EXHIBIT 3.1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ________ to ________
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) | |
| (Address of principal executive offices) | (Zip Code) |
+1
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| The |
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.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
As of February 14, 2024, the number of shares of the registrant’s Common Stock outstanding was .
RENOVARO INC. AND SUBSIDIARIES
- INDEX -
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.
The results for the period ended December 31, 2023, are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2023, filed with the Securities and Exchange Commission on October 2, 2023.
1
RENOVARO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | June 30, | |||||||
| 2023 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Notes receivable | ||||||||
| Prepaids and other assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Definite life intangible assets, net | ||||||||
| Indefinite life intangible assets | ||||||||
| Goodwill | ||||||||
| Deposits and other assets | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable – trade | $ | $ | ||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Notes payable, net | ||||||||
| Convertible notes payable | ||||||||
| Total Current Liabilities | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ par value; shares authorized; Series A Convertible Preferred;1,000,000 shares designated; shares issued and outstanding at December 31, 2023 and zero shares issued and outstanding at June 30, 2023 | ||||||||
| Common Stock, par value $, shares authorized, shares issued and outstanding at December 31, 2023, and shares issued and outstanding at June 30, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
2
RENOVARO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Loss on extinguishment of debt | ( | ) | ||||||||||||||
| Loss on extinguishment of contingent consideration | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest and other income | ||||||||||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| BASIC AND DILUTED LOSS PER SHARE | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING - BASIC AND DILUTED | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
RENOVARO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other Comprehensive Income (Loss) | ||||||||||||||||
| Foreign currency translation, net of taxes | ||||||||||||||||
| Comprehensive Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
RENOVARO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| # of Series A Preferred Shares | Series A Preferred Shares Amount | # of Shares | Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||||||||
| July 1, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Issuance of preferred stock and warrants in private placement | — | |||||||||||||||||||||||||||||||
| Issuance of preferred stock and warrants for conversion of $2 million Note | — | |||||||||||||||||||||||||||||||
| Restricted shares issued for services rendered | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| September 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock issued pursuant to warrants exercised | — | |||||||||||||||||||||||||||||||
| Restricted shares issued for advisory services | — | ( | ) | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
5
| # of Series A Preferred Shares | Series A Preferred Shares Amount | # of Shares | Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||||||||
| July 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Stock issued pursuant to warrants exercised | — | |||||||||||||||||||||||||||||||
| Shares issued for earn-out | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Shares issued in lieu of interest on $1.2 million note payable extension | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||
| December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
6
RENOVARO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on extinguishment of debt | ||||||||
| Loss on extinguishment of contingent consideration liability | ||||||||
| Stock based compensation expense | ||||||||
| Restricted shares for services rendered | ||||||||
| Amortization of discount on notes payable | ||||||||
| Changes in assets and liabilities: | ||||||||
| Other receivables | ||||||||
| Prepaid expenses/deposits | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Other current liabilities | ( | ) | ||||||
| Operating leases, net | ( | ) | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Notes receivable | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of promissory notes | ||||||||
| Repayment of finance agreement | ( | ) | ( | ) | ||||
| Proceeds from private placement | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from exercise of warrants | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Effect of exchange rates on cash | ( | ) | ||||||
| NET CHANGE IN CASH | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES | ||||||||
| Finance agreement entered into in exchange for prepaid assets | $ | $ | ||||||
| Shares in lieu of interest on $1.2 million notes payable extension | $ | $ | ||||||
| Common shares issued for contingent earn out liability | $ | $ | ||||||
| Conversion of note payable for issuance of preferred stock | $ | |||||||
| Debt discount related to convertible promissory notes | $ | $ | ||||||
| Debt discount related to $3 million notes payable | $ | $ | ||||||
| Debt discount related to $1 million note payable | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
7
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business – On February 13, 2024, the Company changed its corporate name from Renovaro Biosciences Inc. to Renovaro Inc. (“Renovaro”, and together with its subsidiaries, the “Company”, “we” or “us”). In August 2023, the Company changed its corporate name from Enochian Biosciences Inc. to Renovaro Biosciences Inc. The Company engages in the research and development of pharmaceutical and biological products for the treatment of cancer, HIV, and HBV with the intent to manufacture said products.
Going Concern – These
financial statements have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and
discharge its liabilities in the normal course of business. The Company has not generated any revenue, has incurred substantial recurring
losses from continuing operations and has an accumulated deficit of $
Basis of Presentation – The Company prepares consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and follows the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The accompanying financial statements are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at December 31, 2023, and 2022 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2023, audited financial statements. The results of operations for the periods ended December 31, 2023, and 2022 are not necessarily indicative of the operating results for the full year.
Consolidation – For the three and six months ended December 31, 2023, and 2022, the condensed consolidated financial statements include the accounts and operations of the Registrant and its subsidiaries. All material inter-company transactions and accounts have been eliminated in the consolidation.
Accounting Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimated. Significant estimates include the fair value and potential impairment of intangible assets, and the fair value of equity instruments issued.
Functional Currency & Foreign Currency Translation – The functional currency of Renovaro Denmark is the Danish Kroner (“DKK”). The Company’s reporting currency is the U.S. Dollar for the purpose of these financial statements. The Company’s balance sheet accounts are translated into U.S. dollars at the period-end exchange rates and all revenue and expenses are translated into U.S. dollars at the average exchange rates prevailing during the periods ended December 31, 2023, and 2022. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred.
8
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents –
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The
Company had balances held in financial institutions in Denmark and in the United States in excess of federally insured amounts at December
31, 2023, and June 30, 2023, of $
Property and Equipment – Property and equipment are stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized and depreciated upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed for financial statement purposes on a straight-line basis over the estimated useful lives of the assets, which range from four to ten years (see Note 4.)
Intangible Assets – The Company has both definite and indefinite life intangible assets.
Definite life intangible assets include patents. The Company accounts for definite life intangible assets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Goodwill and Other Intangible Assets”. Definite life intangible assets are recorded at cost. Patent costs consist of costs incurred to acquire the underlying patent. If it is determined that a patent will not be issued, the related remaining capitalized patent costs are charged to expense. Definite life intangible assets are amortized on a straight-line basis over their estimated useful life. The estimated useful life of patents is twenty years from the date of application.
Indefinite life intangible assets include license agreements and goodwill. The Company accounts for indefinite life intangible assets in accordance with ASC 350, “Goodwill and Other Intangible Assets”. License agreement costs represent the fair value of the license agreement on the date acquired and are tested annually for impairment, as well as whenever events or changes in circumstances indicate the carrying value may not be recoverable.
Goodwill – Goodwill is not amortized but is evaluated for impairment annually as of June 30th of each fiscal year or whenever events or changes in circumstances indicate the carrying value may not be recoverable.
Impairment of Goodwill and Indefinite Lived Intangible Assets – We test for goodwill impairment at the reporting unit level, which is one level below the operating segment level. Our detailed impairment testing involves comparing the fair value of each reporting unit to its carrying value, including goodwill. Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on discounted cash flows or relative market-based approaches. If the carrying value of the reporting unit exceeds its fair value, we record an impairment loss for such excess. The annual fair value analysis performed on goodwill supported that goodwill was not impaired as of June 30, 2023, and no additional impairment is deemed necessary as of December 31, 2023 (see Note 5.)
For indefinite-lived intangible
assets, such as licenses acquired as an IPR&D asset, on an annual basis we determine the fair value of the asset and record an impairment
loss, if any, for the excess of the carrying value of the asset over its fair value. For the year ended June 30, 2023, the carrying value
of the licenses acquired as an IPR&D asset exceeded its fair value. Therefore, the Company recorded an impairment loss of $
The carrying value of IPR&D
and goodwill at December 31, 2023, were $
9
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of Long-Lived Assets – Long-lived assets, such as property and equipment, definite and indefinite life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use are their respective fair values.
Leases – In accordance with ASC Topic 842, the Company determined the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable. The present value of lease payments is determined by using the implicit interest rate in the lease, if that rate is readily determinable; otherwise, the Company develops an incremental borrowing rate based on the information available at the commencement date in determining the present value of the future payments.
Rent expense for operating leases is recognized on a straight-line basis, unless the operating lease right of use assets have been impaired, over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the condensed consolidated statements of operations. For operating leases that reflect impairment, the Company will recognize the amortization of the operating lease right-of-use assets on a straight-line basis over the remaining lease term with rent expense still included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, insurance, and taxes, which vary based on future outcomes, and thus are recognized in general and administrative expenses when incurred (see Note 6.)
Research and Development Expenses
– The Company expenses research and development costs incurred in formulating, improving, validating, and creating alternative
or modified processes related to and expanding the use of the Oncology, HIV and HBV therapies and technologies for use in the prevention,
treatment, amelioration of and/or therapy for Oncology, HIV and HBV. Research and development expenses for the three and six months ended
December 31, 2023, amounted to $
Income Taxes – The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Accounting for Income Taxes”, which requires an asset and liability approach for accounting for income taxes.
10
RENOVARO INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair
Value of Financial Instruments – The Company accounts for fair value measurements for financial assets and
financial liabilities in accordance with FASB ASC Topic 820, “Fair Value Measurements”. The authoritative guidance,
among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each
major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the
exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an asset or liability. There were no Level 1, 2, or 3 assets, nor any
Level 1, 2, or 3 liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022, respectively. During the
three and six months ended December 31, 2022, there was zero and $
Stock-Based Compensation – The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation - Stock Compensation”. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to consultants and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the required service period, which is generally the vesting period. Stock based compensation costs for the vesting of options and RSUs granted for the three and six months ended December 31, 2023 were $ and $, respectively. Stock based compensation costs for the vesting of options and RSUs granted for the three and six months ended December 31, 2022 were $ and $, respectively (See Note 8.)
Recently Adopted Accounting Pronouncements – Recent accounting pronouncements issued by the FASB do not or are not believed by management to have a material impact on the Company’s present or future financial statements.
11
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — GOING CONCERN
The Company’s consolidated
financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has incurred substantial
recurring losses from continuing operations, has used cash in the Company’s continuing operations, and is dependent on additional
financing to fund operations. The Company incurred a net loss of $
Management has reduced overhead and administrative costs by streamlining the organization to focus around two of its therapies (oncology and a HIV therapeutic vaccine). The Company has tailored its workforce to focus on these therapies. In addition, the Company intends to attempt to secure additional required funding through equity or debt financing. However, there can be no assurance that the Company will be able to obtain any sources of funding. Such additional funding may not be available or may not be available on reasonable terms, and, in the case of equity financing transactions, could result in significant additional dilution to our stockholders. If we do not obtain required additional equity or debt funding, our cash resources will be depleted and we could be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us.
Funding that we may receive during the fiscal year 2024 is expected to be used to satisfy existing and future obligations and liabilities and working capital needs, to support commercialization of our products and conduct the clinical and regulatory work to develop our product candidates, and to begin building working capital reserves.
NOTE 3 — NOTES RECEIVABLE
On August 11, 2023, and
August 18, 2023, the Company entered into two Promissory Notes (“Notes Receivable”) in the amounts of $
12
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 — PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| Useful Life | December 31, 2023 | June 30, 2023 | ||||||||||
| Lab Equipment and Instruments | $ | $ | ||||||||||
| Leasehold Improvements | ||||||||||||
| Furniture, Fixtures and Equipment | ||||||||||||
| Total | ||||||||||||
| Less Accumulated Depreciation | ( | ) | ( | ) | ||||||||
| Net Property and Equipment | $ | $ | ||||||||||
Depreciation expense amounted
to $
NOTE 5 — INTANGIBLE ASSETS
At December 31, 2023, and June
30, 2023, definite-life intangible assets, net of accumulated amortization, consisted of patents on the Company’s products and processes
of $
At December 31, 2023, and 2022, indefinite life intangible assets consisted of a license agreement classified as In-Process Research and Development (“IPR&D”) intangible assets, which are not amortizable until the intangible asset provides economic benefit, and goodwill.
At December 31, 2023, and June 30, 2023, definite and indefinite-life intangible assets consisted of the following:
| Useful Life | June 30, 2023 | Period Change | Effect of Currency Translation | December 31, 2023 | ||||||||||||||
| Definite Life Intangible Assets | ||||||||||||||||||
| Patents | $ | $ | $ | $ | ||||||||||||||
| Less Accumulated Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Definite-Life Intangible Assets | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||
| Indefinite Life Intangible Assets | ||||||||||||||||||
| License Agreement | $ | — | $ | |||||||||||||||
| Goodwill | — | |||||||||||||||||
| Total Indefinite Life Intangible Assets | $ | — | $ | |||||||||||||||
13
RENOVARO INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Expected future amortization expense is as follows:
| Year ending June 30, | ||||||
| 2024 | $ | |||||
| 2025 | ||||||
| 2026 | ||||||
| 2027 | ||||||
| Total | $ | |||||
During February 2018, the Company acquired a License Agreement (as licensee) to an HIV therapy which consists of a perpetual, fully paid-up, royalty-free, sub-licensable, and sole and exclusive worldwide license to research, develop, use, sell, have sold, make, have made, offer for sale, import and otherwise commercialize certain intellectual property in cellular therapies for the prevention, treatment, amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in humans. Because the HIV License Agreement is considered an IPR&D intangible asset it is classified as an indefinite life asset that is tested annually for impairment.
Impairment – Following
the fourth quarter of each year, management performs its annual test of impairment of intangible assets by performing a quantitative
assessment and determines if it is more likely than not that the fair value of the asset is greater than or equal to the carrying value
of the asset. The results of the quantitative assessment indicated that the carrying value of the license acquired as an IPR&D asset
exceeded its fair value, due to the sublicensing of RENB-HV01, which required a different valuation approach and changes in other factors
impacting the fair value of the asset as of June 30, 2023, which resulted in an impairment adjustment of $
NOTE 6 — LEASES
Operating
Leases —
The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liabilities:
14
RENOVARO INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Expected lease term
— The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably
certain that the Company would exercise such options. The Company’s lease has a remaining lease term of 44 months. As of December
31, 2023, the weighted-average remaining term is
Incremental borrowing rate
— The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external borrowings for
comparable terms of its leases, the Company estimated the incremental borrowing rate based on the U.S. Treasury Yield Curve rate that
corresponds to the length of each lease. This rate is an estimate of what the Company would have to pay if borrowing on a collateralized
basis over a similar term in an amount equal to the lease payments in a similar economic environment. As of December 31, 2023, the weighted-average
discount rate is
Lease and non-lease components — In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components, and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred.
Below are the lease commitments for the next 5 years:
| Year Ending June 30th | Lease Expense | |||||
| 2024 | ||||||
| 2025 | ||||||
| 2026 | ||||||
| 2027 | ||||||
| 2028 | ||||||
| Sub-total | ||||||
| Less imputed interest | ( | ) | ||||
| Total | $ | |||||
Sublease Agreement
In accordance with ASC Topic 842, the Company treated the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continues to account for the Century City Medical Plaza lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounted for the sublease as a lessor of the lease. The sublease was classified as an operating lease, as it did not meet the criteria of a sales-type or direct financing lease.
15
RENOVARO INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On
April 18, 2023, the Company entered into a sublease termination agreement with the Subtenant, whereby the Subtenant and the Company agreed
to terminate the sublease effective as of April 30, 2023. The Subtenant agreed to pay the Company $
The Company recognized operating income from the sublease on a straight-line basis in its statements of operations over the sublease term.
During the three and six months ended December 31, 2023 and 2022, the net operating lease expenses were as follows:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating Lease Expense | $ | $ | $ | $ | ||||||||||||
| Sub lease Income | ( | ) | ( | ) | ||||||||||||
| Total Net Lease Expense | $ | $ | $ | $ | ||||||||||||
Lease expense charged to
general and administrative expenses for the three and six months ended December 31, 2023, amounted to $
NOTE 7 — DEBT
Convertible Notes Payable —
December 2023 Notes — Between
December 1, 2023, and December 29, 2023, the Company entered into Subscription Agreements with two investors to purchase Convertible
Promissory Notes for an aggregate principal amount of $
16
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The 2023 Notes — Between
September 5, 2023, and October 5, 2023, the Company entered into Subscription Agreements with five investors to purchase
The 2023 Notes are subject to
mandatory conversion (“Mandatory Conversion”) in the event the Company closes an offering of its Common Stock and receives
gross proceeds of not less than $
The 2023 Notes will be accounted for under ASC 470-20, and all proceeds received from the issuance will be recognized as a liability on the balance sheet net of discount.
For the three and six months ended
December 31, 2023, discount amortization of $
The Convertible Notes —
On February 6, 2020, the Company issued two Convertible Notes (the “Convertible Notes”) to Paseco ApS (the “Holder”),
a Danish limited company and an existing stockholder of the Company, each with a face value amount of $
The conversion price was equal to $12.00 per share of Common Stock. The Holder did not exercise its conversion feature that expired on February 6, 2021. The Company evaluated the Convertible Notes in accordance with ASC 470-20 and identified that they each contain an embedded conversion feature that shall not be bifurcated from the host document (i.e., the Convertible Notes) as they are not deemed to be readily convertible into cash. All proceeds received from the issuance were recognized as a liability on the balance sheet.
17
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Effective December 30, 2022 (the
“Effective Date”), the Company amended and restated the Convertible Notes (the “Amended and Restated Secured Notes”).
Pursuant to the Amended and Restated Secured Notes, the due date was extended to
As
of December 31, 2023 and 2022, the Company recorded accrued interest in the amount of zero. For the three and six months ended
December 31, 2023 and 2022, the interest expense related to the Amended and Restated Secured Notes amounted to zero and
$
Notes Payable—
Bridge Loan — On
November 3, 2023, the Company entered into an agreement to purchase
18
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Promissory Note —
On March 30, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $
On February 11, 2021, the Company
entered into an amendment to the Promissory Note that extended the Maturity Date to November 30, 2022. All other terms of the Promissory
Note remained the same. The change in Maturity Date required an additional year of interest at the fixed rate of
On May 17, 2022, the Company entered
into a second amendment to the Promissory Note that extended the Maturity Date to
Effective December 30, 2022, the Company entered into a third amendment to the Promissory Note. Pursuant to the third amendment, the Company’s obligations under the Promissory Note were secured by the Security Agreement. To secure the Company’s obligations under each of the Amended and Restated Secured Notes and the Promissory Note, the Company entered into a Security Agreement with the Holder, pursuant to which the Company granted a lien on all assets of the Company (the “Collateral”) for the benefit of the Holder. Upon an Event of Default (as defined in the Amended and Restated Secured Notes and Promissory Note, respectively) the Holder may, among other things, collect or take possession of the Collateral, proceed with the foreclosure of the security interest in the Collateral or sell, lease, or dispose of the Collateral.
On June 12, 2023, the Holder notified
the Company that it wanted to apply the Interest Payment due to it towards the Company’s next private placement. Therefore, on June
26, 2023, in conjunction with the Company’s private placement, the Company issued (i) shares of its Common Stock, par value
$ per share and (ii) warrants to purchase
19
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On July 31, 2023, the Company
and the Holder agreed to amend the Promissory Note (the “Fourth Amendment”) to provide the Holder with limited conversion
rights in connection with the Company’s next private placement. Per the terms of the Fourth Amendment, the Holder could elect to
convert $2 million of the outstanding principal balance of the Promissory Note into the Units being offered in the private placement at
a price per Unit being paid by the investors in the private placement (the “Conversion Right”). On August 1, 2023, the Holder
notified the Company of its election to exercise the Conversion Right. As a result, $2 million of the outstanding principal balance of
the Promissory Note was converted into 280,505 Units at $7.13 per unit, comprised of an aggregate of (i) 280,505 shares of Series A Convertible
Preferred Stock of the Company and (ii) Warrants to purchase an aggregate of 1,402,525 shares of Common Stock with an exercise price of
$0.65 per share. The Series A Convertible Preferred Stock acquired by the Holder is initially convertible into 2,805,050 shares of Common
Stock. A $3 million principal balance remains outstanding under the Promissory Note after the foregoing conversion. The Company concluded
that in accordance with ASC 470-20-40-4, the difference between the fair value of the Preferred Shares and warrants and the carrying value
of the portion of the Note being converted should be recognized as an extinguishment. The extinguishment loss of $120,018 is recorded
in Other Income/Loss in the Statement of Operations. On November 30, 2023, the Company and the Holder agreed to amend the Promissory Note
(the “Fifth Amendment”) to where the Company and the Holder extended the maturity of the Original Note until February 29,
2024. In addition, all interest payable from November 30, 2023 to the Maturity Date was payable and is currently payable by the Company
as of November 30, 2023. For the three and six months ended December 31, 2023, discount amortization of $
For the three and six months ended
December 31, 2022, discount amortization of $
Finance Agreement —
On November 30, 2023, the
Company entered into a premium finance agreement (the “Agreement”) related to insurance, which
resulted in a liability and prepaid expense with a principal amount of $
Total interest expense recorded
for the three and six months ended December 31, 2023, was $
NOTE 8 — STOCKHOLDERS’ EQUITY
Preferred Stock — The Company has authorized shares of Preferred Stock, par value $ per share, of which shares have been designated as Series A Convertible Preferred Stock. At December 31, 2023, and June 30, 2023, there were and zero shares of Series A Convertible Preferred Stock issued and outstanding.
20
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Voting — Holders of Series A Preferred Stock shall be permitted to vote on all matters required or permitted to be voted on by the holders of Common Stock of the Company and shall be entitled to that number of votes equal to ten votes for the number of shares of Common Stock into which such Holder’s shares of the Preferred Stock could then be converted in accordance with conversion rights.
Dividends — The Company shall pay dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Preferred Stock.
Liquidation Rights — In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount in cash equal to the aggregate liquidation value of all Shares held by such holder. The Series A Preferred Stock is not participating preferred.
Conversion Rights — On or after the date of issuance, any holder of Series A Preferred Stock shall have the right by written election (a “Series A Election Notice”) to the Company to convert all or any portion of the outstanding Shares of Series A Preferred Stock held by such holder into an aggregate number of shares of Common Stock as is determined by multiplying the number of Shares to be converted by ten (10) (the “Conversion Ratio”).
Common Stock —The Company has authorized shares of Common Stock, par value $ per share. At December 31, 2023, and June 30, 2023, there were and shares issued and outstanding, respectively.
Voting — Holders of Common Stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.
Dividends — Holders of Common Stock are entitled to receive ratably such dividends as the Board from time to time may declare out of funds legally available.
Liquidation Rights — In the event of any liquidation, dissolution, or winding up of affairs of the Company, after payment of all debts and liabilities and preferences to holders of preferred stock, the holders of Common Stock will be entitled to share ratably in the distribution of any of the remaining assets.
Purchase Agreement with Lincoln Park Capital
On June
20, 2023, the Company entered into a purchase agreement (the “2023 Purchase Agreement”) with Lincoln Park Capital Fund, LLC
(“Lincoln Park”), pursuant to which the Company may sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase,
up to $
21
NOTE 8 — STOCKHOLDERS’ EQUITY (Continued)
In consideration for entering into the 2023 Purchase Agreement, the Company issued shares of Common Stock to Lincoln Park as a commitment fee on June 20, 2023.
During the three and six months ended December 31, 2023, no shares of Common Stock to Lincoln Park were sold under the Purchase Agreement.
Preferred Stock Issuances
On August 1, 2023, the Company
closed a private placement of
The Company issued an aggregate
of shares of Preferred Stock, which are initially convertible into an aggregate of shares of Common Stock. In connection
with the Private Placement, the Company sold Warrants to purchase an aggregate of
Common Stock Issuances
Between July 28, 2023 and September 28, 2023, the Company issued shares of Common Stock for consulting services.
On October 23, 2023 the Company issued shares of Common Stock for advisory services to Avram Miller, the Company’s board of directors.
On December 4, 2023 the Company
issued shares of Common Stock pursuant to warrants exercised for cash proceeds of $
Acquisition of Renovaro Denmark — At December 31, 2023, and June 30, 2023, the Company maintained a reserve of shares of Common Stock of the Registrant held in escrow according to Danish law (the “Escrow Shares”), all of which are reflected as issued and outstanding in the accompanying financial statements. The Escrow Shares are reserved to acquire the shares of Renovaro Denmark held by non-consenting shareholders of Renovaro Denmark on both December 31, 2023, and June 30, 2023, in accordance with Section 70 of the Danish Companies Act and the Articles of Association of DanDrit Denmark. There have been shares of Common Stock issued to non-consenting shareholders of Renovaro Denmark as of December 31, 2023. During the three and six months ended December 31, 2023, the Company issued zero shares of Common Stock to such non-consenting shareholders of Renovaro Denmark. There is no impact on outstanding shares as these shares are reflected as issued and outstanding.
22
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (Continued)
Stock-based Compensation
The Company recognizes compensation costs for stock option awards to employees and directors based on their grant-date fair value. The value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average assumptions used to estimate the fair values of the stock options granted using the Black-Scholes option-pricing model are as follows in the three months ended December 31, 2023:
| Renovaro Inc. | ||||
| Expected term (in years) | – | |||
| Volatility | % – % | |||
| Risk free interest rate | % – % | |||
| Dividend yield | % | |||
The Company recognized stock-based compensation expense related to the options of $ and $ for the three and six months ended December 31, 2023, respectively. The Company recognized stock-based compensation expense related to the options of $ and $ for the three and six months ended December 31, 2022, respectively. At December 31, 2023, the Company had approximately $ of unrecognized compensation cost related to non-vested options.
Plan Options
On February 6, 2014, the Board adopted the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), and the Company had reserved shares of Common Stock for issuance in accordance with the terms of the 2014 Plan.
On October 30, 2019, the Board approved and on October 31, 2019, the Company’s stockholders adopted its 2019 Equity Incentive Plan (the “2019 Plan”), which replaced the 2014 Plan. The 2019 Plan provided that the maximum aggregate number of shares of the Company’s Common Stock reserved and available for issuance under the 2019 Plan was the sum of (1) 6,000,000 new shares, and (2) the number of shares available for the grant of awards as of the effective date under the 2014 Plan plus any options related to awards that expire, are terminated, surrendered, or forfeited for any reason without issuance of shares under the 2014 Plan after the effective date of the 2019 Plan.
Effective July 21, 2023, the Company adopted the Renovaro Biosciences Inc. 2023 Equity Incentive Plan (the “2023 Plan”). The 2023 Plan replaced the 2019 Plan. Any awards outstanding under the 2019 Plan as of the date of adoption of the 2023 Plan remain subject to and will be paid under the 2019 Plan, and any shares subject to outstanding awards under the 2019 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares automatically become available for issuance under the 2023 Plan.
The Company granted options to purchase and shares of Common Stock to employees with a three-year vesting period during the three and six months ended December 31, 2023, respectively under the 2019 and 2023 Plan. The Company granted options to purchase shares of Common Stock to employees with a three-year vesting period during the three and six months ended December 31, 2022, respectively under the 2019 Plan.
23
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCKHOLDERS’ EQUITY (Continued)
During the three and six months ended December 31, 2023, respectively, the Company granted options to purchase zero shares of Common Stock to employees with a six-month vesting period under the 2023 Plan. During the three and six months ended December 31, 2022, the Company granted options to purchase zero and issued and forfeited shares of Common Stock to employees with a six-month vesting period, respectively under the 2019 Plan.
During the three and six months ended December 31, 2023, respectively, the Company granted options to purchase zero shares of Common Stock to employees with a one-year vesting period under the 2023 Plan. During the three and six months ended December 31, 2022, the Company granted options to purchase zero and issued and forfeited shares of Common Stock to employees with a one-year vesting period, respectively under the 2019 Plan.
During the three and six months ended December 31, 2023, the Company granted options to purchase and shares of Common Stock, to the Board of Directors and Scientific Advisory Board Members with a one-year vesting period under the 2023 Plan and the 2019 Plan, respectively. During the three and six months ended December 31, 2022, the Company granted options to purchase and shares of Common Stock, to the Board of Directors and Scientific Advisory Board Members with a one-year vesting period under the 2019 Plan, respectively.
During the three and six months ended December 31, 2023, the Company granted options to purchase zero and shares, respectively of Common Stock for Scientific Advisory Board members with immediate vesting under the 2023 Plan. During the three and six months ended December 31, 2022, the Company did t grant options to purchase shares of Common Stock with immediate vesting. During the three and six months ended December 31, 2023, the Company forfeited options to purchase shares of Common Stock to a consultant with immediate vesting.
All of the above options are exercisable at the market price of the Company’s Common Stock on the date of the grant.
To date the Company has
granted options under the 2014, 2019 and 2023 Plans (“Plan Options”) to purchase shares of Common Stock. At December
31, 2023, the Company has
A summary of the status of the Plan Options outstanding at December 31, 2023, is presented below:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||
| Exercise Price Ranges | Number Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||||||
| $ | – | $ | $ | |||||||||||||||||||||||||||
| $ | – | $ | $ | |||||||||||||||||||||||||||
| $ | – | $ | $ | |||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||
24
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the Plan Options at December 31, 2023, and changes since July 1, 2023, are presented below:
| Shares | Weighted Average Exercise Price | Average Remaining Life | Weighted Average Intrinsic Value | |||||||||||||||
| Outstanding at beginning of period | $ | $ | ||||||||||||||||
| Granted | $ | |||||||||||||||||
| Exercised | $ | |||||||||||||||||
| Forfeited | $ | |||||||||||||||||
| Expired/Canceled | ( | ) | $ | |||||||||||||||
| Outstanding at end of period | $ | $ | ||||||||||||||||
| Exercisable at end of period | $ | $ | ||||||||||||||||
At December 31, 2023, the Company had exercisable Plan Options outstanding. The total intrinsic value of options exercisable at December 31, 2023, was . Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) and at December 31, 2023 (for outstanding options), less the applicable exercise price.
Common Stock Purchase Warrants
A summary of the status of the Common Stock Purchase Warrants outstanding at December 31, 2023, is presented below:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||||||
| Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | ||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||
A summary of the warrants outstanding at December 31, 2023, and changes since July 1, 2023, are presented below:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Life | ||||||||||
| Outstanding at beginning of period | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | ( | ) | $ | — | ||||||||
| Cancelled/Expired | $ | — | ||||||||||
| Outstanding and exercisable at end of period | $ | |||||||||||
25
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2023, the Company
had
Restricted Stock Awards (RSA)
The Company recognized stock-based compensation expense related to RSAs of $ for the three and six months ended December 31, 2023, respectively. The restricted stock awards are related to a grant of shares of restricted stock with a -year vesting period made to a director as consideration for advisory services, with a total value of $2,760,000. At December 31, 2023, the Company had $2,226,144 of unrecognized stock-based compensation expense remaining to be amortized.
NOTE 9 — COMMITMENTS AND CONTINGENCIES
Commitments
On July 9, 2018, the Company entered
into a consulting agreement with G-Tech Bio, LLC, a California limited liability company (“G-Tech”) to assist the Company
with the development of the gene therapy and cell therapy modalities for the prevention, treatment, and amelioration of HIV in humans,
and with the development of a genetically enhanced Dendritic Cell for use as a wide spectrum platform for various diseases (including
but not limited to cancers and infectious diseases) (the “G-Tech Agreement”). G-Tech was entitled to consulting fees for 20
months, with a monthly consulting fee of not greater than $
On January 31, 2020, the Company entered into a Statement of Work and License Agreement (the “HBV License Agreement”) by and among the Company, G-Tech, and G Health Research Foundation, a not for profit entity organized under the laws of California doing business as Seraph Research Institute (“SRI”) (collectively the “Licensors”), whereby the Company acquired a perpetual, sublicensable, exclusive license (the “HBV License”) for a treatment under development (the “Treatment”) aimed to treat Hepatitis B Virus (HBV) infections.
The HBV License Agreement states
that in consideration for the HBV License, the Company shall provide cash funding for research costs and equipment and certain other in-kind
funding related to the Treatment over a 24 month period, and provides for an up-front payment of $
The cash funding for research costs pursuant to the HBV License Agreement consisted of monthly payments amounting to $144,500 that covered scientific staffing resources to complete the project as well as periodic payments for materials and equipment needed to complete the project. There were no payments made after January 31, 2022. The Company paid zero under the HBV License Agreement in the three and six months ended December 31, 2023, and 2022. The Company has filed a claim against the Licensors, which includes certain payments it made related to this license (see Contingencies sub-section below).
26
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On April 18, 2021, the Company entered into a Statement of Work and License Agreement (the “License Development Agreement”), by and among the Company, G-Tech and SRI (collectively, the “Licensors”), whereby the Company acquired a perpetual sublicensable, exclusive license (the “Development License”) to research, develop, and commercialize certain formulations which were aimed at preventing and treating pan-coronavirus or the potential combination of the pan-coronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and pan-influenza (the “Prevention and Treatment”).
The Development License Agreement
was entered into pursuant to the existing Framework Agreement between the parties dated November 15, 2019. The Development License Agreement
states that in consideration for the Development License, the Company shall provide cash funding for research costs and equipment and
certain other in-kind funding related to the Prevention and Treatment over a 24-month period. Additionally, the License Agreement provides
for an up-front payment of $
The Development License Agreement provides for cooperation related to the development of intellectual property related to the Prevention and Treatment and for a 3% royalty to G-Tech on any net sales that may occur under the Development License Agreement. The Company is no longer pursuing any product candidates that relate to this license. The Company has filed a claim against the Licensors to recover all monies it paid related to this license (see Contingencies sub-section below).
On August 25, 2021, the Company
entered into an ALC Patent License and Research Funding Agreement in the HIV Field (the “ALC License Agreement”) with Serhat
Gümrükcü and SRI (collectively, the “Licensors”) whereby the Licensors granted the Company an exclusive, worldwide,
perpetual, fully paid-up, royalty-free license, with the right to sublicense, proprietary technology subject to a U.S. patent application,
to make, use, offer to sell, sell or import products for use solely for the prevention, treatment, amelioration of or therapy exclusively
for HIV in humans, and research and development exclusively relating to HIV in humans; provided the Licensors retained the right to conduct
HIV research in the field. Pursuant to the ALC License Agreement, the Company granted a non-exclusive license back to the Licensors, under
any patents or other intellectual property owned or controlled by the Company, to the extent arising from the ALC License, to make, use,
offer to sell, sell or import products for use in the diagnosis, prevention, treatment, amelioration or therapy of any (i) HIV Comorbidities
and (ii) any other diseases or conditions outside the HIV Field. The Company made an initial payment to SRI of $
G-Tech and SRI are controlled by Anderson Wittekind, a stockholder of the Company.
Shares held for non-consenting shareholders – The remaining shares of Common Stock related to the Acquisition of Renovaro Denmark have been reflected as issued and outstanding in the accompanying financial statements. There were zero shares of Common Stock issued to such non-consenting stockholders during the three and six months ended December 31, 2023 (see Note 8.)
Service Agreements –The Company maintains employment agreements with certain senior staff in the ordinary course of business.
27
RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Stock
Purchase Agreement with GEDi Cube Intl Ltd. – On September 28, 2023, the Company, entered into a Stock Purchase Agreement (the
“Purchase Agreement”) with GEDi Cube Intl Ltd., a private company formed under the laws of England and Wales (“GEDi
Cube”). Upon the terms and subject to the conditions set forth in the Purchase Agreement, the Company will acquire
At the effective time of the Transaction (the “Effective Time”), each ordinary share of GEDi Cube (each, a “GEDi Cube Share”) issued and outstanding as of immediately prior to the Effective Time will be exchanged for (i) shares of Common Stock of the Company (the “Renovaro Shares”) such that the total number of Renovaro Shares issued to the holders of GEDi Cube Shares shall equal approximately 49.9% of the total number of Renovaro Shares outstanding as of the Effective Time, (the “Closing Consideration”) and (ii) additional Renovaro Shares to be issued pro rata to the Sellers upon the exercise or conversion of any of the Company’s derivative securities (subject to certain exceptions) which are outstanding at the Effective Time (the “Pro-rata Shares”).
Each of the Company and GEDi Cube agreed, subject to certain exceptions with respect to unsolicited proposals, not to directly or indirectly solicit competing acquisition proposals or to enter into discussions concerning, or provide confidential information in connection with, any unsolicited alternative acquisition proposals.
The completion
of the Transaction is subject to the satisfaction or waiver of customary closing conditions, including: (i) adoption of the Purchase
Agreement by holders of all of the outstanding GEDi Cube Shares, (ii) approval of the issuance of Renovaro Shares in connection with
the Transaction by a majority of the votes cast at the shareholder meeting of the Company, (iii) absence of any court order or regulatory
injunction prohibiting completion of the Transaction, (iv) subject to specified materiality standards, the accuracy of the representations
and warranties of the other party, (v) the authorization for listing of Renovaro Shares to be issued in the Transaction on the Nasdaq,
(vi) compliance by the other party in all material respects with its covenants, and (vii) the entry by the parties into a registration
rights agreement, to become effective as of the Effective Time, pursuant to which the Company will provide registration rights to
the Sellers with respect to (a) the Renovaro Shares issued to the Sellers as Closing Consideration at the Effective Time and (b) any Pro-rata
Shares that they receive after the Closing.
The Company and GEDi Cube each made customary representations and warranties in the Purchase Agreement. The Purchase Agreement also contains customary covenants and agreements, including covenants and agreements relating to (i) the conduct of each of the Company’s and GEDi Cube’s business between the date of the signing of the Purchase Agreement and the closing date of the Transaction and (ii) the efforts of the parties to cause the Transaction to be completed. The Purchase Agreement contains certain termination rights for both the Company and GEDi Cube.
On February 13, 2024 (the “Closing Date”), the Company consummated the previously announced acquisition of GEDi Cube and the other transactions contemplated by the Stock Purchase Agreement (collectively, the “Transaction”). As a result of the Transaction, GEDi Cube became a wholly-owned subsidiary of the Company.
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RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contingencies
Securities Class Action Litigation. On July 26, 2022 and July 28, 2022, securities class action complaints (the former, the “Chow Action” and the latter, the “Manici Action”) were filed by purported stockholders of the Company in the United States District Court for the Central District of California against the Company and certain of the Company’s current and former officers and directors. The complaints allege, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat Gümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. On November 22, 2022, the Manici Action was voluntarily dismissed without prejudice, but the Chow action remains pending. On October 22, 2023, the Court appointed a lead plaintiff in the Chow Action. The lead plaintiff filed an amended complaint on December 15, 2023. The Company intends to file a motion to dismiss the amended complaint, but expresses no opinion as to the likelihood of a favorable outcome.
Federal Derivative Litigation. On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central District of California. On January 19, 2023, John Solak filed a substantially similar shareholder derivative action in the United States District Court for the District of Delaware. Both derivative actions recite similar underlying facts as those alleged in the Securities Class Action Litigation. The actions, filed on behalf of the Company, name Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The actions also name the Company as a nominal defendant. The actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also set out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiffs do not quantify any alleged injury, but seek damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court for the Central District of California stayed the Koenig matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. On April 6, 2023, the United States District Court for the District of Delaware stayed the Solak matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to either complaint. The Company intends to contest these matters but expresses no opinion as to the likelihood of favorable outcomes.
State Derivative Litigation. On October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County, reciting similar underlying facts as those alleged in the Securities Class Action Litigation. The action, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The action also names the Company as a nominal defendant. The action sets out claims for breaches of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. On January 20, 2023, the Court stayed the Midler matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to the complaint. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
On October 21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat Gümrükcü, William Anderson Wittekind (“Wittekind”), G Tech Bio LLC (“G Tech”), SG & AW Holdings, LLC, and Seraph Research Institute (“SRI”) (collectively, the “Defendants”). The Complaint alleges that the Defendants engaged in a “concerted, deliberate scheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its Hepatitis B and SARS-CoV-2/influenza pipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth.” As a result of the Defendants’ conduct, the Company claims that it “paid approximately $25 million to Defendants and third-parties that it would not otherwise have paid.” On April 21, 2023, defendants Wittekind, G Tech, SG & AW Holdings, LLC, and SRI filed a demurrer with respect to some, but not all, of the Company’s claims, as well as a motion to strike. On September 6, 2023, the court denied in part and granted in part the pending motions. On September 7, 2023, the court entered a case management order setting the final status conference, trial, and other intervening deadlines.
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RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On December 4, 2023, the Defendants answered the Company’s First Amended Complaint and G Tech and SRI filed a Cross-Complaint. In the Cross-Complaint, G Tech and SRI seek declaratory and injunctive relief related to certain agreements between G Tech, SRI, and the Company, including, inter alia, a declaration that the Framework Agreement, effective as of November 15, 2019, the Statement of Work & License Agreement, effective as of January 31, 2020, and the Statement of Work and License Agreement for Influenza and Coronavirus Indications, effective as of April 18, 2021, have been terminated and the Company has no rights to any license under such agreements. The Company denies these allegations and intends to vigorously defend against the cross claims while pursuing its claims against the Defendants.
On March 1, 2021, the Company’s former Chief Financial Officer, Robert Wolfe and his company, Crossfield, Inc., filed a Complaint in the U.S. District Court for the District of Vermont against the Company, Renovaro Biosciences Denmark ApS, and certain directors and officers. In the Complaint, Mr. Wolfe and Crossfield, Inc. asserted claims for abuse of process and malicious prosecution, alleging, inter alia, that the Company lacked probable cause to file and prosecute an earlier action, and sought millions of dollars of compensatory damages, as well as punitive damages. The allegations in the Complaint relate to an earlier action filed by the Company and Renovaro Biosciences Denmark ApS in the Vermont Superior Court, Orange Civil Division. On March 3, 2022, the Court partially granted the Company’s motion to dismiss, dismissing the abuse of process claim against all defendants and all claims against Mark Dybul and Henrik Grønfeldt-Sørensen. On November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. On August 24, 2023, the Court denied the motion for summary judgment. On September 7, 2023, the Company moved for reconsideration of the Court’s order, which the Court denied on December 4, 2023. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
On June 7, 2023, Weird Science LLC (“Weird Science”), Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson Wittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust (collectively, the “Trusts”) (collectively, “Plaintiffs”) filed a Verified Complaint against the Company in the Court of Chancery of Delaware. Plaintiffs allege that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS (the “Investor Rights Agreement”). According to the Verified Complaint, the Investor Rights Agreement required the Company to (i) notify all “Holders” of “Registrable Securities” at least 30 days prior to filing a registration statement and (ii) afford such Holders an opportunity to have their Registrable Securities included in such registration statement. Plaintiffs allege that the Company breached these registration rights by failing to provide the required notice in connection with S-3 registration statements filed by the Company on July 13, 2020 and February 11, 2022. Plaintiffs seek compensatory damages, pre- and post-judgment interest, costs, and attorneys’ fees. The Company moved to dismiss the Verified Complaint on September 15, 2023.
On December 4, 2023, in lieu of opposing the motion to dismiss, Plaintiffs filed a Verified First Amended Complaint (“FAC”). In the FAC, Plaintiffs assert claims against the Company and others for purported breaches of the Investor Rights Agreement, fraud, tortious interference with a contract, and breaches of fiduciary duty. Plaintiffs seek compensatory, exemplary, and punitive damages, as well as certain declaratory relief, specific performance, and pre- and post-judgment interest, costs, and attorneys’ fees. The Company filed a motion to dismiss the FAC on December 18, 2023. The Company denies Plaintiffs’ allegations and intends to vigorously defend against the claim.
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RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On August 24, 2023, counsel on behalf of Weird Science, Wittekind, individually, and Wittekind, as trustee of the Trusts served a demand to inspect the Company’s books and records (the “Demand”) pursuant to Delaware General Corporation Law, § 220 (“Section 220”). The Demand seeks the Company’s books and records in connection with various issues identified in the Demand. The Company takes its obligations under Section 220 seriously and, to the extent that the requests are proper under Section 220, intends to comply with those obligations.
On January 23, 2024, Weird Science and Wittekind filed a shareholder derivative action in the United States District Court for the Central District of California against certain officers, directors, and investors of the Company, as well as other defendants. The Verified Stockholder Derivative Complaint (“Derivative Complaint”) alleges, among other claims, violations of Section 13(d) and 14(a) and Rules 10b-5(a), 10b-5(c) and 14a-9 of the Exchange Act of 1934. The Derivative Complaint also includes claims of breach of fiduciary duty, corporate waste, unjust enrichment, and contribution/indemnification. Weird Science and Wittekind seek unspecified compensatory, exemplary and punitive damages and certain injunctive relief. Simultaneously with the Derivative Complaint, Weird Science and Wittekind filed an emergency Ex Parte Application for Temporary Restraining Order (“Application”) asking the Court to enjoin a special meeting of the Company’s stockholders noticed for January 25, 2024. As the basis for the Application, Weird Science and Wittekind recited many of the same allegations as in the Derivative Complaint. The Court denied the Application on January 24, 2024. The Company denies the allegations in the Derivative Complaint and intends to vigorously defend against the claims asserted therein.
NOTE 10 — RELATED PARTY TRANSACTIONS
On November 3, 2023, the Company
entered into an agreement to purchase
On August 1, 2023, RS Bio ApS, a Danish entity
(“RS Bio”), purchased in the Private Placement
of the Company’s Units at a price per Unit equal to $
for aggregate proceeds to the Company of $
On August 1, 2023, Paseco ApS, a Danish entity,
in connection with the Private Placement, converted $
The Company currently has a consulting agreement with Paseco for business advisory services since December of 2019. For the three and six months ended December 31, 2023 the Company issued zero and restricted common shares in lieu of services.
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RENOVARO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On October 10, 2023, the Board of Directors of the Company (the “Board”) appointed Avram Miller to the Board, effective October 11, 2023, to fill a vacancy. Mr. Miller will serve until the Company’s 2024 Annual Meeting of Stockholders subject to this re-election or until his successor has been duly elected and qualified. In addition to Mr. Miller’s appointment to the Board, Mr. Miller, the co-founder of Intel Capital, entered into an advisory agreement with the Company (the “Advisory Agreement”), pursuant to which Mr. Miller will provide advice to the Board and the Company on various matters including strategic opportunities, capital allocation, business development, minority investments and licensing arrangements, among others.
NOTE 11 — SUBSEQUENT EVENTS
On January 1, 2024, the Company
entered into an amendment with RS Bio for the November 3, 2023, $
On January 2, 2024, the Company
entered into an agreement with RS Bio to purchase a
On January 11, 2024, the Company
entered into an amendment with one of the investors of the 2023 Notes whereas the conversion terms were amended to provide for optional
conversion at a conversion price of $
On January 12, 2024, the Company
entered into Subscription Agreements with an investor (the “Investor”) to purchase Convertible Promissory Notes for an aggregate
principal amount of $
On January 24, 2024, the Company entered into a Promissory Note (“Notes Receivable”) in the amount of $143,000, to GEDi Cube Intl Ltd. (“Issuer”) to use towards operational expenses. Pursuant to the Notes, the Issuer promised to pay the Company the outstanding principal and related accrued interest at a rate of 12% per annum on the maturity date of July 24, 2024.
On February 1, 2024, the Company
filed a Certificate of Amendment of Certificate of Incorporation in accordance with the provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware (the “DGCL” whereby it amends
On February 5, 2024, the Company
entered into an agreement with RS Bio to purchase a 5% Original Issue Discount Secured Promissory Note for the principal
amount of $
On February 12, 2024, the Company entered into amendments with GEDi Loans related to the Notes Receivable outstanding at 12/31/2023 to extend the maturity dates to August 11, 2024 and August 18, 2024 (see Note 3.)
On February 13, 2024 (the “Closing Date”), the Company consummated the previously announced acquisition of GEDi Cube and the other transactions contemplated by the Stock Purchase Agreement (collectively, the “Transaction”). As a result of the Transaction, GEDi Cube became a wholly-owned subsidiary of the Company.
Pursuant to the Stock Purchase Agreement, as of the Closing Date, the Company acquired all the issued and outstanding equity interests of GEDi Cube owned by the Sellers as of the Closing Date (each, a “GEDi Cube Share” and, collectively, the “GEDi Cube Shares”) in exchange for which each Seller was entitled to receive (i) as of the Closing Date, such Seller’s pro rata percentage of an aggregate of 70,834,183 shares of common stock, par value $0.0001 per share, of the Company (“Common Stock”), which represents the 67,224,089 shares of Common Stock issued and outstanding as of the Closing Date (minus (a) 1 million shares of Common Stock previously issued to a consultant assisting with the Transaction and (b) 1 million shares of Common Stock previously issued to Avram Miller, a director of the Company, pursuant to his Advisory Agreement, dated October 11, 2023, by and between Mr. Miller and the Company) (the “Closing Consideration”) plus 5,610,100 shares of Common Stock representing the Seller’s Earnout Shares (defined below) resulting from the automatic conversion of the Company’s Series A Convertible Preferred and, (ii) following the Closing Date, such Seller’s pro rata percentage of the shares of Common Stock (the “Earnout Shares” and, together with the Closing Consideration, the “Exchange Consideration”) to be issued to the Sellers upon the exercise or conversion of any of the Company’s derivative securities (subject to certain exceptions) that are outstanding at the Closing Date (the “Closing Derivative Securities”). Each Seller’s pro rata percentage of the Exchange Consideration is equal to the ratio of the aggregate number of GEDi Cube Shares owned by such Seller divided by the aggregate number of GEDi Cube Shares issued and outstanding, in each case, as of the Closing Date. No fractional shares of Common Stock were or will be issued in the Exchange Consideration, and no cash was or will be issued in exchange therefore. Any fractional share of Common Stock that a Seller would otherwise be entitled to receive is rounded down to the nearest whole share.
As discussed above, pursuant to the Stock Purchase Agreement, upon the closing of the Transaction, the Company issued 70,834,183 unregistered, restricted shares of Common Stock as the Closing Consideration to the Sellers, which shares were not registered under the Securities Act in reliance on the private offering exemption from the registration requirements of the Securities Act, including Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated under the Securities Act, and Regulation S under the Securities Act, as applicable. The Company made this determination based on its receipt from the Sellers of representations and warranties supporting the Company’s reliance on such exemptions.
As a result of the issuance of the Closing Consideration on the Closing Date and based on the number of shares of Common Stock outstanding as of the Closing Date, the Sellers hold approximately 49% of the issued and outstanding shares of Common Stock immediately following the closing of the Transaction and the conversion of the Series A Convertible Preferred Stock.
In connection with the closing of the Transaction, on February 13, 2024, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment of Certificate of Incorporation to change its corporate name from “Renovaro Biosciences Inc.” to “Renovaro Inc.”, effective immediately.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statement Notice
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements of Renovaro Inc. (“Renovaro,” and together with its subsidiaries, the “Company”, “we” or “us”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on October 2, 2023. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of the business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
Our Business
We are a biotechnology company committed to developing advanced allogeneic cell and gene therapies to promote stronger immune system responses potentially for long-term or life-long cancer remission in some of the deadliest cancers, and potentially to treat or cure serious infectious diseases such as Human Immunodeficiency Virus (HIV) and Hepatitis B Virus (HBV) infection.
Our Product Development strategy is anchored in the use of “non-self” or allogeneic cells that enhance the immune response that we seek to elicit.
Over the past several years, Renovaro has evolved from a company with a single product candidate as a potential cure for HIV (RENB-HV01), adding two additional pipeline candidates for HIV (RENB-HV12 and RENB-HV21), a pipeline for Hepatitis B Virus (HBV) (RENB-HB01), and with a significant expansion into cancer immune therapies to address high unmet needs from difficult-to-treat solid tumors (RENB-DC11.)
The oncology platform is now at the forefront of our development activities, beginning with pancreatic cancer and other solid tumors with poor life expectancy, for example triple negative breast, second-line liver, head, neck, and oral among other possible targets.
Many operational aspects of our platforms can be quickly adapted to multiple disease states from a single therapeutic approach, potentially streamlining and accelerating development, and regulatory process, as well as manufacturing operations. Moreover, because our product candidates do not require specialized delivery devices and surgical procedures, our potentially groundbreaking interventions could have worldwide applicability.
The Company responds quickly to new data and perceived development opportunities and risk assessments. Based on the maturation of our pipelines, the Company makes business decisions to prioritize the programs that could move more rapidly through development and commercial processes.
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Therapeutic Platforms
The Company’s general approach with gene- and/or cell-therapy is to train the immune system to allow a person to better fight diseases. Our vision is for a world free from toxic chemotherapy and healthy longevity for those with cancer and other diseases. The Company is leveraging general principles and advances in the knowledge of the immune response to engineer cells with enhanced attributes to promote the recognition and elimination of diseased cells.
Advanced Allogeneic Cell Therapy
The strategic benefit of cell therapy platforms is to potentially allow for manufacture of large, “off-the-shelf” banks of therapeutic cells that could be accessed on demand by health care professionals to potentially decrease the time between diagnosis and treatment.
In addition, because we focus on cells from donors, the strategy could potentially enhance the ability of the therapeutic candidates to induce a more robust response once injected into patients. The human immune system is designed to recognize and distinguish “self” from “non-self” and destroy “otherness” such as bacteria, viruses, and damaged or diseased cells such as cancer cells. Alloreactivity (reacting against another person’s cells) is the most powerful response the immune system generates. Several of our technologies take advantage of the alloreactivity to hyper stimulate a person’s immune response to better attack a chronic infection (e.g., HIV) or solid tumor.
In certain treatments (e.g., HIV and cancer), cells taken from healthy donors are sometimes genetically modified to introduce signaling molecules that are designed to enhance the ability of specific immune cells to recognize diseased cells, and to help recruit other cells that will destroy cancer or virus infected cells.
The Company believes that the combination of off-the-shelf allogeneic cells, combined with genetic modifications designed to enhance immune signaling, could potentially generate therapeutic candidates that have unique attributes that will increase the likelihood of success.
Cell Therapy enabling technology
In addition to the platform described above, Renovaro has an innovative gene therapy approach to enhance the selection and engraftment (uptake) of cells carrying therapeutic attributes. Enhanced uptake or engraftment could play a critical role in some cases to increase the likelihood of therapeutic benefit. This technology was initially developed for autologous cell therapy from a person living with HIV, and genetically modifying those cells so they cannot be infected with most variants of HIV, plus a gene modification to enhance uptake. We have sublicensed under a profit-sharing agreement our technology to potentially increase engraftment for use in CAR-T therapy as a potential cure for HIV.
HBV Gene Therapy
Renovaro Inc. is exploring various approaches for gene therapy design elements to potentially eliminate virus-infected cells with an innovative molecular mechanism that co-opts the virus’ machinery to induce the death of infected cells rather than reproducing and causing more infection to exacerbate disease.
Oncology:
RENB-DC11: Genetically modified Allogeneic Dendritic Cell Therapeutic Vaccine as Potential Product for Long-term Remission of Solid Tumors – Starting with Pancreatic Cancer
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Allogeneic Cell Therapy Platform – Advanced Pre-Clinical
Based on learning from peer-reviewed publications of Phase I/IIa trials, we have designed an innovative therapeutic vaccination platform that could potentially be used to induce life-long remission from some of the deadliest solid tumors. The survival rate in pancreatic cancer is currently only 5 to 10 percent at 5 years.
Initial preclinical in vitro and proof of concept in vivo studies have been compelling. The platform might also allow for non-specific immune enhancement that could have impact against a broad array of solid tumors. We initially plan to target pancreatic cancer. Other potential targets for later development could include triple-negative breast cancer, liver or mesothelioma. As with HIV, our approach would potentially allow for outpatient therapy without wiping out or significantly impairing the patient’s immune system, as many current approaches require.
Renovaro Inc. has initiated a collaboration with Dr. Anahid Jewett from UCLA to study further the in vitro and in vivo effectiveness of the approach in pancreatic cancer. Dr. Jewett created an innovative pancreatic cancer mouse model that comprises the human immune system repertoire in combination with implanted human cancer cells. Multiple experiments in different humanized mouse models are consistently showing with only one cycle of therapy – in humans five to ten are likely - what Dr. Jewett calls “the Holy Grail of cancer research”:
| 1. | 80-90% substantial tumor size reduction (volume and weight) |
| 2. | Remnant of tumor sack significantly infiltrated with effector immune cells indicating ongoing killing of cancer. |
| 3. | Significant correlation with expected immune response important to fight cancer detected in blood, and |
| 4. | No metastases |
The confirming reproducibility and robustness of the therapeutic response in an aggressive form of human pancreatic cancer in several models is promising. We received FDA input from pre-IND interactions which helped solidify our IND-enabling plan as well as our investigational plan. We are now fully committed to process development/improvements and IND-enabling activities. We believe that we can complete IND-enabling activities in the second half of 2024 which if successful, would enable the start of clinical trials in humans during the second half of 2024. The investigational plan discussed with the FDA includes phase 1 safety testing broadly in all solid tumor types, followed by a phase 2a focusing on a few solid tumor types that are difficult to treat and have poor life expectancy, for example triple negative breast, second-line liver, head and neck cancers. Phase 2b would expand cohorts in cancers with the strongest response in phase 2a.
RENB-DC-12--XX: Genetically modified Allogeneic Dendritic Cell Therapeutic Vaccine as Potential Product for Long-term Remission of Additional Indications
The technology is a platform that could potentially be adapted to other solid tumors first line and/or salvage therapy, by itself or, potentially, in combination with other cancer treatments. Additional cancer vaccine designs are being evaluated strategically to balance risk and opportunity to advance therapeutic development quickly in cancer indications with few treatment options.
Infectious Diseases:
HIV:
RENB-HV12: HIV Therapeutic Vaccines for Potential Long-term Remission/Cure
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Allogeneic Cell Therapy Platform - Advanced Pre-Clinical Stage; Non-Human Primate Studies Ongoing.
In persons living with HIV who are controlling the spread of virus with anti-retroviral (ARV) treatment, boosting the immune system in a different way than the virus already has through infection, could allow for control of HIV after stopping ARVs.
Renovaro Inc. is developing RENB-HV12 that utilizes a novel cellular and immunotherapy approach that could potentially provide therapeutic vaccines for HIV. A non-human study of the therapeutic vaccine in primates at the Fred Hutchinson Cancer Research Center is ongoing. Animals began receiving the first injections of the potential therapeutic vaccine in August, 2022. Preliminary results assessment may potentially be available in the second half of 2023. A Pre-IND request could be submitted in the second half of 2024, with IND submission and the beginning of Phase I clinical trials by mid- to end-2025.
RENB-HV01: Autologous Transplant with Genetically Modified Cells:
FDA INTERACT Meeting Held February 2020 - Advanced Pre-Clinical Stage
We have pioneered a novel enabling technology (ALDH gene modification) that we believe will allow sufficient engraftment of the CCR5 gene-modified Hematopoietic Stem Cell (HSC) to eliminate the need for Antiretroviral Treatment (ART.)
Management conducted a successful FDA INTERACT Meeting in alignment with the Company’s experimental plan. Although in vitro and in vivo studies have demonstrated promising results, further development of RENB-HV01 at this time was deemed costly and a long-term undertaking. While the Company plans to return to full development of the approach when resources are available, it has become less attractive and been deprioritized for business reasons, while pipelines that could move more quickly have been prioritized (e.g., RENB-DC11). Therefore, a business decision was made to sub-license the ALDH gene modification.
RENB-HV01 was sub-licensed to Caring Cross with a profit share arrangement. Caring Cross is developing a CAR-T approach that they believe, when combined with Renovaro ALDH gene modification, could enhance engraftment of their CAR-T cell therapy and enhance their likelihood of success.
RENB-HV21: Immunotherapy with Allogeneic NK/GDT Cells
Allogeneic Cell Therapy Platform - Pre-IND conducted - Advanced Pre-Clinical with Human Data through a Collaboration
We are also exploring RENB-HV21, an innovative treatment for HIV with allogeneic Natural Killer (NK) and Gamma Delta T-Cells (GDT). It is believed that the GDT cells, a small subset of immune cells that can be infected with HIV, could both be infected by, and be a key factor in controlling the virus. The initial scientific findings were presented during the American Society of Gene & Cell Therapy (ASCGT) Annual Meeting in 2021. Renovaro Inc. has an exclusive license to use the underlying patent to develop RENB-HV21 for potential treatment or cure of HIV. A successful investigator-initiated Pre-IND was completed in October 2021. However, due to a shift in priorities to the Oncology pipeline, Renovaro does not plan to pursue the IND and potential clinical trial in the medium- to long-term.
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HBV:
RENB-HB01: Potential Cure for HBV
HBV Gene Therapy - Pre-Clinical
RENB-HB01 is in an early pre-clinical phase as we explore various approaches for gene therapy design elements. If those explorations are successful, it is possible we could begin the regulatory process at the earliest in the second half of 2024. However, our highest priority is currently the oncology platform, beginning with pancreatic cancer and other solid tumors with poor life expectancy.
Corporate History
We were incorporated under the laws of the State of Delaware on January 18, 2011, under the name Putnam Hills Corp. and in 2014 we merged with and changed our name to DanDrit Biotech USA, Inc. In 2018, we acquired Enochian Biopharma and changed our name to Enochian BioSciences Inc. In August 2023, the Company changed its corporate name from Enochian Biosciences Inc. to Renovaro Biosciences Inc. On February 13, 2024, the Company changed its corporate name from Renovaro Biosciences Inc. to Renovaro Inc.
Going Concern and Management’s Plans
The financial statements included elsewhere herein for the period ended December 31, 2023, were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. As of December 31, 2023, we had cash and cash equivalents of $243,980, an accumulated deficit of $257,733,402 and a working capital deficit of $11,355,216 and total liabilities of $14,422,584. We have incurred losses from continuing operations, have used cash in our continuing operations, and are dependent on additional financing to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for one year after the date the financial statements are issued. The financial statements included elsewhere herein do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Management has reduced overhead and administrative costs by streamlining the organization to focus around two of its therapies (oncology and a HIV therapeutic vaccine). The Company has tailored its workforce to focus on these therapies. In addition, the Company intends to attempt to secure additional required funding through equity or debt financing. However, there can be no assurance that the Company will be able to obtain any sources of funding. Such additional funding may not be available or may not be available on reasonable terms, and, in the case of equity financing transactions, could result in significant additional dilution to our stockholders. If we do not obtain required additional equity or debt funding, our cash resources will be depleted and we could be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us.
Funding that we may receive during the fiscal year 2024 is expected to be used to satisfy existing and future obligations and liabilities and working capital needs, to support commercialization of our products and conduct the clinical and regulatory work to develop our product candidates, and to begin building working capital reserves.
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On September 28, 2023, the Company, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with GEDi Cube Intl Ltd., a private company formed under the laws of England and Wales (“GEDi Cube”). Upon the terms and subject to the conditions set forth in the Purchase Agreement, the Company will acquire 100% of the equity interests of GEDi Cube from its equity holders (the “Sellers”) and GEDi Cube will become a wholly-owned subsidiary of the Company (the “Transaction”). On September 28, 2023, the board of directors of the Company, and the board of managers of GEDi Cube unanimously approved the Purchase Agreement (see Note 9.) On January 25, 2024, the Company held a Special Shareholders’ Meeting, during which the shareholders approved the issuance of the Company’s common stock to the Sekkers and the requisite increase in the amount of the Company’s authorized common stock. The Company is working with the GEDi Cube to close the transaction.
Results of Operations for the three and six months ended December 31, 2023, compared to the three and six months ended December 31, 2022
The following table sets forth our revenues, expenses and net loss for the three and six months ended December 31, 2023 and 2022. The financial information below is derived from our unaudited condensed consolidated financial statements.
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| December 31, | Increase/(Decrease) | December 31, | Increase/(Decrease) | |||||||||||||||||||||||||||||
| 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||||||||||
| General and administrative | $ | 3,616,392 | $ | 4,013,063 | $ | (396,671 | ) | (1 | 0)% | $ | 11,906,602 | $ | 8,569,903 | $ | 3,336,699 | 39 | % | |||||||||||||||
| Research and development | 620,521 | 325,959 | 294,562 | 90 | % | 1,187,165 | 2,931,334 | (1,744,169 | ) | (60 | )% | |||||||||||||||||||||
| Depreciation and amortization | 33,162 | 28,844 | 4,318 | 15 | % | 60,422 | 57,245 | 3,177 | 6 | % | ||||||||||||||||||||||
| Total Operating Expenses | 4,270,075 | 4,367,866 | (97,791 | ) | (2 | )% | 13,154,189 | 11,558,482 | 1,595,707 | 14 | % | |||||||||||||||||||||
| LOSS FROM OPERATIONS | (4,270,075 | ) | (4,367,866 | ) | 97,791 | (2 | )% | (13,154,189 | ) | (11,558,482 | ) | (1,595,707 | ) | 14 | % | |||||||||||||||||
| Other Income (Expenses) | ||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | 0 | % | (120,018 | ) | — | (120,018 | ) | 100 | % | ||||||||||||||||||||
| Loss on extinguishment of contingent consideration liability | — | — | — | 0 | % | — | (419,182 | ) | 419,182 | (100 | )% | |||||||||||||||||||||
| Interest expense | (274,984 | ) | (92,892 | ) | (182,092 | ) | 196 | % | (454,255 | ) | (188,477 | ) | (265,778 | ) | 141 | % | ||||||||||||||||
| Interest and other income | 15,938 | 3,010 | 12,928 | 430 | % | 24,313 | 8,633 | 15,680 | 182 | % | ||||||||||||||||||||||
| Total Other Income (Expenses) | (259,046 | ) | (89,882 | ) | (169,164 | ) | 188 | % | (549,960 | ) | (599,026 | ) | 49,066 | (8 | )% | |||||||||||||||||
| NET LOSS | $ | (4,529,121 | ) | $ | (4,457,748 | ) | $ | (71,373 | ) | 2 | % | $ | (13,704,149 | ) | $ | (12,157,508 | ) | $ | (1,546,641 | ) | 13 | % | ||||||||||
Revenues
We are a pre-revenue, pre-clinical biotechnology company. We have never generated revenues and have incurred losses since inception. We do not anticipate earning any revenues until our therapies or products are approved for marketing and sale.
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Expenses
Our operating expenses for the three months ended December 31, 2023 and 2022, were $4,270,075 and $4,367,866 respectively, representing a decrease of $97,791 or approximately 2%. The decrease in operating expenses primarily relates to the decrease in general and administrative expenses of $396,671 partially offset by the increase in research and development expenses of $294,562.
Our operating expenses for the six months ended December 31, 2023 and 2022, were $13,154,189 and $11,558,482 respectively, representing an increase of $1,595,707, or approximately 14%. The increase in operating expenses primarily relates to the increase in general and administrative expenses of $3,336,699 partially offset by the decrease in research and development expenses of $1,744,169.
General and administrative expenses for the three months ended December 31, 2023, and 2022, were $3,616,392 and $4,013,063, respectively, representing a decrease of $396,671 or approximately 10%. The variance is related to a decrease in legal expenses of $453,934, compensation and related expenses of $353,309, and accounting fees of $133,819, partially offset by an increase in investor relations expenses of $142,183, marketing expenses of $100,183, filing fees of $62,243 and insurance expenses of $60,525.
General and administrative expenses for the six months ended December 31, 2023, and 2022, were $11,906,602 and $8,569,903, respectively, representing an increase of $3,336,699 or approximately 39%. The variance is related to an increase in non-cash consulting fees of $4,470,000, investor relations expenses of $241,051, insurance expenses of $178,836, and marketing expenses of $121,183, partially offset by a decrease in compensation and related expenses of $970,649 and legal expenses of $859,497.
Research and development expenses for the three months ended December 31, 2023, and 2022, were $620,521 and $325,959, respectively, representing an increase of $294,562 or approximately 90%. The variance is primarily driven by an increase of $129,990 in consumables related to pre-clinical testing and $104,628 in consulting expenses related to regulatory and outsourced consultants.
Research and development expenses for the six months ended December 31, 2023, and 2022, were $1,187,165 and $2,931,334, respectively, representing a decrease of $1,744,169 or approximately 60%. The variance is primarily driven by a decrease of $2,188,807 in collaborating partner expenses with CDMO and CROs related to discontinued product candidates, partially offset by an increase in consumables of $239,619 and consulting expenses of $200,655.
The Company recorded other expense of $259,046 for the three months ended December 31, 2023, compared to other expense of $89,882 for the three months ended December 31, 2022, representing an increase in other expense of $169,164 or 188%. The variance is primarily due to an increase of $182,092 in interest expense related to the convertible promissory notes and other notes entered into in the current period.
The Company recorded other expense of $549,960 for the six months ended December 31, 2023, compared to other expense of $599,026 for the six months ended December 31, 2022, representing a decrease in other expense of $49,066 or 8%. The variance is primarily due to the loss on extinguishment of contingent consideration liability of 419,182 in the prior period, partially offset by an increase of $265,778 in interest expense and by the loss on extinguishment of debt of $120,018 in the current period.
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Net Loss
Net loss for the three months ended December 31, 2023, and 2022, was $4,529,121 and $4,457,748, respectively, representing an increase in net loss of $71,373 or approximately 2%. The increase in net loss was primarily due to a decrease in general and administrative expenses of $396,671, partially offset by an increase in research and development expenses of $294,562 and $182,092 of additional interest expense.
Net loss for the six months ended December 31, 2023, and 2022, was $13,704,149 and $12,157,508, respectively, representing an increase in net loss of $1,546,641 or approximately 13%. The increase in net loss was primarily due to an increase in general and administrative expenses of $3,336,699, partially offset by a decrease in research and development expenses of $1,744,169.
Liquidity and Capital Resources
We have historically satisfied our capital and liquidity requirements through funding from stockholders, the sale of our Common Stock and warrants, and debt financing. We have never generated any sales revenue to support our operations and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee that a market for the therapies or products will develop. We may never be profitable.
As noted above under the heading “Going Concern and Management’s Plans,” through December 31, 2023, we have incurred substantial losses. We will need additional funds for (a) research and development, (b) increases in personnel, and (c) the purchase of equipment, specifically to advance towards an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA for RENB-DC11, RENB-HV12, RENB-HV01, RENB-HV21 and RENB-HB01. The availability of any required additional funding cannot be assured. In addition, an adverse outcome in legal or regulatory proceedings in which we are currently involved or in the future may be involved could adversely affect our liquidity and financial position. We may raise such funds from time to time through public or private sales of our equity or debt securities. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely affect our growth plans and our financial condition and results of operations.
As of December 31, 2023, the Company had $243,980 in cash and working capital of $(11,355,216) as compared to $1,874,480 in cash and working capital of $(8,457,693) as of June 30, 2023, a decrease of 87% and 34%, respectively.
Assets
Total assets at December 31, 2023, were $58,018,120 compared to $58,300,796 as of June 30, 2023. The decrease in total assets was primarily due to the decrease in cash of $1,630,500, partially offset by increases in notes receivable of $1,073,625 and prepaids and other assets of $394,620.
Liabilities
Total liabilities at December 31, 2023, were $14,422,584 compared to $11,798,685 as of June 30, 2023. The increase in total liabilities was primarily related to increases of $2,569,379 in convertible notes payable, net of discount, $484,651 in other current liabilities and $281,095 in accounts payable, partially offset by a decrease of $684,947 in notes payable, net of discount.
The following is a summary of the Company’s cash flows (used in) or provided by operating, investing, and financing activities:
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| Six Months Ended December 31, 2023 | Six Months Ended December 31, 2022 | |||||||
| Net Cash Used in Operating Activities | $ | (5,923,830 | ) | $ | (6,205,145 | ) | ||
| Net Cash Used in Investing Activities | (1,115,209 | ) | (23,633 | ) | ||||
| Net Cash Provided by Financing Activities | 5,409,682 | 1,158,375 | ||||||
| Effect of exchange rates on cash | (1,143 | ) | 17,157 | |||||
| Change in Cash and Cash Equivalents | $ | (1,630,500 | ) | $ | (5,053,246 | ) | ||
Cash Flows
Cash used in operating activities for the six months ended December 31, 2023, and 2022 was ($5,923,830) and ($6,205,145), respectively. Cash used in operating activities during the current period primarily related to the next loss including $1,187,165 in research and development expenses for CDMO and CRO costs, along with approximately $5,554,634 in general and administrative expenses, net of non-cash items, partially offset by an increase in accounts payable of $281,095 due to the timing of cash payments and a $516,296 increase in prepaid expenses.
Cash used in investing activities for the six months ended December 31, 2023, and 2022 was ($1,115,209) and ($23,633), respectively. Cash used in investing activities during the current period related to the issuance of notes receivable totaling $1,050,000 in principal and $23,625 of interest accrued as of December 31, 2023 (see Note 3.)
Cash provided by financing activities for the six months ended December 31, 2023, was $5,409,682 as compared to cash provided by financing activities of $1,158,375 during the six months ended December 31, 2022. During the six months ended December 31, 2023, the Company received net proceeds of $3,490,000 from issuance of promissory notes, $2,000,000 from a private placement and $341,865 from Common Stock warrants exercised, that were partially offset by $422,183 in repayment of a finance agreement.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Significant Accounting Policies and Critical Accounting Estimates
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
For a summary of our accounting policies, see Note 1 to the unaudited condensed consolidated financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this Report was prepared.
The Certifying Officers are responsible for establishing and maintaining adequate internal control over financial reporting for the Company and used the “Internal Control over Financial Reporting Integrated Framework” issued by the Committee of Sponsoring Organizations (“COSO”) to conduct an extensive review of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act, Rules 13a-15(e) and 15-d-15(e)) as of the end of each of the periods covered by this Report (the “Evaluation Date”). Based upon that evaluation, the Certifying Officers concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective in ensuring that the information we were required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The deficiency is attributed to the Company not having adequate resources to address complex accounting matters. This control deficiency will be monitored, and attention will be given to this matter as we grow.
The Certifying Officers based their conclusion on the fact that the Company has identified a material weakness in controls over financial reporting, detailed above. We expect to be deficient in our disclosure controls and procedures until sufficient capital is available to hire the appropriate internal accounting staff.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting during the three months ended December 31, 2023, that have materially affected or are reasonably likely to materially affect our internal controls.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
Securities Class Action Litigation. On July 26, 2022 and July 28, 2022, securities class action complaints (the former, the “Chow Action” and the latter, the “Manici Action”) were filed by purported stockholders of the Company in the United States District Court for the Central District of California against the Company and certain of the Company’s current and former officers and directors. The complaints allege, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with the Company’s relationship with Serhat Gümrükcü and its commercial prospects. The complaints seek unspecified damages, interest, fees, and costs. On November 22, 2022, the Manici Action was voluntarily dismissed without prejudice, but the Chow action remains pending. On October 22, 2023, the Court appointed a lead plaintiff in the Chow Action. The lead plaintiff filed an amended complaint on December 15, 2023. The Company intends to file a motion to dismiss the amended complaint but expresses no opinion as to the likelihood of a favorable outcome.
Federal Derivative Litigation. On September 22, 2022, Samuel E. Koenig filed a shareholder derivative action in the United States District Court for the Central District of California. On January 19, 2023, John Solak filed a substantially similar shareholder derivative action in the United States District Court for the District of Delaware. Both derivative actions recite similar underlying facts as those alleged in the Securities Class Action Litigation. The actions, filed on behalf of the Company, name Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The actions also name the Company as a nominal defendant. The actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also set out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiffs do not quantify any alleged injury, but seek damages, disgorgement, restitution, and other costs and expenses. On January 24, 2023, the United States District Court for the Central District of California stayed the Koenig matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. On April 6, 2023, the United States District Court for the District of Delaware stayed the Solak matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to either complaint. The Company intends to contest these matters but expresses no opinion as to the likelihood of favorable outcomes.
State Derivative Litigation. On October 20, 2022, Susan Midler filed a shareholder derivative action in the Superior Court of California, Los Angeles County, reciting similar underlying facts as those alleged in the Securities Class Action Litigation. The action, filed on behalf of the Company, names Serhat Gümrükcü and certain of the Company’s current and former directors as defendants. The action also names the Company as a nominal defendant. The action sets out claims for breaches of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement. Plaintiff does not quantify any alleged injury, but seeks damages, disgorgement, restitution, and other costs and expenses. On January 20, 2023, the Court stayed the Midler matter pending resolution of the defendants’ anticipated motion to dismiss in the Securities Class Action Litigation. The defendants have not yet responded to the complaint. The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome.
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On October 21, 2022, the Company filed a Complaint in the Superior Court of the State of California for the County of Los Angeles against Serhat Gümrükcü, William Anderson Wittekind (“Wittekind”), G Tech Bio LLC (“G Tech”), SG & AW Holdings, LLC, and Seraph Research Institute (“SRI”) (collectively, the “Defendants”). The Complaint alleges that the defendants engaged in a “concerted, deliberate scheme to alter, falsify, and misrepresent to the Company the results of multiple studies supporting its Hepatitis B and SARS-CoV-2/influenza pipelines.” Specifically, “Defendants manipulated negative results to reflect positive outcomes from various studies, and even fabricated studies out of whole cloth.” As a result of the Defendants’ conduct, the Company claims that it “paid approximately $25 million to Defendants and third-parties that it would not otherwise have paid.” On April 21, 2023, defendants Wittekind, G Tech, SG & AW Holdings, LLC, and SRI filed a demurrer with respect to some, but not all, of the Company’s claims, as well as a motion to strike. On September 6, 2023, the Court denied in part and granted in part the pending motions. On September 7, 2023, the Court entered a case management order setting the final status conference, trial, and other intervening deadlines.
On December 4, 2023, the Defendants answered the Company’s First Amended Complaint and G Tech and SRI filed a Cross-Complaint. In the Cross-Complaint, G Tech and SRI seek declaratory and injunctive relief related to certain agreements between G Tech, SRI, and the Company, including, inter alia, a declaration that the Framework Agreement, effective as of November 15, 2019, the Statement of Work & License Agreement, effective as of January 31, 2020, and the Statement of Work and License Agreement for Influenza and Coronavirus Indications, effective as of April 18, 2021, have been terminated and the Company has no rights to any license under such agreements. The Company denies these allegations and intends to vigorously defend against the cross claims while pursuing its claims against the Defendants.
On March 1, 2021, the Company’s former Chief Financial Officer, Robert Wolfe and his company, Crossfield, Inc., filed a Complaint in the U.S. District Court for the District of Vermont against the Company, Renovaro Biosciences Denmark ApS, and certain directors and officers. In the Complaint, Mr. Wolfe and Crossfield, Inc. asserted claims for abuse of process and malicious prosecution, alleging, inter alia, that the Company lacked probable cause to file and prosecute an earlier action, and sought millions of dollars of compensatory damages, as well as punitive damages. The allegations in the Complaint relate to an earlier action filed by the Company and Renovaro Biosciences Denmark ApS in the Vermont Superior Court, Orange Civil Division. On March 3, 2022, the Court partially granted the Company’s motion to dismiss, dismissing the abuse of process claim against all defendants and all claims against Mark Dybul and Henrik Grønfeldt-Sørensen. On November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. On August 24, 2023, the Court denied the motion for summary judgment. On September 7, 2023, the Company moved for reconsideration of the Court’s order, which the Court denied on December 4, 2023. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
On June 7, 2023, Weird Science LLC (“Weird Science”), Wittekind, the William Anderson Wittekind 2020 Annuity Trust, the William Anderson Wittekind 2021 Annuity Trust, the Dybul 2020 Angel Annuity Trust, and the Ty Mabry 2021 Annuity Trust (collectively, the “Trusts”) (collectively, “Plaintiffs”) filed a Verified Complaint against the Company in the Court of Chancery of Delaware. Plaintiffs allege that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS (the “Investor Rights Agreement”). According to the Verified Complaint, the Investor Rights Agreement required the Company to (i) notify all “Holders” of “Registrable Securities” at least 30 days prior to filing a registration statement and (ii) afford such Holders an opportunity to have their Registrable Securities included in such registration statement. Plaintiffs allege that the Company breached these registration rights by failing to provide the required notice in connection with S-3 registration statements filed by the Company on July 13, 2020 and February 11, 2022. Plaintiffs seek compensatory damages, pre- and post-judgment interest, costs, and attorneys’ fees. The Company moved to dismiss the Verified Complaint on September 15, 2023.
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On December 4, 2023, in lieu of opposing the motion to dismiss, Plaintiffs filed a Verified First Amended Complaint (“FAC”). In the FAC, Plaintiffs assert claims against the Company and others for purported breaches of the Investor Rights Agreement, fraud, tortious interference with a contract, and breaches of fiduciary duty. Plaintiffs seek compensatory, exemplary, and punitive damages, as well as certain declaratory relief, specific performance, and pre- and post-judgment interest, costs, and attorneys’ fees. The Company filed a motion to dismiss the FAC on December 18, 2023. The Company denies Plaintiffs’ allegations and intends to vigorously defend against the claim.
On August 24, 2023, counsel on behalf of Weird Science, Wittekind, individually, and Wittekind, as trustee of the Trusts served a demand to inspect the Company’s books and records (the “Demand”) pursuant to Delaware General Corporation Law, § 220 (“Section 220”). The Demand seeks the Company’s books and records in connection with various issues identified in the Demand. The Company takes its obligations under Section 220 seriously and, to the extent that the requests are proper under Section 220, intends to comply with those obligations.
On January 23, 2024, Weird Science and Wittekind filed a shareholder derivative action in the United States District Court for the Central District of California against certain officers, directors, and investors of the Company, as well as other defendants. The Verified Stockholder Derivative Complaint (“Derivative Complaint”) alleges, among other claims, violations of Section 13(d) and 14(a) and Rules 10b-5(a), 10b-5(c) and 14a-9 of the Exchange Act of 1934. The Derivative Complaint also includes claims of breach of fiduciary duty, corporate waste, unjust enrichment, and contribution/indemnification. Weird Science and Wittekind seek unspecified compensatory, exemplary and punitive damages and certain injunctive relief. Simultaneously with the Derivative Complaint, Weird Science and Wittekind filed an emergency Ex Parte Application for Temporary Restraining Order (“Application”) asking the Court enjoin a special meeting of the Company’s stockholders notice for January 25, 2024. As the basis for the Application, Weird Science and Wittekind recited many of the same allegations as in the Derivative Complaint. The Court denied the Application on January 24, 2024. The Company denies the allegations in the Derivative Complaint and intends to vigorously defend against the claims asserted therein.
Item 1A. Risk Factors.
Risk factors that may affect our business and financial results are discussed within Item 1A ”Risk Factors” of our annual report for the fiscal year ended June 30, 2023, on Form 10-K (“2023 Form 10-K”) filed with the SEC on October 2, 2023. There have been no material changes to the disclosures relating to this item from those set forth in our 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
| (a) | Exhibits required by Item 601 of Regulation S-K. |
| ** | Filed herewith. |
| *** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: February 14, 2024 | RENOVARO INC. | |
| By: | /s/ Mark Dybul | |
| Mark Dybul | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Luisa Puche | |
| Luisa Puche | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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EXHIBIT 3.1
Exhibit 31.1
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302
I, Mark Dybul, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended December 31, 2023, of Renovaro Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 14, 2024 | By: | /s/ Mark Dybul |
| Name: | Mark Dybul | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302
I, Luisa Puche, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended December 31, 2023, of Renovaro Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 14, 2024 | By: | /s/ Luisa Puche |
| Name: | Luisa Puche | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Renovaro Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2023 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: February 14, 2024 | By: | /s/ Mark Dybul |
| Name: | Mark Dybul | |
| Title: | Chief Executive Officer (Principal Executive Officer) |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Renovaro Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to her knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: February 14, 2024 | By: | /s/ Luisa Puche |
| Name: | Luisa Puche | |
| Title: | Chief Financial Officer (Principal Financial Officer) |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the U.S. Securities and Exchange Commission or its staff upon request.