Pharm. from Monash University, an M.Sc. degree from Sydney University and a Ph.D. degree from Melbourne University, and he is a fellow of the Australian Institute of Company Directors.

Mr. Lawrence Gozlan was appointed as a director of our company on August 8, 2011. Mr. Gozlan, a leading biotechnology investor and advisor, is the Chief Investment Officer and Founder of Scientia Capital, a specialized global investment fund focused exclusively in life sciences. Scientia Capital was founded to provide high level expertise and to manage investments for high net worth individuals, family offices and institutional investors seeking exposure to the biotechnology industry. Mr. Gozlan commenced his position with Scientia Capital in June 2006. Previously, Mr. Gozlan was responsible for the largest biotechnology investment portfolio in Australia as the institutional biotechnology analyst at the Queensland Investment Corporation (QIC), an investment fund with over AU$60 billion worth of assets under management. Mr. Gozlan also worked as the senior biotechnology analyst in the equities team at Foster Stock broking, and gained senior corporate finance experience advising life sciences companies at Deloitte. Mr. Gozlan is an investment advisor to several companies in the biotechnology industry, presented at numerous international healthcare conferences, and has been featured in various published media as an expert on investing in life sciences. He holds a Bachelor of Science with Honors in microbiology and immunology from the University of Melbourne specializing in neurodegenerative diseases.

There are no family relationships among our directors and senior executives.

B.	Compensation

The following table sets forth all compensation we paid for the year ended June 30, ~~2011~~2012 with respect to each of our executive officers and directors during the ~~2011~~2012 fiscal ~~year (including Mr. Paul Marks who resigned as a director of our company effective as of January 4, 2011).~~year.

Salaries, fees,
commissions,
bonuses and other

Pension, retirement and other similar
benefits

Geoffrey P. Kempler (1) A$403,402 –
Richard Revelins A$80,000 –
Dianne Angus (3) 507,544 –
Paul Marks (2) A$20,00 –
Peter Marks A$55,000 –
Brian D. Meltzer A$90,000 –
George W. Mihaly A$75,000 –

	Salaries, fees, commissions, bonuses and other		Pension, retirement and other similar benefits
Geoffrey P. Kempler (1)	A$	416,579		--
Richard Revelins	A$	81,681		--
Dianne Angus (2)	A$	374,850		--
Peter A. Marks	A$	55,000		--
Brian D. Meltzer	A$	90,000		--
George W. Mihaly	A$	75,000		--
Lawrence Gozlan	A$	36,667		--

______________

(1)

Mr. Kempler has elected not to accept an A$100,000 incentive bonus to which he is entitled until further notice.

	(2)	~~Mr. Paul Marks resigned as a director of our company effective as of January 4, 2011.~~
	~~(3)~~	~~Including a payment of A$150,000 in consideration of reducing in nine (9) months~~During the ~~monthly payments of her usual salary that~~2012 fiscal year, Ms. Angus ~~will be entitled~~also received options to ~~receive in the event of termination of~~purchase 315,637 ordinary shares, which are exercisable for A$0.25 on or before March 20, 2017, as remuneration for her ~~employment.~~services.

In accordance with the approval of our shareholders at our 2004 annual general meeting of shareholders, the aggregate amount available per annum for the remuneration of our non-executive directors for their services (payable in cash, ordinary shares or options) is A$1,250,000.

~~During~~Except for the ~~year ended June 30, 2011,~~options granted to Ms. Angus, we did not grant options to any of our executive ~~officer~~officers or directors. As of June 30, ~~2011,~~2012, our directors and executive officers as a group, then consisting of ~~six~~seven persons, held options to purchase an aggregate ~~1,737,093~~2,052,730 of our ordinary shares. Of such options, (i) options to purchase 1,444,837 ordinary shares are exercisable for nil consideration on or before August 7, 2014. Such options may not be exercised until and unless the price of our ordinary shares has achieved and maintained a minimum value of A$0.40 for five consecutive trading days; ~~and~~ (ii) options to purchase 292,256 ordinary shares are exercisable for A$0.15 consideration on or before March 31, ~~2014.~~2014; and (iii) options to purchase 315,637 ordinary shares are exercisable for A$0.25 consideration on or before March 20, 2017. All such options were granted under our 2004 Employees’, Directors’ & Consultants’ Share and Option Plan. See Item 6.E. “Directors, Senior Management and Employees - Share Ownership – Stock Option Plans.”

Agreement with Chief Executive Officer. On September 21, 2007, we entered into an agreement with Mr. Geoffrey Kempler, a director, in connection with his employment as our Chief Executive Officer. Under the agreement, we agreed to pay Mr. Kempler a base salary of A$386,400 per annum (which may be increased at the discretion of our Board of Directors). On June 5, 2008 at the discretion of our Board of Directors, Mr. Kempler received a salary adjustment for CPI of 4.4% effective July 1, 2008, increasing his base salary to A$403,402. We also agreed to pay Mr. Kempler a bonus of $50,000 upon a capital raising of at least A$7.0 million (before costs) prior to September 30, 2007, which milestone was timely met and therefore we paid such bonus to Mr. Kempler in the 2008 fiscal year. In addition, Mr. Kempler is entitled to a bonus of A$6,000 for holding regular meetings (minimum twice a year) of the full Research and Development Advisory Board. ~~We also agreed to pay Mr. Kempler additional bonuses subject to certain milestones that were not timely met and therefore he is no longer entitled to such bonuses.~~ Mr. Kempler is entitled to ~~(i)~~ up to 20 ~~days~~days’ vacation a ~~year. Vacation~~year (vacation days that are not used in any calendar year will be carried over for use in the following year to a maximum carry-over of two ~~years;~~years) and ~~(ii)~~ reimbursement of reasonable business expenses incurred in the performance of his duties. Mr. Kempler is also entitled to participate in the employee benefits established by our company, as applicable to executives, including, without limitation, a Section 401(k) retirement plan, health, dental, life insurance and short and long term disability plans.

In the event of termination of Mr. Kempler’s employment:

●·

By our company without cause (as defined in the agreement) or by Mr. Kempler with good reason (as defined in the agreement), he will be entitled to: (i) the sum of A$1 million provided we have sufficient capital requirements to fulfill this obligation within 90 days of termination date; (ii) business expenses that have not been reimbursed and accrued and unused vacation days; and (iii) the acceleration of the vesting of any unvested options to purchase ordinary shares which may be purchased during the remainder of the exercise period of such options.


	●·	By our company with cause (as defined in the agreement) or by Mr. Kempler without good reason (as defined in the agreement), he will be entitled to business expenses that have not been reimbursed and accrued and unused vacation days. Mr. Kempler will only be permitted to exercise unvested options to purchase shares that had been granted to him prior to the employment agreement.


	●·	Due to death or disability (as defined in the agreement), we shall pay Mr. Kempler or his estate, as applicable, all accrued base salary, pro-rata bonus, business expenses that have not been reimbursed and accrued, unused vacation days (and in the case of disability, less such amounts under any disability policy maintained by our company). Mr. Kempler or his estate, as applicable, will be entitled to exercise vested options for ordinary shares.

The agreement contains customary confidentiality provisions.

Agreement with Chief Operating Officer. On June 12, 2007, we entered into an amendment to an employment agreement with Ms. Angus in connection with her appointment as our Chief Operating Officer, effective as of May 31, 2007. Under the amended agreement we agreed to pay Ms. Angus a base salary of A$268,125 per year, plus superannuation equivalent to 9.0% of the base salary (or the percentage stipulated by applicable Australian law). Effective May 1, 2010, Ms. Angus received a salary increase of 8% bringing her annual base salary to A$315,637. In addition, under the amended agreement, we granted to Ms. Angus options to purchase an additional 250,000 ordinary shares in recognition of our company’s achievements and performance. Such options are exercisable for nil consideration on or before August 7, 2014 and will not be exercisable unless the price of our ordinary shares has achieved and maintained a minimum value of A$0.40 for five consecutive trading days. During the 2012 fiscal year, Ms. Angus also received options to purchase 315,637 ordinary shares, which are exercisable for A$0.25 on or before March 20, 2017, as remuneration for her services. The options were granted under the 2004 ASX Plan (as defined below). If we terminate the employment agreement without cause or if Ms. Angus terminates the employment agreement with good reason (as such terms are defined in the agreement) (i) we will pay to Ms. Angus, within 90 days of such termination, the sums she would have been entitled to receive had she continued to provide services for three months following the termination date; and (ii) any unvested options shall be accelerated and will become fully vested and she will be entitled to exercise her options during the remainder of their term.

C.	Board Practices

Introduction

Our Board of Directors is elected by and accountable to our shareholders. Our Board of Directors’ responsibilities are divided into operating activities, financial and capital markets activities and scientific activities. The Chairman of our Board of Directors, currently Mr. Geoffrey Kempler, is responsible for the management of the Board of Directors and its functions.

Election of Directors

Directors are elected at our annual general meeting of shareholders. Under our Constitution, the term of office of our directors are staggered, such that at every annual general meeting of shareholders one-third, rounded down to the nearest whole number, of the directors, except a Managing Director, must retire from office and may offer himself/herself for re-election. No director, except a Managing Director, shall retain office for a period in excess of three years without submitting for re-election. Under Australian law, directors who have reached the age of 72 must stand for re-election annually. Our Board of Directors has the power to appoint any person to be a director, either to fill a vacancy or as an additional director (provided that the total number of directors does not exceed the maximum allowed by law), and any director so appointed may hold office only until the next annual general meeting when he or she shall be eligible for election. Mr. Kempler is our Managing Director. Dr. Mihaly must retire and may stand for re-election at our 2012 annual general meeting of shareholders. Mr. Brian Meltzer must retire and may stand for re-election at our 2013 annual general meeting of shareholders. Mr. Peter Marks must retire and may stand for re-election at our ~~2011~~2014 annual general meeting of shareholders. Mr. Lawrence Gozlan was appointed by our board of directors as a director on August 8, 2011 and was elected by our shareholders at a general meeting of shareholders on October 7, 2011.

4547

Non-Executive and Independent Directors

Australian law does not require a company to appoint a certain number of independent directors to its board of directors or audit committee. However, under the ASX Best Practice Guide, the ASX recommends, but does not require, that an ASX-listed company have a majority of independent directors on its board of directors and that the audit committee be comprised of independent directors, within the meaning of the rules of the ASX. Our Board of Directors currently has five directors, of which four are non-executive directors within the meaning of the ASX Best Practice Guide, and our audit committee consists of such three non-executive directors. Accordingly, we currently comply with the foregoing recommendations of the ASX Best Practice Guidance.

Under the rules of the NASDAQ Stock Market, ~~in general~~ a majority of our Board of Directors must qualify as independent directors within the meaning of the rules of the NASDAQ Stock Market, ~~and our audit committee must have at least three members and be comprised only of independent directors,~~ each of whom satisfies the respective “independence” requirements of the NASDAQ Stock Market Rules and the Securities and Exchange Commission.

Our Board of Directors has determined that each of Messrs. Peter Marks and Brian Meltzer and Dr. George Mihaly qualifies as an independent director under the requirements of the ASX, the NASDAQ Stock Market and the Securities and Exchange Commission.

Committees of the Board of Directors

Our Board of Directors has established the following committees:

Audit Committee. The NASDAQ Stock Market rules require us to establish an audit committee comprised of at least three members, each of whom is financially literate and satisfies the respective “independence” requirements of the Securities and Exchange Commission and NASDAQ and one of whom has accounting or related financial management expertise at senior levels within a company.

Our Audit Committee assists our Board of Directors in overseeing the accounting and financial reporting processes of our company and audits of our financial statements, including the integrity of our financial statements, compliance with legal and regulatory requirements, our independent public accountants’ qualifications and independence, the performance of our internal audit function and independent public accountants, and such other duties as may be directed by our Board of Directors. The Audit Committee is also required to assess risk management. The audit committee meets at least four times per year.

Our Audit Committee currently consists of three board members, each of whom satisfies the “independence” requirements of the Securities and Exchange Commission, the NASDAQ Stock Market Rules and ASX Rules. Our Audit Committee is currently composed of Messrs. ~~Peter~~ Marks and ~~Brian~~ Meltzer and Dr. ~~George~~ Mihaly. ~~The audit committee meets at least four times per year.~~

Remuneration Committee. Our Board of Directors has established a Remuneration Committee, which is comprised solely of independent directors, within the meaning of the NASDAQ Stock Market Rules. The Remuneration Committee is responsible for reviewing the salary, incentives and other benefits of our executive officers and to make recommendations on such matters for approval by our Board of Directors. The Remuneration Committee is also responsible for overseeing and advising our Board of Directors with regard to the adoption of policies that govern our compensation programs, including share and ADR option and employee benefit plans. Additionally, the Remuneration Committee administers our share and ADR option plans and any other employee benefit plans through a sub-committee that it established for this purpose (see Share Plan Committee below). Dr. Mihaly and Mr. Meltzer are the current members of the Remuneration Committee, each of whom qualifies as an “independent director” within the meaning of the NASDAQ Stock Market Rules.

4648

Share Plan Committee. Our Remuneration Committee has established a sub-committee, the Share Plan Committee, which administers our share and ADR option plans. Dr. Mihaly and Mr. Meltzer are the current members of the Share Plan Committee, each of whom qualifies as an “independent director” within the meaning of the NASDAQ Stock Market Rules.

Nominations Committee. Our Board of Directors has established a Nominations Committee, which is comprised solely of independent directors, within the meaning of the NASDAQ Stock Market Rules. The Nominations Committee is responsible for identifying and recommending to the Board of Directors director nominees for election at the annual meetings of shareholders, as well as candidates to fill any vacancies on the Board of Directors or as an addition to existing directors. Dr. Mihaly and Mr. Meltzer are the current members of the Nominations Committee, each of whom qualifies as an “independent director” within the meaning of the NASDAQ Stock Market Rules.

Research and Development Advisory Board. Our Research and Development Advisory Board oversees and administers our research activities. Our Research and Development Advisory Board is comprised of a number of the leading scientists in the field of age-related degenerative disorders. The members of our Scientific Advisory Board are as follows:

Dr. Jeffrey Cummings is the Chairman of our Research and Development Advisory Board. Dr. Cummings is the Director of the Cleveland Clinic Lou Ruvo Center for Brain Health and the Andrea and Joseph Hahn Professor of Neurotherapeutics. The Lou Ruvo Center for Brain Health provides clinical care to patients, promotes innovative programs for caregivers, and advances translational research and clinical trials for Alzheimer’s disease and related disorders. Dr. Cummings was formerly the director of the UCLA Alzheimer’s Disease Center; the Augustus S. Rose Professor of Neurology at UCLA and the Director of the Deane F. Johnson Center for Neurotherapeutics. Dr. Cummings’ interests embrace clinical trials and the development of new treatments for neurodegenerative disorders and other neurological diseases. Dr. Cummings has broad interests in dementing disorders, neuropsychiatry, neurotherapeutics and the interface of neuroscience and society.

~~Dr. Ashley Bush~~ (MB BS, DPM, FRANZCP, PhD, FTSE) is a psychiatrist and translational neuroscientist, who heads the Oxidation Biology Laboratory at the Mental Health Research Institute, University of Melbourne, Australia, and also has academic appointments in psychiatry at Massachusetts General Hospital, or MGH, and neuroscience at Cornell University. Dr. Bush is the recipient of numerous awards including the Potamkin Prize for Alzheimer’s disease research. Dr. Bush received his PhD in Colin Masters’ laboratory at the University of Melbourne, performed post-doctoral studies with Rudy Tanzi at MGH, directed a laboratory at MGH from 1995-2005, whereupon he took up a professorship as Australian Research Council Federation Fellow at his current location. Dr. Bush discovered the interaction of beta-amyloid with zinc as a major factor in Alzheimer’s disease pathogenesis, and focuses on the neurobiology of metal ions in neurodegenerative disorders.

Professor Jean-Marc Orgogozo, MD, is the Chair of the Department of Clinical Neurosciences and Professor of Neurology at the University of Bordeaux, France. Professor Orgogozo has extensive experience in neuroepidemiology and clinical trials, particularly in stroke and dementia. Professor Orgogozo’s early publications on the amyloid vaccines have helped to shape the field of anti-amyloid therapeutics. Professor Orgogozo’s main therapeutic research now is on the prodromal phase of Alzheimer’s disease.

Dr. Craig Ritchie is the Clinical Research Fellow (Senior), Old Age Psychiatry at Imperial College, London. In 2011 Dr. Ritchie was appointed Co-Director of the London (Northwest) Comprehensive Local Research Network. Dr. Ritchie is heavily involved, both clinically and academically, in psychiatric disorders of late life, in particular ~~Alzheimer’s~~Alzheimer‘s disease, delirium and schizophrenia. Dr. Ritchie’s interest in conducting and assimilating evidence from clinical trials is based on his clinical background, having worked with elderly patients with dementia for most of his career.

Professor Colin Masters is the Executive Director of the Mental Health Research Institute (Australia) and an ex-founding director of our company. For more than 30 years, Professor Masters has dedicated his research to the study of the nature of Alzheimer’s disease and other neurodegenerative disorders. Professor Masters and his team are internationally renowned for their work on the disease and he is considered the most eminent neuroscientist in Australia. In addition, Professor Masters is regarded as one of the leading worldwide researchers in the study of Alzheimer’s disease. In 2006, Professor Masters was awarded the Lifetime Achievement Award in ~~Alzheimer’s~~Alzheimer‘s Disease Research at the 10th International Conference on ~~Alzheimer’s~~Alzheimer‘s Disease (ICAD), the Lennox K. Black International Prize for Excellence in Biomedical Research and the Grand Hamdan International Award for a research breakthrough in the subject of Molecular and Cellular Pathology of Neurological Disorders.

Professor Rudolph Emile Tanzi is the Joseph P. and Rose F. Kennedy Professor of Neurology at Harvard Medical School and Director of Genetics and the Aging Research Unit at MGH. Professor Tanzi co-discovered three of the four known Alzheimer’s disease genes and contributed greatly to elucidating the molecular mechanisms by which they cause of Alzheimer’s disease. Professor Tanzi’s laboratory at MGH is one of the leaders in the field. Professor Tanzi conceived the “Metal Hypothesis of ~~Alzheimer’s~~Alzheimer's Disease” with ~~Dr.~~Professor Ashley Bush, and over the past 15 years has helped guide the design and development of our platform technology. In January 2012, Professor Tanzi was appointed our Chief Scientific Advisor.

Dr. Steven D. Targum is our Chief Medical Advisor. Dr. Targum consults widely to the pharmaceutical industry regarding the design and implementation of clinical trials for new psychotropic drugs and the progression of drug development from concept to approval to launch. Dr. Targum is well known for his expertise in clinical trials methodologies. In this capacity, Dr. Targum founded both PharmaStar and Clintara LLC, global rater training and medical education companies focused on central nervous system drug development and international clinical trials. ~~Dr.Targum~~Dr. Targum has been Professor of Psychiatry and Vice-Chairman of the Department of Mental Health Sciences at Hahnemann University School of Medicine in Philadelphia, and most recently a consultant in psychiatry at MGH in Boston.

Directors’ Service Contracts

~~Our Chief Executive Officer. On September 21, 2007, we entered into an~~Except for the agreement with Mr. ~~Geoffrey~~ Kempler ~~the Chairman of our Board of Directors,~~ in connection with his employment as our Chief Executive ~~Officer. For details regarding the agreement with Mr. Kempler, including benefits upon termination of his employment, see Item 6.B. “Operating and Financial Review and Prospects - Compensation.”~~

~~Other. Except~~Officer, as described above, there are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries.

Indemnification of Directors and Officers

Our Constitution provides that, subject to the Australian Corporations Act, every director, secretary, manager or officer of our company or any person employed by our company as auditor shall be indemnified out of our funds against all liability incurred by such person as a director or officer in defending proceedings, whether civil or criminal, in which judgment is given in the persons favor or in which the person is acquitted in connection with any application under the Australian Corporations Act in which relief is granted to the person by a Court.

Under our Constitution no director, auditor or other officer shall be liable for (i) any acts, receipts, neglect or defaults of any other director or officer for joining in any receipt or other act for conformity; (ii) any loss or expense that may happen to us through the inefficiency or deficiency of title to any property acquired by order of the directors or on our behalf; (iii) the inefficiency or deficiency of any security in or upon which any of our monies shall be invested; (iv) any loss or damage arising from bankruptcy, insolvency or tortuous act of any person with whom any monies, securities or effects shall be deposited; (v) any loss occasioned by any error of judgment, omission, default or oversight on the persons part; or (vi) any other loss damage or misfortune whatsoever which shall happen in relation to those things unless the same shall happen through the persons own negligence, default, breach or duty, breach of trust or dishonesty.

In addition, our Constitution provides that to the extent permitted by law, we may pay, or agree to pay, a premium in respect of a contract insuring a person who is ~~liable~~ or has been an officer of our company or one of our subsidiaries against a liability:

●·

incurred by the person in his or her capacity as an officer of our company or a subsidiary of our company provided that the liability does not arise out of a conduct involving a willful breach of duty in relation to our company or a subsidiary of our company; or


	●·	for costs and expenses incurred by that person defending proceedings, whatever their outcome.

We maintain a directors’ and officers’ liability insurance policy. We have established a policy for the indemnification of our directors and officers against certain liabilities incurred as a director or officer, including costs and expenses associated in successfully defending legal proceedings.

Employees

At June 30, 2012, we had eight employees. Of such employees, five persons were employed in research and development, two persons in management and administration and one person in operations. All such employees were located in Australia.

At June 30, 2011, we had 9nine employees. Of such employees, five persons were employed in research and development, two persons in management and administration and two persons in operations. All such employees were located in Australia.

At June 30, 2010, we had 12 employees. Of such employees, eight persons were employed in research and development, two persons in management and administration and two persons in operations. All such employees were located in Australia.

At June 30, 2009, we had 12 employees. Of such employees, seven persons were employed in research and development, three persons in management and administration and two persons in operations. All such employees were located in Australia.

Australian labor laws and regulations are applicable to all of our employees. The laws concern various matters, including severance pay rights at termination, retirement or death, length of work day and work week, minimum wage, overtime payments and insurance for work-related accidents.

E.	Share Ownership

Beneficial Ownership of Executive Officers and Directors

The following table sets forth certain information as of September ~~27, 2011~~30, 2012 regarding the beneficial ownership of our ordinary shares by each of our directors and executive officers and by all of our directors and executive officers as a group:

Name
Number of Ordinary Shares Beneficially Owned (1)

Percentage of
Ownership (2)

Geoffrey P. Kempler 17,055,000 (3 ) 6.06 %
Richard Revelins 20,308 (4 ) *
Dianne Angus 1,837,093 (5 ) *
Peter Marks 43,111 (6 ) *
Brian D. Meltzer 326,666 (7 ) *
George W. Mihaly 226,666 (8 ) *
All directors and executive officers as a group (s persons) 19,508,844 (9 ) 6.93 %

Name	Number of Ordinary Shares Beneficially Owned (1)		Percentage of Ownership (2)
Geoffrey P. Kempler (3)		17,811,000		5.78	%
Richard Revelins (4)437437		20,308		*
Dianne Angus (5)		2,052,730		*
Peter Marks (6)		43,111		*
Brian D. Meltzer (7)		326,666		*
George W. Mihaly (8)		226,666		*
Lawrence Gozlan		--		--
All directors and executive officers as a group (7 persons)		20,480,481		6.65	%

__________________

Title of each class		Name of each exchange on which registered
American Depositary Shares, each representing ten Ordinary Shares		NASDAQ Capital Market

	As of June 30,
	2011					2010					2009					As of June 30,
	Amount			Weighted average exercise price		Amount			Weighted average exercise price		Amount			Weighted average exercise price		2012					2011					2010
																Amount			Weighted average exercise price		Amount			Weighted average exercise price		Amount			Weighted average exercise price
Options outstanding at the beginning of the year		15,855,394		$	0.26		16,271,183		$	0.25		13,987,848		$	0.20		7,831,311		$	0.26		15,855,394		$	0.26		16,271,183		$	0.25
Granted		200,000			–		2,204,609		$	0.10		3,099,818		$	0.32		4,158,674		$	0.25		200,000			--		2,204,609		$	0.10
Exercised		(816,583	)		–		(420,398	)		–		(816,483	)	$	0.14		(341,865	)		--		(816,583	)		--		(420,398	)		--
Expired		(7,327,500	)	$	0.23		(2,200,000	)		–		–			–		--			--		(7,327,500	)	$	0.23		(2,200,000	)		--
Forfeited		(80,000	)		–		–			–		–			–		(1,500,437	)	$	0.25		(80,000	)		--		--			--

Options outstanding at the end of the year		7,831,311		$	0.26		15,855,394		$	0.26		16,271,183		$	0.25		10,147,683		$	0.27		7,831,311		$	0.26		15,855,394		$	0.26

Options exercisable at the end of the year		6,810,621		$	0.29		12,277,204		$	0.34		11,198,846		$	0.36		9,126,993		$	0.27		6,810,621		$	0.29		12,277,204		$	0.34

Options that may be granted as of the end of the year		34,897,723					42,850,233					23,652,332					31,819,485					34,897,723					42,850,233

	Per ADR (US$)		Per ADR (US$)
	High	Low	High	Low

Fiscal Year Ended June 30,
2007	4.35	1.21
Fiscal Year Ended June 30,
2008	6.73	2.06	6.73	2.06
2009	5.70	1.00	5.70	1.00
2010	3.35	1.02
2010 `			3.35	1.02
2011	4.50	1.09	4.50	1.09

Fiscal Year Ended June 30, 2010:
First Quarter	2.17	1.05
Second Quarter	1.89	1.13
Third Quarter	1.60	1.02
Fourth Quarter	3.35	1.09
2012			2.31	1.40

Fiscal Year Ended June 30, 2011:
First Quarter	1.38	1.09	1.38	1.09
Second Quarter	1.68	1.13	1.68	1.13
Third Quarter	4.50	1.23	4.50	1.23
Fourth Quarter	2.83	1.70	2.83	1.70

Fiscal Year Ended June 30, 2012:
First Quarter			2.31	1.40
Second Quarter			1.78	1.40
Third Quarter			2.03	1.46
Fourth Quarter			1.74	1.41

Month Ended:
April 2011	2.83	2.21
May 2011	2.52	1.85
June 2011	2.22	1.70
July 2011	2.13	1.77
August 2011	1.95	1.40
September 2011 (through September 27)	2.31	1.50
April 2012			1.74	1.47
May 2012			1.65	1.41
June 2012			1.60	1.45
July 2012			1.65	1.50
August 2012			1.87	1.50
September 2012			2.74	1.66

Category	Depositary actions	Associated fee or charge

(a) Depositing or substituting the underlying shares	Issuances against deposits of shares, including deposits and issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or the deposited securities	Up to ~~US $5.00~~US$5.00 for each 100 ADSs (or portion thereof) issued or delivered (as the case may be) The depositary may sell (by public or private sale) sufficient securities and property received in respect of share distributions, rights and other distributions prior to such deposit to pay such charge
(b) Receiving or distributing dividends	Cash distributions made pursuant to the deposit agreement		~~US $0.02~~US$0.02 or less per ADS
(c) Selling or exercising rights	Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities	Up to ~~US $5.00~~US$5.00 for each 100 ADSs (or portion thereof)
(d) Withdrawing, cancelling or reducing an underlying security	Acceptance of ADSs surrendered for withdrawal, cancellation or reduction of deposited securities		Up to ~~US $5.00~~US$5.00 for each 100 ADSs (or portion thereof) surrendered, cancelled or reduced (as the case may be) The depositary may sell (by public or private sale) sufficient securities and property received in respect of share distributions, rights and other distributions prior to such deposit to pay such charge
(e) Transferring, combination or split-up of receipts	Transfer, combination and split-up of ADRs		~~US $1.50~~US$1.50 per ADR

(f) Fees and expenses of the depositary	· · · · · ·	Fees and expenses incurred by the depositary or the depositary’s agents on behalf of holders, including in connection with:		~~Expenses payable at the sole discretion of the depositary by billing ADR holders or by deducting such charges from one or more cash dividends or other cash distributions~~
		●	compliance with foreign exchange control regulations or any law or regulation relating to foreign investment
		●	stock transfer or other taxes and governmental charges
		●	cable, telex and facsimile transmission and delivery charges
		●	fees for the transfer or registration of deposited securities in connection with the deposit or withdrawal of deposited securities
		●	expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars
		●	any other charge payable by the depositary or the depositary’s agents in connection with the servicing of the shares or other deposited securities (which charge shall be assessed against holders as of the record date or dates set by the depositary)		Expenses payable at the sole discretion of the depositary by billing ADR holders or by deducting such charges from one or more cash dividends or other cash distributions

o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	2.	The percentages shown are based on ~~281,608,383~~308,189,928 ordinary shares issued and outstanding as of September ~~27, 2011.~~30, 2012.

	3.	Of the ~~17,055,000~~17,811,000 outstanding ordinary shares, 30,000 ordinary shares are held of record by Mr. Kempler, 13,965,000 ordinary shares are held by Baywick Pty Ltd., an Australian corporation owned by Mr. Kempler, 756,000 ordinary shares are held by Sadarajak Pty Ltd., an Australian corporation owned by Mr. Kempler, 90,000 ordinary shares are held of record by Crystal Triangle Pty Ltd., an Australian corporation owned by Mr. Kempler and 2,970,000 ordinary shares are held of record by NRB Developments Pty Ltd., an Australian corporation in which Mr. Kempler holds a 50% interest. Mr. Kempler may be deemed to be the beneficial owner of the ordinary shares held of record by Baywick Pty Ltd., Crystal Triangle Pty Ltd. and NRB Developments Pty Ltd.

	4.	The 20,308 outstanding ordinary shares are held of record by Darontack Pty Ltd., an Australian corporation owned by Mr. Revelins.

	5.	Includes (i) ~~100,000 outstanding ordinary shares; and (ii) options to purchase 1,737,093 ordinary shares. Of such options,~~ options to purchase 1,444,837 ordinary shares are exercisable for nil consideration on or before August 7, ~~2014. These options~~2014, which may not be exercised unless the price of our ordinary shares has achieved and maintained a minimum value of A$0.40 for five consecutive trading ~~days. Options~~days; (ii) options to purchase 292,256 ordinary shares are exercisable for A$0.15 consideration on or before March 31, ~~2014.~~2014; and (iii) options to purchase 315,637 ordinary shares are exercisable for A$0.25 consideration on or before March 20, 2017.

	6.	The 43,111 outstanding ordinary shares are held of record by Lampam Pty Ltd, an Australian corporation owned by Mr. Peter Marks.

	7.	The 326,666 outstanding ordinary shares are held of record by RBC Dexia Pty Ltd., a superannuation fund of Mr. Meltzer.

	8.	Of the 226,666 outstanding ordinary shares, 166,666 ordinary shares are held of record by Dr. Mihaly, 52,000 ordinary shares are held of record by Waide Pty Ltd., an Australian corporation owned by Dr. Mihaly, and 4,000 ordinary shares are held of record by each of Kieren Mihaly and Warwick Mihaly, Dr. Mihaly’s sons. Dr. Mihaly disclaims beneficial ownership of the ordinary shares held by his sons, Kieren Mihaly and Warwick Mihaly.

	9.	~~See Footnotes (3) - (8).~~

Name	Number of Ordinary Shares Beneficially Owned (1)		Percentage of Outstanding Ordinary Shares (2)		Number of Ordinary Shares Beneficially Owned (1)			Percentage of Outstanding Ordinary Shares (2)

Geoffrey P. Kempler	17,055,000	(3)	6.06	%		17,811,000	(3)		5.78	%
Jagen Nominees Pty Ltd	15,409,060	(4)	5.47	%		15,409,060	(4)		5.00	%

	Per Ordinary Share (A$)		Per Ordinary Share (A$)
	High	Low	High	Low

Fiscal Year Ended June 30,
2007	0.80	0.18
Fiscal Year Ended June 30,
2008	0.70	0.23	0.70	0.23
2009	0.69	0.12	0.69	0.12
2010	0.25	0.12
2010 `			0.25	0.12
2011	0.38	0.11	0.38	0.11

Fiscal Year Ended June 30, 2010:
First Quarter	0.25	0.14
Second Quarter	0.24	0.14
Third Quarter	0.17	0.12
Fourth Quarter	0.22	0.12
2012			0.22	0.14

Fiscal Year Ended June 30, 2011:
First Quarter	0.17	0.12	0.17	0.12
Second Quarter	0.16	0.12	0.16	0.12
Third Quarter	0.38	0.11	0.38	0.11
Fourth Quarter	0.26	0.16	0.26	0.16

Fiscal Year Ended June 30, 2012:
First Quarter			0.22	0.14
Second Quarter			0.19	0.14
Third Quarter			0.19	0.14
Fourth Quarter			0.18	0.14

Month Ended:
April 2011	0.26	0.20
May 2011	0.22	0.17
June 2011	0.20	0.16
July 2011	0.19	0.16
August 2011	0.17	0.14
September 2011 (through September 27)	0.22	0.14
April 2012			0.17	0.14
May 2012			0.18	0.14
June 2012			0.17	0.14
July 2012			0.16	0.15
August 2012			0.20	0.15
September 2012			0.29	0.17


	●·	the amount allocated to each year during which we are considered a PFIC other than the year of the dividend payment or disposition would be subject to tax at the highest individual or corporate tax rate, as the case may be, in effect for that year and an interest charge would be imposed with respect to the resulting tax liability allocated to each such year,


	●·	the amount allocated to the current taxable year and any taxable year before we became a PFIC will be taxable as ordinary income in the current year, and


	●·	you will be required to file an annual return on ~~IRS~~Internal Revenue Service Form 8621.


	●·	A shareholder of a PFIC that is a shareholder of another PFIC, or


	●·	A 50%-or-more shareholder of a foreign corporation that is not a PFIC and that directly or indirectly owns stock of a PFIC.


	●·	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

	Year Ended June 30,				Year Ended June 30,
Services Rendered	2011		2010		2012		2011

Audit (1)		A$132,000		A$140,672	A$	145,000	A$	132,000
Audit-Related (2)		–		45,000		-		-
Other (3)		85,000		26,637		-		85,000
Total		A$217,000		A$212,309	A$	145,000	A$	217,000

	(1) Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services that generally only the independent accountant can reasonably provide.
	(2) Audit-related fees relate to services provided in connection with the auditor’s review of our internal controls.
	~~(3) Other fees relate to services provided in connection with~~ ~~other public filings for~~ ~~the Securities and Exchange Commission.~~

		Page

Index to Consolidated Financial Statements		F-0
Report of Independent Registered Public Accounting Firm for fiscal years ~~2011~~2012 and ~~2010~~	2011	F-1
Consolidated Statements of Financial Position		F-2
Consolidated Statements of Comprehensive Income		F-3
Consolidated Cash Flow Statements		F-4
Consolidated Statements of Changes in Stockholders’ Equity		F-5
Notes to Consolidated Financial Statements		F-6

Exhibit		Description

1.1		Constitution of Registrant (1)
2.1		Deposit Agreement dated March 23, 2001, as amended and restated as of December 21, 2007, among the Registrant, the Bank of New York, as Depositary, and owners and holders from time to time of ADRs issued thereunder, including the Form of American Depositary Receipts (2)
4.1		Agreement for the Assignment of Patents and Intellectual Property Licensing dated February 8, 2000, between Registrant and the Biomolecular Research Institute (3)
4.2		License Agreement dated January 1, 2001, between the Registrant and The General Hospital Corporation (3)
4.3		Variation Agreement dated August 8, 2001, between the Registrant and The General Hospital Corporation, which amends the License Agreement dated January 1, 2001, between the parties (3)
4.4		Agreement to Provide Accounting, Administration, Corporate Advice and Company Secretarial Services dated February 23, 2000, between the Registrant and Malvern Administrative Services (now ~~named~~ The CFO solution) (3)
4.5		Second Amendment to Exclusive License Agreement dated January 1, 2001, between the Registrant and The General Hospital Corporation dated March 15, 2004 ~~between the between the Registrant and The General Hospital Corporation~~ (4)
4.6		~~Fourth Research Funding and Intellectual Property Assignment Agreement dated December 1, 2009 (5)~~
~~4.7~~		~~GMP 30kg Manufacture Agreement dated June 6, 2007, between the Registrant and Institute of Drug Technology Australia Limited (6)~~
~~4.8~~		~~GMP 4kg Manufacture Agreement dated June 6, 2007, between the Registrant and Institute of Drug Technology Australia Limited (7)~~
~~4.9~~		Settlement Agreement dated July 28, 2004, among the Registrant, P.N. Gerolymatos S.A, or PNG, Mr. Gerolymatos, ~~The General Hospital Corporation of Massachusetts, or The~~ GHC, Professor Ashley Bush, Dr. Rudolph Tanzi and Dr. Robert Cherny and the ancillary agreements of even date therewith exhibited thereto, including the Patent Assignment and Settlement Agreement among the Registrant and PNG, Patent Rights Security Agreement among the Registrant and PNG and the Derivatives Agreement among the Registrant and PNG ~~(8)~~(5)

~~4.10~~	4.7	Prana Biotechnology Limited, 2004 American Depository Share (ADS) Option Plan ~~(9)~~(6)
~~4.11~~	4.8	Prana Biotechnology Limited, 2004 Employees’, Directors’ and Consultants’ Share and Option Plan ~~(10)~~(7)
4.9	Fourth Research Funding and Intellectual Property Assignment Agreement dated December 1, 2009
4.10	GMP 30kg Manufacture Agreement dated June 6, 2007, between the Registrant and Institute of Drug Technology Australia Limited (8)
4.11	GMP 4kg Manufacture Agreement dated June 6, 2007, between the Registrant and Institute of Drug Technology Australia Limited (9)
4.12		Employment Agreement dated September 21, 2007, among the Registrant and Mr. Kempler ~~(11)~~(10)
4.13		Letter Agreements effective as of June 12, 2007 between the Registrant and Ms. Dianne Angus ~~(12)~~(11)
4.14		Assignment and Novation Deed between Commonwealth Scientific Industrial and Research Organization and the Biomolecular Research Institute and the Registrant dated September 10, 2007 ~~(13)~~(12)
4.15		Agreement dated May 22, 2007, ~~by and~~ between the Registrant and Patheon Inc. regarding the formulation, development and manufacture of capsules of PBT2 ~~(14)~~(13)
4.16		Placement Confirmation Letter dated September 8, 2009, between the Registrant and BAM Capital LLC ~~(15)~~(14)
4.17		Consultancy Services Agreement dated January 8, 2004, between the Registrant and Professor Ashley Bush ~~(16)~~(15)
4.18		Letter agreement dated November 14, 2007, between the Registrant and Professor Ashley Bush ~~(17)~~(16)
4.19		Letter agreement dated May 22, 2009, between the Registrant and Professor Ashley Bush ~~(18)~~(17)
4.20		Process Development and Manufacturing Agreement dated December 26, 2008, between the Registrant and Dr. Reddy’s Laboratories Limited, as amended by Amendment No. 1 effective February 3, 2009 and Amendment No. 2 effective March 13, 2009 ~~(19)~~(18)
4.21		Amendments to Process Development and Manufacturing Agreement dated December 26, 2008 between the Registrant and Dr. Reddy’s Laboratories Limited, as amended: Amendment No 3 effective July 6, 2009; Amendment No. 4 effective September 15, 2009; Amendment No. 5 effective November 13, 2009; Amendment No. 6 effective December 22, 2009; Amendment No. 7 effective December 22, 2009; Amendment No. 8 effective May 7, 2010; and Amendment No. 9 effective May 20, 2010 ~~(20)~~(19)

4.22		Amendments to Process Development and Manufacturing Agreement dated December 26, 2008 between the Registrant and Dr. Reddy’s Laboratories Limited, as amended: Amendment No. 10 effective October 21, 2010; Amendment No. 11 effective March 21, ~~2011;~~2011 and Amendment No. 12 effective May 18, 2011 (20)
4.23	Amendments to Process Development and Manufacturing Agreement dated December 26, 2008 between the Registrant and Dr. Reddy’s Laboratories Limited, as amended: Amendment No. 13 effective February 14, 2012
4.24	Agreement dated June 23, 2010, between the Registrant and Quintiles Limited (21)
~~4.24~~	4.25	Placement Confirmation Letter dated March 22, 2011, between the Registrant and certain institutional investors (22)
~~4.25~~	4.26	At-The-Market Issuance Sales Agreement dated July 13, 2011, by and between the Registrant and McNicoll, Lewis & Vlak LLC (23)
~~8.1~~4.27	Clinical Trial Agreement between the Registrant and the University of Rochester dated October 7, 2011.
4.28	Clinical Research Support Agreement between the Registrant and the General Hospital Corporation dated June 14, 2012.
8.1	List of Subsidiaries of the Registrant
12.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act, as amended
12.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act, as amended
13.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1		Consent of PricewaterhouseCoopers, Registered Public Accounting Firm

~~(7)~~(9)	Filed as Exhibit 4.10 to our Annual Report on Form 20-F for the year ended June 30, 2007, and incorporated herein by reference.
~~(8)~~	~~Filed as Exhibit 4.21 to our Annual Report on Form 20-F for the year ended June 30, 2004, and incorporated herein by reference.~~
~~(9)~~	~~Incorporated by reference to Annexure A to Item 1 of our Report on Form 6-K for the month of November 2004.~~

(10)	~~Incorporated by reference to Annexure B to Item 1 of our Report on Form 6-K for the month of November 2004.~~
~~(11)~~	Filed as Exhibit 4.19 to our Annual Report on Form 20-F for the year ended June 30, 2007, and incorporated herein by reference.

		Page Number

Report of Independent Registered Public Accounting Firm for fiscal years ~~2011~~2012 and ~~2010~~2011		F-1

Consolidated Statements of Financial Position		F-2

Consolidated Statements of Comprehensive Income		F-3

Consolidated Cash Flow Statements		F-4

Consolidated Statements of Changes in Stockholders’ Equity		F-5

Notes to Consolidated Financial Statements		F-6

		June 30,
	Notes	2011			2010

Assets
Current Assets
Cash and cash equivalents			8,838,245			5,227,298
Trade and other receivables	6		3,373			825
Other current assets	7		90,588			1,479,603

Total Current Assets			8,932,206			6,707,726

Non-Current Assets
Property and equipment, net of accumulated depreciation of A$355,788 and A$329,646 respectively	8		40,909			58,527
Other non-current assets	7		37,837			35,164

Total Non-Current Assets			78,746			93,691

Total Assets			9,010,952			6,801,417

Liabilities
Current Liabilities
Trade and other payables	9		1,399,584			1,244,417
Other financial liabilities	10		355,815			–
Provisions	11		319,965			256,074

Total Current Liabilities			2,075,364			1,500,491

Non-Current Liabilities
Provisions	11		4,386			71,610

Total Non-Current Liabilities			4,386			71,610

Total Liabilities			2,079,750			1,572,101

Net Assets			6,931,202			5,229,316

Equity
Issued and unissued capital 2011: 275,286,783 fully paid ordinary shares Nil options over fully paid ordinary shares 2010: 234,045,871 fully paid ordinary shares Nil options over fully paid ordinary shares	13		82,340,819			75,120,164
Reserves	14		9,494,995			8,582,579
Accumulated deficit during the development stage	15		(84,904,612	)		(78,473,427	)

Total Equity			6,931,202			5,229,316

		Years ended June 30,
	Notes	2011			2010			2009

Revenues from ordinary activities	3		156,135			215,008			428,193
Other income	3		6,785			–			–

Research and development expenses, net	4		(2,329,491	)		(87,992	)		(2,215,358	)
Personnel expenses	4		(2,394,298	)		(3,087,234	)		(3,832,804	)
Intellectual property expenses	4		(399,237	)		(431,082	)		(1,107,534	)
Auditor and accounting expenses	4		(157,436	)		(168,909	)		(129,998	)
Travel expenses	4		(159,971	)		(234,555	)		(195,251	)
Public relations and marketing expenses	4		(110,646	)		(130,090	)		(222,679	)
Depreciation expenses	4		(31,577	)		(35,290	)		(34,190	)
Other expenses	4		(857,281	)		(940,699	)		(978,875	)
Foreign exchange loss	4		(145,377	)		(6,079	)		(6,723	)
Gain (loss) on fair valuation of financial liabilities	4		(8,791	)		–			772,430

Loss before income tax expense			(6,431,185	)		(4,906,922	)		(7,522,789	)

Income tax expense	5		–			–			–

Loss for the year			(6,431,185	)		(4,906,922	)		(7,522,789	)

Other comprehensive income (loss)			–			–			–

Total comprehensive loss for the year	15		(6,431,185	)		(4,906,922	)		(7,522,789	)

Loss per share (basic and diluted - cents per share)	20		(2.60	)		(2.16	)		(3.72	)

Weighted average number of ordinary shares used in computing basic and diluted net loss per share			247,578,570			227,527,388			202,357,885