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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

OR

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

Commission File Number 001-39387

 

https://cdn.kscope.io/cb796fc4dc7f8241b272c5acbce86236-img84505606_0.jpg 

Renalytix plc

(Exact name of Registrant as specified in its Charter)

 

England and Wales

Not Applicable

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2 Leman Street
London, United Kingdom

E1W 9US

(Address of principal executive offices)

(Zip Code)

+44 20 3139 2910

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

American Depositary Shares, each representing two ordinary shares, nominal value £0.0025 per share

 

RNLX

 

The Nasdaq Stock Market, LLC

Ordinary shares, nominal value £0.0025 per share

 

*

 

The Nasdaq Stock Market, LLC*

 

* Not for trading, but only in connection with the registration of the American Depositary Shares.

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

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). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the 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

 

 

 

 

Non-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 May 14, 2024, there were 154,368,191 ordinary shares, nominal value £0.0025 per share, outstanding, which if all were held in ADS form would be represented by 77,184,096 American Depositary Shares, each representing two ordinary shares.

 

 

 


 

RENALYTIX PLC

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I

Item 1.

Consolidated Financial Statements (unaudited)

1

Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023 (unaudited)

1

 

Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended March 31, 2024 and 2023 (unaudited)

2

 

Consolidated Statements of Shareholders' Equity (Deficit) for the three and nine months ended March 31, 2024 and 2023 (unaudited)

3

 

Consolidated Statements of Cash Flows for the nine months ended March 31, 2024 and 2023 (unaudited)

4

 

Notes to Consolidated Financial Statements (unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

 

 

 

PART II

 

 

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Defaults Upon Senior Securities

40

Item 4.

Mine Safety Disclosures

40

Item 5.

Other Information

40

Item 6.

Exhibits

41

 

 

 

 

 

 

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the three months ended March 31, 2024 (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “goal,” “target,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:

the timing and plans for commercialization of KidneyIntelX;
the timing and plans for regulatory filings and decisions;
our plans to maintain regulatory approval of kidneyintelX.dkd and obtain and maintain regulatory approvals for other products from our KidneyIntelX platform;
the potential benefits of KidneyIntelX;
the market opportunities for KidneyIntelX and our ability to maximize those opportunities;
our business strategies and goals;
our ability and plans to establish and maintain partnerships and projections related to future test volume as part of those partnerships;
our ability and plans to drive adoption of KidneyIntelX and integrate KidneyIntelX into clinical workflow;
estimates of our sales, revenue, expenses, cash runway and capital requirements and our need for and ability to obtain additional financing;
our ability to continue as a going concern;
third-party payor reimbursement and coverage decisions;
the performance of our third-party suppliers and manufacturers,
our expectations regarding our ability to obtain, maintain and enforce intellectual property protection for our diagnostic products and our ability to operate our business without infringing on the intellectual property rights of others;
our expectations regarding regulatory classification of KidneyIntelX, as well as the regulatory response to the marketing and promotion of KidneyIntelX;
the impact of guidelines and recommendations published by various organizations on the use of our products;
our expectations regarding developments relating to our competitors;
our ability to identify, recruit and retain key personnel;
the potential for breaches of data privacy, or disruptions in our information technology systems;
the potential direct or indirect impact of COVID-19 and the Russia-Ukraine or Hamas-Israel armed conflict on the global economy and our business or operations;
our ability to satisfy the listing requirements of the NASDAQ Global Market;
the progress and potential outcome of our formal sale process (as referred to in Note 2 on Rule 2.6 of the City Code on Takeovers and Mergers);
our expectation that we will not be an investment company under applicable SEC interpretations;
the sufficiency of our existing cash, cash equivalents and short-term investments to fund our operations and capital expenditure requirements;

i


 

any other factors which may impact our financial results or future trading prices of our ADSs and ordinary shares and the impact of securities analysts’ reports on these prices; and
risks detailed under the caption “Risk Factors” in this Quarterly Report and in our other reports filed with the U.S. Securities and Exchange Commission (“SEC”), from time to time hereafter.

 

You should refer to the section titled "Part I, Item 1A. Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended June 30, 2023 (the “Annual Report on Form 10-K”) and the sections of this Quarterly Report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law, applicable regulations or the rules of the Nasdaq Stock Market LLC.

You should read this Quarterly Report, the documents that we reference in this Quarterly Report and the documents we have filed as exhibits to this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

ii


 

RENALYTIX PLC

CONSOLIDATED BALANCE SHEETS (Unaudited)

 

(in thousands, except share and per share data)

 

 

 

March 31, 2024

 

 

June 30, 2023

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

$

4,704

 

 

$

24,682

 

Accounts receivable

 

 

 

 

554

 

 

 

776

 

Prepaid expenses and other current assets

 

 

 

 

1,082

 

 

 

1,424

 

Total current assets

 

 

 

 

6,340

 

 

 

26,882

 

Property and equipment, net

 

 

 

 

230

 

 

 

1,027

 

Right of Use Asset

 

 

 

 

 

 

 

159

 

Investment in VericiDx

 

 

 

 

1,060

 

 

 

1,460

 

Other Assets

 

 

 

 

1,139

 

 

 

1,101

 

Total assets

 

 

 

$

8,769

 

 

$

30,629

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

$

2,101

 

 

$

1,485

 

Accounts payable – related party

 

 

 

 

3,027

 

 

 

1,451

 

Accrued expenses and other current liabilities

 

 

 

 

4,273

 

 

 

6,644

 

Accrued expenses – related party

 

 

 

 

1,060

 

 

 

1,963

 

Current lease liability

 

 

 

 

78

 

 

 

130

 

Convertible notes-current

 

 

 

 

4,449

 

 

 

4,463

 

Total current liabilities

 

 

 

 

14,988

 

 

 

16,136

 

Convertible notes-noncurrent

 

 

 

 

4,892

 

 

 

7,485

 

Noncurrent lease liability

 

 

 

 

 

 

 

41

 

Total liabilities

 

 

 

 

19,880

 

 

 

23,662

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Ordinary shares, £0.0025 par value per share: 128,042,743 shares
   authorized;
119,916,187 and 93,781,478 shares issued and
   outstanding at March 31, 2024 and June 30, 2023, respectively

 

 

 

 

368

 

 

 

286

 

Additional paid-in capital

 

 

 

 

194,786

 

 

 

186,456

 

Accumulated other comprehensive loss

 

 

 

 

(1,558

)

 

 

(1,450

)

Accumulated deficit

 

 

 

 

(204,707

)

 

 

(178,325

)

Total shareholders’ (deficit) equity

 

 

 

 

(11,111

)

 

 

6,967

 

Total liabilities and shareholders’ (deficit) equity

 

 

 

$

8,769

 

 

$

30,629

 

The accompanying notes are an integral part of these consolidated financial statements.

1


 

RENALYTIX PLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

 

 

For the Three Months Ended March 31,

 

 

For the Nine Months Ended March 31,

 

(in thousands, except share data)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

 

$

535

 

 

$

724

 

 

$

1,703

 

 

$

2,885

 

Cost of revenue

 

 

601

 

 

 

603

 

 

 

1,583

 

 

 

2,010

 

Gross profit (loss)

 

 

(66

)

 

 

121

 

 

 

120

 

 

 

875

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,216

 

 

 

3,943

 

 

 

8,228

 

 

 

11,026

 

General and administrative

 

 

3,854

 

 

 

7,095

 

 

 

15,252

 

 

 

22,155

 

Impairment loss on property, equipment and other long-lived assets

 

 

417

 

 

 

 

 

 

723

 

 

 

 

Performance of contract liability to affiliate

 

 

 

 

 

 

 

 

 

 

 

(19

)

Total operating expenses

 

 

6,487

 

 

 

11,038

 

 

 

24,203

 

 

 

33,162

 

Loss from operations

 

 

(6,553

)

 

 

(10,917

)

 

 

(24,083

)

 

 

(32,287

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in net losses of affiliate

 

 

 

 

 

 

 

 

 

 

 

(9

)

Foreign currency gain (loss), net

 

 

15

 

 

 

(461

)

 

 

215

 

 

 

238

 

Fair value adjustment to VericiDx investment

 

 

40

 

 

 

129

 

 

 

(205

)

 

 

(1,070

)

Fair value adjustment to convertible notes

 

 

(1,196

)

 

 

(1,168

)

 

 

(2,517

)

 

 

(1,898

)

Other (expense) income, net

 

 

(49

)

 

 

310

 

 

 

212

 

 

 

521

 

Net loss before income taxes

 

 

(7,743

)

 

 

(12,107

)

 

 

(26,378

)

 

 

(34,505

)

Income tax (expense) benefit

 

 

 

 

 

1

 

 

 

(4

)

 

 

2

 

Net loss

 

$

(7,743

)

 

$

(12,106

)

 

$

(26,382

)

 

$

(34,503

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per ordinary share—basic

 

$

(0.08

)

 

$

(0.14

)

 

$

(0.27

)

 

$

(0.44

)

Net loss per ordinary share—diluted

 

$

(0.08

)

 

$

(0.14

)

 

$

(0.27

)

 

$

(0.44

)

Weighted average ordinary shares—basic

 

 

97,654,961

 

 

 

85,560,783

 

 

 

98,184,650

 

 

 

78,366,984

 

Weighted average ordinary shares—diluted

 

 

97,654,961

 

 

 

85,560,783

 

 

 

98,184,650

 

 

 

78,366,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Changes in the fair value of the convertible notes

 

$

155

 

 

$

593

 

 

$

230

 

 

$

70

 

Foreign exchange translation adjustment

 

 

21

 

 

 

505

 

 

 

(338

)

 

 

6

 

Comprehensive loss

 

$

(7,567

)

 

$

(11,008

)

 

$

(26,490

)

 

$

(34,427

)

The accompanying notes are an integral part of these consolidated financial statements.

2


 

RENALYTIX PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (Unaudited)

 

 

Ordinary shares

 

 

Additional
paid-in

 

 

Accumulated
other
comprehensive

 

 

Accumulated

 

 

Total
shareholders’

 

(in thousands, except share and per share data)

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

equity (deficit)

 

Balance at July 1, 2023

 

 

93,781,478

 

 

$

286

 

 

$

186,456

 

 

$

(1,450

)

 

$

(178,325

)

 

$

6,967

 

Shares issued for repayment of convertible bond

 

 

1,052,422

 

 

 

3

 

 

 

1,051

 

 

 

 

 

 

 

 

 

1,054

 

Vesting of RSUs

 

 

185,540

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

524

 

 

 

 

 

 

 

 

 

524

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

42

 

 

 

 

 

 

42

 

Changes in the fair value of the convertible notes at fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

75

 

 

 

 

 

 

75

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,154

)

 

 

(10,154

)

Balance at September 30, 2023

 

 

95,019,440

 

 

$

290

 

 

$

188,031

 

 

$

(1,333

)

 

$

(188,479

)

 

$

(1,491

)

Shares issued for repayment of convertible bond

 

 

4,835,388

 

 

 

15

 

 

 

1,928

 

 

 

 

 

 

 

 

 

1,943

 

Shares issued under employee stock purchase program

 

 

75,328

 

 

 

 

 

 

93

 

 

 

 

 

 

 

 

 

93

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

385

 

 

 

 

 

 

 

 

 

385

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(401

)

 

 

 

 

 

(401

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,485

)

 

 

(8,485

)

Balance at December 31, 2023

 

 

99,930,156

 

 

$

305

 

 

$

190,437

 

 

$

(1,734

)

 

$

(196,964

)

 

$

(7,956

)

Shares issued in March 2024 Private placement, net

 

 

19,986,031

 

 

 

63

 

 

 

3,964

 

 

 

 

 

 

 

 

 

4,028

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

385

 

 

 

 

 

 

 

 

 

385

 

Changes in the fair value of the convertible notes at fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

155

 

 

 

 

 

 

155

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

21

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,743

)

 

 

(7,743

)

Balance at March 31, 2024

 

 

119,916,187

 

 

$

368

 

 

$

194,787

 

 

$

(1,558

)

 

$

(204,708

)

 

$

(11,111

)

 

 

 

Ordinary shares

 

 

Additional
paid-in

 

 

Accumulated
other
comprehensive

 

 

Accumulated

 

 

Total
shareholders’

 

(in thousands, except share and per share data)

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

equity (deficit)

 

Balance at July 1, 2022

 

 

74,760,432

 

 

$

228

 

 

$

164,012

 

 

$

(915

)

 

$

(132,718

)

 

$

30,607

 

Shares issued under the employee share purchase program

 

 

131,412

 

 

 

1

 

 

 

115

 

 

 

 

 

 

 

 

 

116

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

763

 

 

 

 

 

 

 

 

 

763

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(1,087

)

 

 

 

 

 

(1,087

)

Changes in the fair value of the convertible notes at fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

397

 

 

 

 

 

 

397

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,953

)

 

 

(11,953

)

Balance at September 30, 2022

 

 

74,891,844

 

 

$

229

 

 

$

164,890

 

 

$

(1,605

)

 

$

(144,671

)

 

$

18,843

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

818

 

 

 

 

 

 

 

 

 

818

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

588

 

 

 

 

 

 

588

 

Changes in the fair value of the convertible notes at fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

(920

)

 

 

 

 

 

(920

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,444

)

 

 

(10,444

)

Balance at December 30, 2022

 

 

74,891,844

 

 

$

229

 

 

$

165,708

 

 

$

(1,937

)

 

$

(155,115

)

 

$

8,885

 

Shares issued under the February 2023 private placement

 

 

18,722,960

 

 

 

57

 

 

 

19,248

 

 

 

 

 

 

 

 

 

19,305

 

Shares issued under the employee share purchase program

 

 

166,674

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

145

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

770

 

 

 

 

 

 

 

 

 

770

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

593

 

 

 

 

 

 

593

 

Changes in the fair value of the convertible notes through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

505

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,106

)

 

 

(12,106

)

Balance at March 31, 2023

 

 

93,781,478

 

 

$

286

 

 

$

185,871

 

 

$

(839

)

 

$

(167,221

)

 

$

18,097

 

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

RENALYTIX PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

For the Nine Months Ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(26,382

)

 

$

(34,503

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

304

 

 

 

388

 

Impairment loss on property, equipment and other long-lived assets

 

 

723

 

 

 

 

Stock-based compensation

 

 

1,291

 

 

 

2,358

 

Equity in losses of affiliate

 

 

 

 

 

9

 

Reduction of Kantaro liability

 

 

 

 

 

(55

)

Fair value adjustment to VericiDx investment

 

 

205

 

 

 

1,070

 

Unrealized foreign exchange loss

 

 

 

 

 

327

 

Realized loss on sale of ordinary shares in VericiDx

 

 

94

 

 

 

 

Realized foreign exchange gain

 

 

(144

)

 

 

 

Fair value adjustment to convertible debt, net interest paid

 

 

2,255

 

 

 

1,898

 

Non cash lease expense

 

 

67

 

 

 

78

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

222

 

 

 

154

 

Prepaid expenses and other current assets

 

 

310

 

 

 

(77

)

Accounts payable

 

 

617

 

 

 

358

 

Accounts payable – related party

 

 

1,576

 

 

 

370

 

Accrued expenses and other current liabilities

 

 

(2,519

)

 

 

2,704

 

Accrued expenses – related party

 

 

(904

)

 

 

(485

)

Deferred revenue

 

 

 

 

 

(46

)

Net cash used in operating activities

 

 

(22,285

)

 

 

(25,452

)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of equipment

 

 

(3

)

 

 

 

Payment for long term deferred expense

 

 

 

 

 

(59

)

Net cash used in investing activities

 

 

(3

)

 

 

(59

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Payment of convertible notes principal

 

 

(1,660

)

 

 

(3,262

)

Proceeds from issuance of ordinary shares in Private Placement

 

 

5,072

 

 

 

20,296

 

Payment of offering costs

 

 

(1,044

)

 

 

(666

)

Proceeds from purchase of ordinary shares under employee share
   purchase plan

 

 

93

 

 

 

116

 

Net cash provided by financing activities

 

 

2,461

 

 

 

16,484

 

Effect of exchange rate changes on cash

 

 

(151

)

 

 

721

 

Net decrease in cash and cash equivalents

 

 

(19,978

)

 

 

(8,306

)

Cash and cash equivalents, beginning of period

 

 

24,682

 

 

 

41,333

 

Cash and cash equivalents, end of period

 

$

4,704

 

 

$

33,027

 

Supplemental noncash investing and financing activities:

 

 

 

 

 

 

Cash paid for interest on convertible debt

 

$

249

 

 

$

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4


 

 

RENALYTIX PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Business and risks

Renalytix PLC and its wholly-owned subsidiaries, (the “Company” or "Renalytix") is an artificial intelligence-enabled in vitro diagnostics company, focused on optimizing clinical management of kidney disease to drive improved patient outcomes and significantly lower healthcare costs. KidneyIntelX, the Company’s first-in-class diagnostic platform, employs a proprietary artificial intelligence-enabled algorithm that combines diverse data inputs, including validated blood-based biomarkers, inherited genetics and personalized patient data from EHR systems, to generate a unique patient risk score. Additionally, the Company plans to pursue collaborations with pharmaceutical companies and make ‘Pharmaceutical Services Revenue’ a core part of the business going forward with the goal of improving guideline-based standard-of-care for optimal utilization of existing and novel therapeutics using the KidneyIntelX testing platform and proprietary care management software.

Since inception in March 2018, the Company has focused primarily on organizing and staffing the Company, raising capital, developing the KidneyIntelX platform, conducting clinical validation studies for KidneyIntelX, establishing and protecting its intellectual property portfolio and commercial laboratory operations, pursuing regulatory clearance and developing a reimbursement strategy. The Company has funded its operations primarily through equity and debt financings.

The Company is subject to risks and uncertainties common to early-stage companies in the diagnostics industry, including, but not limited to, ability to secure additional capital to fund operations, compliance with governmental regulations, development by competitors of new technological innovations, dependence on key personnel and protection of proprietary technology. To achieve widespread usage, KidneyIntelX and additional diagnostic products currently under development will require extensive clinical testing and validation prior to regulatory approval and commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure, and extensive compliance-reporting capabilities.

2. Liquidity and Going Concern

The Company has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $204.7 million as of March 31, 2024. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of KidneyIntelX or any future products currently in development.

As a result of its losses and projected cash needs, substantial doubt exists about the Company’s ability to continue as a going concern. Substantial additional capital will be necessary to fund the Company's operations, expand its commercial activities and develop other potential diagnostic related products. The Company is seeking additional funding through public or private equity offerings, debt financings, other collaborations, strategic alliances and licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders. If the Company is unable to obtain funding, the Company may not be able to meet its obligations and could be required to delay, curtail or discontinue research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects.

The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation:

Seeking additional capital through public or private equity offerings, debt financings, other collaborations, strategic alliances and licensing arrangements
Implementation of various additional operating cost reduction options that are available to the Company
The achievement of a certain volume of assumed revenue

The consolidated financial statements do not include any adjustments that may result from the outcome of this going concern uncertainty.

5


 

3. Basis of presentation and summary of significant accounting policies

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented.

Principles of consolidation

The consolidated financial statements include the accounts of Renalytix plc, and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation. The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results may materially vary from these estimates.

Estimates and assumptions are periodically reviewed, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant areas that require management’s estimate include the assumptions used in determining the fair value of share-based awards, determining the fair value of the bonds, recording the prepaid/accrual and associated expense for research and development activities performed for the Company by third parties and determining useful lives of property and equipment and capitalized software.

Segment information

The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is to make significant improvements in kidney disease diagnosis and prognosis, clinical care, patient stratification for drug clinical trials, and drug target discovery.

Foreign currency

The Company’s consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. The functional currency of Renalytix plc and Renalytix AI Limited is GB Pounds. The functional currency of Renalytix AI, Inc. is the U.S. dollar. Assets and liabilities of Renalytix plc and Renalytix AI Limited are translated at the rate of exchange at period-end, while the statements of operations are translated at the weighted average exchange rates in effect during the reporting period. The net effect of these translation adjustments is shown as a component of accumulated other comprehensive loss. Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency are included in income in the period in which the change occurs and reported in the consolidated statements of operations and comprehensive loss.

Concentrations of credit risk and major customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable balances. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and are not exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships and has not experienced any losses on such accounts.

The Company’s accounts receivables are derived from revenue earned from customers located in the U.S. For the nine months ended March 31, 2024, approximately 47% of all receivables related to KidneyIntelX testing revenue related to two customers and the remaining 53% of receivables were due from other third party payors. For the nine months ended March 31, 2023, approximately 73% of all receivables related to Mount Sinai, approximately 15% of all receivables related to Medicare claims and the remaining 12% of receivables were due from other third party payors. The Company performs initial and ongoing credit reviews on customers, which involve consideration of the customers’ financial information, their location, and other factors to assess the customers’ ability to pay and reserved for $0.1 million of receivables as of March 31, 2024.

6


 

Fair value of financial instruments

At March 31, 2024 and June 30, 2023, the Company’s financial instruments included accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities. The carrying amounts of these assets and liabilities approximates fair value due to their short-term nature. The convertible notes are recorded at their estimated fair value.

Fair value option

Under the Fair Value Option Subsections of ASC subtopic 825-10, Financial Instruments – Overall, the Company has the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument-by-instrument basis, with changes in fair value reported in earnings (see Note 5). The Company has elected to measure and record the convertible notes at their estimated fair value.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. As of March 31, 2024 and June 30, 2023, the Company had cash and cash equivalents of $4.7 million and $24.7 million, respectively.

Accounts receivable

Accounts receivable are recorded at the invoice amount and are non-interest bearing. The Company estimates expected credit losses of its accounts receivable by assessing the risk of loss and available relevant information about collectability, including historical credit losses, existing contractual payment terms, actual payment patterns of its customers, individual customer circumstances, and reasonable and supportable forecast of economic conditions expected to exist throughout the contractual life of the receivable. The Company reserved for $0.1 million of receivables as of March 31, 2024. The Company reserved for $0.1 million of receivables as of June 30, 2023.

Property, equipment and other long-lived assets

Property and equipment are recorded at cost. Depreciation is determined using the straight-line method over the estimated useful lives ranging from three to ten years. Expenditures for maintenance and repairs are expensed as incurred while renewals and betterments are capitalized. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in operations. In November 2023, the Company consolidated lab operations which resulted in a $0.3 million impairment of property and equipment at the Company's Utah lab. In February 2024, the Company performed a recoverability assessment and determined the entire $0.1 million right-of-use asset related to the Utah lease to be impaired, and in addition the Company further consolidated lab operations which resulted in a $0.3 million impairment of property and equipment at the Company's Florida lab. The Company recorded a $0.4 million impairment of property, equipment and other long-lived assets for the three months ended March 31, 2024 and a $0.7 million impairment for the nine months ended March 31, 2024. There was no impairment loss on property, equipment and other long-lived assets in the nine months ended March 31, 2023.

Investments

VericiDx plc

The Company accounts for its ownership of VericiDx securities at fair value in accordance with ASC 321, Investments-Equity Securities, with changes in fair value recorded in earnings as the fair value of VericiDx's ordinary shares is readily determinable via the London Stock Exchange. Based on the closing stock price of VericiDx, the fair value of the investment in VericiDx was $1.1 million and $1.5 million at March 31, 2024 and June 30, 2023, respectively.

In March 2024, the Company sold 750,000 ordinary shares of VericiDx for net proceeds of $0.1 million and a realized loss of $0.1 million. The Company did not sell any shares during the three and nine months ended March 31, 2023. During the three months ended March 31, 2024 and 2023, the Company recorded an increase in fair value of $0.04 million and $0.1 million, respectively, in the consolidated statements of operations and comprehensive loss. During the nine months ended March 31, 2024 and 2023, the Company recorded a decrease in fair value of $0.2 million and $1.1 million, respectively, in the consolidated statements of operations and comprehensive loss. The Company owned 3.7% of the ordinary shares of VericiDx at March 31, 2024, and owned 5.8% of ordinary shares of VericiDx at June 30, 2023.

7


 

Impairment assessment

The Company evaluates its investments that are in unrealized loss positions, if any, and equity method investments for other-than-temporary impairment on a quarterly basis (see Note 5). Such evaluation involves a variety of considerations, including assessments of the risks and uncertainties associated with general economic conditions and distinct conditions affecting specific issuers or investees. Factors considered by the Company include (i) the length of time and the extent to which an investment’s fair value has been below its cost; (ii) the financial condition, credit worthiness, and near-term prospects of the issuer; (iii) the length of time to maturity; (iv) future economic conditions and market forecasts; (v) the Company’s intent and ability to retain its investment for a period of time sufficient to allow for recovery of market value; (vi) an assessment of whether it is more likely than not that the Company will be required to sell its investment before recovery of market value; and (vii) whether events or changes in circumstances indicate that the investment’s carrying amount might not be recoverable.

Software development costs

The Company follows the provisions of ASC 985, Software, which requires software development costs for software marketed externally to be expensed as incurred until the establishment of technological feasibility, at which time those costs are capitalized until the software is available for general release and amortized over its estimated useful life of ten years. For the three and nine months ended March 31, 2024 and 2023, there was no capitalization of research and development expenses related to software development to record. Technological feasibility is established upon the completion of a working model that has been validated.

Revenue recognition

Pursuant to ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when a customer obtains control of promised goods or services. The Company records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations it must deliver and which of these performance obligations are distinct. Certain contracts have options for the customer to acquire additional services. The Company evaluates these options to determine if a material right exists. If, after that evaluation, it determines a material right does exist, it assigns value to the material right based upon the renewal option approach. The Company recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied. The Company uses the present right to payment principle and customer acceptance as indicators to determine the transfer of control to the customer occurs at a point in time. Sales tax and other similar taxes are excluded from revenues.

Cost of revenue

Cost of revenue consists of costs directly attributable to the services rendered, including labor, rent, lab consumables, depreciation, amortization and sample collection costs directly related to revenue generating activities.

Research and development expenses

Research and development costs consist primarily of internal and external labor costs incurred in connection with the development of KidneyIntelX as well as expenses related to studies and clinical trials to further the clinical value, performance and utility of KidneyIntelX. Research and development costs are expensed as incurred.

Share-based compensation

The Company measures equity classified share-based awards granted to employees and nonemployees based on the estimated fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is the vesting period of the respective award. The Company accounts for forfeitures as they occur. For share-based awards with service-based vesting conditions, the Company recognizes compensation expense on a straight-line basis over the service period. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend yield. The Company was a

8


 

privately-held organization prior to November 2018 and has been a publicly-traded company for a limited period of time and therefore lacks company-specific historical and implied volatility information for its shares. Therefore, it estimates its expected share price volatility based on the historical volatility of publicly-traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is none based on the fact that the Company has never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.

The Company classifies share-based compensation expense in its consolidated statement of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Income taxes

Income taxes are accounted for under the asset and liability method as required by FASB ASC Topic 740, Income Taxes (ASC 740). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A reduction in the carrying value of the deferred tax assets is required when it is not more likely than not that such deferred tax assets are realizable.

FASB ASC Subtopic 740-10, Accounting for Uncertainty of Income Taxes (ASC 740-10), defines the criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in financial statements prepared in conformity with U.S. GAAP. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the respective tax position. The tax benefits recognized in the financial statements from such a tax position should be measured based on the largest benefit having a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. In accordance with disclosure requirements of ASC 740-10, the Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of income tax expense.

The Company recorded an immaterial provision for income taxes for the three and nine months ended March 31, 2024. The Company did not record a provision for income taxes for the three and nine months ended March 31, 2023, as the Company generated losses for such periods. The Company periodically evaluates the realizability of its deferred tax assets based on all available evidence, both positive and negative. The realization of deferred tax assets is dependent on the Company’s ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. The Company weighed both positive and negative evidence and determined that there is a continued need for a full valuation allowance on its deferred tax assets as of March 31, 2024. Should the Company determine that it would be able to realize its remaining deferred tax assets in the foreseeable future, an adjustment to its remaining deferred tax assets would cause a material increase to income in the period such determination is made.

Comprehensive loss

Comprehensive loss includes net loss as well as other changes in shareholders’ equity that result from transactions and economic events other than those with shareholders. For the periods presented, changes in shareholders’ equity include foreign currency translation as well as changes in fair value of the convertible note due to changes in instrument specific credit risk. The change in instrument specific credit risk was calculated as the change in the risk yield from the convertible debt issuance date to the valuation date. The instrument specific credit risk at issuance date was calibrated such that the fair value of the convertible bond was equal to the issue price as of the issuance date. The risk yield was adjusted to reflect the change in credit spreads between the issuance date and the valuation date.

Net loss per ordinary share

Basic net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during each period. Diluted net loss per ordinary share includes the effect, if any, from the potential exercise or conversion of securities, such as options and convertible debt which would result in the issuance of incremental ordinary shares.

9


 

The dilutive effect of convertible securities is calculated using the if-converted method. Under the if-converted method, interest charges applicable to the convertible debt as well as nondiscretionary adjustments which include any expenses or charges that are determined based on the income (loss) for the period are added back to net income. The convertible debt is assumed to have been converted at the beginning of the period (or at time of issuance, if later). For the three and nine months ended March 31, 2024, under the if-converted method, the add back of nondiscretionary adjustments and inclusion of potentially converted shares would be anti-dilutive.

Emerging growth company

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). Under the JOBS Act, companies have extended transition periods available for complying with new or revised accounting standards. The Company has elected to avail itself of this exemption and, therefore, while the Company is an emerging growth company it will not be subject to new or revised accounting standards at the same time that they become applicable to other public emerging growth companies that have not elected to avail themselves of this exemption.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the previous guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. The Company implemented ASU 2016-13 in the fiscal year beginning July 1, 2023 and evaluated the impact of ASU 2016-13 and it did not have a material impact on the consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity