What changed in Lunai Bioworks Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Lunai Bioworks Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+173 added−153 removedSource: 10-K (2023-10-02) vs 10-K (2023-02-27)
Top changes in Lunai Bioworks Inc.'s 2023 10-K
173 paragraphs added · 153 removed · 113 edited across 5 sections
- Item 7. Management's Discussion & Analysis+79 / −66 · 46 edited
- Item 1A. Risk Factors+64 / −67 · 52 edited
- Item 3. Legal Proceedings+22 / −12 · 11 edited
- Item 2. Properties+2 / −6 · 2 edited
- Item 5. Market for Registrant's Common Equity+6 / −2 · 2 edited
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
52 edited+12 added−15 removed186 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
52 edited+12 added−15 removed186 unchanged
2022 filing
2023 filing
Biggest changeEven if we pursue a transaction, such transaction may not be consistent with our stockholders’ expectations or may not ultimately be favorable for our stockholders, either in the shorter or longer term. 31 Our growth prospects and the future value of our Company are primarily dependent on the progress of our ongoing and planned development programs for our product candidates as well as the outcome of our ongoing business development efforts and pipeline progression, together with the amount of our remaining available cash.
Biggest changeThere can be no assurance that the Transaction will be fully realized or may take longer to realize than expected; the possibility that shareholders of Renovaro may not approve the issuance of new shares of Renovaro common stock in the proposed Transaction or that shareholders of Renovaro may not approve the proposed Transaction; the risk that a condition to closing of the proposed Transaction may not be satisfied, that either party may terminate the Transaction Agreement or that the closing of the proposed Transaction might be delayed or not occur at all. 33 Our growth prospects and the future value of our Company are primarily dependent on the progress of our ongoing and planned development programs for our product candidates as well as the outcome of our ongoing business development efforts and pipeline progression, together with the amount of our remaining available cash.
Techniques in gene, cell and immunotherapy are subject to rapid technological change and development and are significantly affected by existing rival products and medical procedures, new product introductions and the market activities of other participants. With additional resources, our competitors may be able to respond to the rapid and significant technological changes faster than we can.
Techniques in gene, cell and immunotherapy are subject to rapid technological change and development and are significantly affected by existing rival products and medical procedures, new product introductions and the market activities of other participants. With additional resources, our competitors may be able to respond to rapid and significant technological changes faster than we can.
These include terms that: ● permit our Board of Directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences, and privileges as they may designate; ● provide that all vacancies on our Board of Directors, including as a result of newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; ● provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice; and ● not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of Common Stock entitled to vote in any election of directors to elect all of the directors standing for election.
These include terms that: ● permit our Board of Directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences, and privileges as they may designate; ● provide that all vacancies on our Board of Directors, including as a result of newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; ● provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice; and ● do not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of Common Stock entitled to vote in any election of directors to elect all of the directors standing for election.
Our future capital requirements depend on many factors, including: ● the costs and payments associated with license agreements for our potential products and technologies; ● the costs of conducting pre-clinical and clinical studies and the costs of manufacturing our product candidates ● the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates, if clinical studies are successful, including any costs from post-market requirements; 17 ● the cost of commercialization activities for our product candidates, if any of these product candidates is approved for sale, including marketing, sales and distribution costs; ● our ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements; ● the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and ● the timing, receipt and amount of sales of, or royalties on, our future products, if any.
Our future capital requirements depend on many factors, including: ● the costs and payments associated with license agreements for our potential products and technologies; ● the costs of conducting pre-clinical and clinical studies and the costs of manufacturing our product candidates ● the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates, if clinical studies are successful, including any costs from post-market requirements; ● the cost of commercialization activities for our product candidates, if any of these product candidates is approved for sale, including marketing, sales and distribution costs; ● our ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements; ● the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and ● the timing, receipt and amount of sales of, or royalties on, our future products, if any.
Additionally, if any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects or safety concerns caused by these product candidates, a number of potentially significant negative consequences could result, including: ● regulatory authorities may withdraw, suspend, or limit approvals of such product and require us to take them off the market; ● regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies; ● regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or that we implement a REMS or REMS-like plan to ensure that the benefits of the product outweigh its risks; ● we may be required to change the way a product is distributed or administered, conduct additional clinical trials, or change the labeling of a product; ● we may be required to conduct additional post-marketing studies or surveillance; ● we may be subject to limitations on how we may promote the product; ● sales of the product may decrease significantly; ● we may be subject to regulatory investigations, ● government enforcement actions, litigation, or product liability claims; and ● our products may become less competitive, or our reputation may suffer. 32 Any of these events could prevent us or any collaborators from achieving or maintaining market acceptance of our product candidates or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating revenue from the sale of our product candidates.
Additionally, if any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects or safety concerns caused by these product candidates, a number of potentially significant negative consequences could result, including: ● regulatory authorities may withdraw, suspend, or limit approvals of such products and require us to take them off the market; ● regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies; ● regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or that we implement a REMS or REMS-like plan to ensure that the benefits of the product outweigh its risks; ● we may be required to change the way a product is distributed or administered, conduct additional clinical trials, or change the labeling of a product; ● we may be required to conduct additional post-marketing studies or surveillance; ● we may be subject to limitations on how we may promote the product; ● sales of the product may decrease significantly; ● we may be subject to regulatory investigations, ● we may be subject to government enforcement actions, litigation, or product liability claims; and ● our products may become less competitive, or our reputation may suffer. 34 Any of these events could prevent us or any collaborators from achieving or maintaining market acceptance of our product candidates or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating revenue from the sale of our product candidates.
The market price of our Common Stock may be influenced by many factors, including the following: ● negative publicity; ● our compliance with Nasdaq rules and regulations; ● the success of competitive products or technologies; ● regulatory actions with respect to our product candidates or products or our competitors’ product candidates or products; 26 ● actual or anticipated changes in our growth rate relative to our competitors; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments; ● results of clinical studies of our product candidates or those of our competitors; ● regulatory or legal developments in the U.S. and other countries; ● developments or disputes concerning patent applications, issued patents or other proprietary rights; ● the recruitment or departure of key personnel; ● the level of expenses related to any of our product candidates or clinical development programs; ● the results of our efforts to in-license or acquire additional product candidates or products; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● variations in our financial results or those of companies that are perceived to be similar to us; ● fluctuations in the valuation of companies perceived by investors to be comparable to us; ● inconsistent trading volume levels of our shares; ● announcement or expectation of additional financing efforts; ● sales of our Common Stock by us, our insiders or our other stockholders; ● market conditions in the pharmaceutical and biotechnology sectors; ● general economic, industry and market conditions; and ● the other risks described in this “Risk Factors” section.
The market price of our Common Stock may be influenced by many factors, including the following: ● negative publicity; ● our compliance with Nasdaq rules and regulations; ● the success of competitive products or technologies; ● regulatory actions with respect to our product candidates or products or our competitors’ product candidates or products; 28 ● actual or anticipated changes in our growth rate relative to our competitors; ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments; ● results of clinical studies of our product candidates or those of our competitors; ● regulatory or legal developments in the U.S. and other countries; ● developments or disputes concerning patent applications, issued patents or other proprietary rights; ● the recruitment or departure of key personnel; ● the level of expenses related to any of our product candidates or clinical development programs; ● the results of our efforts to in-license or acquire additional product candidates or products; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● variations in our financial results or those of companies that are perceived to be similar to us; ● fluctuations in the valuation of companies perceived by investors to be comparable to us; ● inconsistent trading volume levels of our shares; ● announcement or expectation of additional financing efforts; ● sales of our Common Stock by us, our insiders or our other stockholders; ● market conditions in the pharmaceutical and biotechnology sectors; ● general economic, industry and market conditions; and ● the other risks described in this “Risk Factors” section.
We cannot predict with any certainty if or when we might submit any such application for regulatory approval for our product candidates or whether any such application will be approved by the applicable regulatory authority in our target markets. Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements.
We cannot predict with any certainty if or when we might submit any such application for regulatory approval of our product candidates or whether any such application will be approved by the applicable regulatory authority in our target markets. Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements.
Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall. We expect that significant additional capital will be needed in the future to continue our planned operations.
Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall. 30 We expect that significant additional capital will be needed in the future to continue our planned operations.
Any term of our Certificate of Incorporation or Bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock. 29 Risks Related To Our Business Operations and Managing Growth If our operations require a full time Chief Medical Officer (“CMO”), and we are not able to hire a full time CMO to manage our clinical operations or if our current Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Operating Officer (“COO”) or key scientific personnel cease to serve, our business will be harmed.
Any term of our Certificate of Incorporation or Bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock. 31 Risks Related To Our Business Operations and Managing Growth If our operations require a full time Chief Medical Officer (“CMO”), and we are not able to hire a full time CMO to manage our clinical operations or if our current Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Operating Officer (“COO”) or key scientific personnel cease to serve, our business will be harmed.
We also may be subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous materials. 30 If we, our service providers, or any third parties engaged in development of our product candidates fail to comply with applicable federal, state, local or foreign laws or regulations, we could be subject to enforcement actions, which could adversely affect our ability to develop, market and sell our product candidates successfully and could harm our reputation and lead to reduced acceptance of our product candidates.
We also may be subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous materials. 32 If we, our service providers, or any third parties engaged in development of our product candidates fail to comply with applicable federal, state, local or foreign laws or regulations, we could be subject to enforcement actions, which could adversely affect our ability to develop, market and sell our product candidates successfully and could harm our reputation and lead to reduced acceptance of our product candidates.
Our business and reputation have been negatively affected by the recent negative publicity resulting from the arrest and indictment of Serhat Gümrükcü, a co-founder of the Company and an inventor of some of the Company’s intellectual property.
Our business and reputation have been negatively affected by negative publicity resulting from the arrest and indictment of Serhat Gümrükcü, a co-founder of the Company and an inventor of some of the Company’s intellectual property.
Our reliance on third parties, such as university laboratories, contract manufacturing organizations and contract or clinical research organizations, may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our agreements with them. 20 In the course of the development of our pipeline, we have and expect to continue to engage university laboratories, non-profit organizations, independent contractors, other biotechnology companies or contract or clinical manufacturing organizations to conduct and manage research and development, pre-clinical and clinical studies and to manufacture materials for us to be used in pre-clinical and clinical testing.
Our reliance on third parties, such as university laboratories, contract manufacturing organizations and contract or clinical research organizations, may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our agreements with them. 22 In the course of the development of our pipeline, we have and expect to continue to engage university laboratories, non-profit organizations, independent contractors, other biotechnology companies or clinical manufacturing organizations to conduct and manage research and development, pre-clinical and clinical studies and to manufacture materials for us to be used in pre-clinical and clinical testing.
In addition, orphan drug exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition or if another drug with the same active moiety is determined to be safer, more effective, or represents a major contribution to patient care. 33 1B.
In addition, orphan drug exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition or if another drug with the same active moiety is determined to be safer, more effective, or represents a major contribution to patient care. 35 1B.
There is no guarantee that we will be able to obtain a license from such a third party on commercially reasonable terms, or at all. 24 In addition, the United States Patent and Trademark Office (USPTO) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.
There is no guarantee that we will be able to obtain a license from such a third party on commercially reasonable terms, or at all. 26 In addition, the United States Patent and Trademark Office (USPTO) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.
Such further inquiries could result in more formal investigations or allegations, which could adversely impact our business, financial condition, and operating results. 18 Litigation, regulatory proceedings, such as the investigations described above, as well as the related class action claims and lawsuits, and securities matters that we are currently facing or could face, can be protracted and expensive, and have results that are difficult to predict.
Such further inquiries could result in more formal investigations or allegations, which could adversely impact our business, financial condition, and operating results. 20 Litigation, regulatory proceedings, such as the investigations described above, as well as the related class action claims and lawsuits, and securities matters that we are currently facing or could face, can be protracted and expensive, and have results that are difficult to predict.
Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the effectiveness of our patient recruitment efforts, delays in enrollment due to travel or quarantine policies, or other factors, related to COVID-19, the existing body of safety and efficacy data with respect to the study candidate, the perceived risks and benefits of gene therapy approaches for the treatment of certain diseases, the number and nature of competing existing treatments for our target indications, the number and nature of ongoing trials for other product candidates in development for our target indications, perceived risk of the delivery procedure, patients with pre-existing conditions that preclude their participation in any trial, the proximity of patients to clinical sites and the eligibility criteria for the study.
Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the effectiveness of our patient recruitment efforts, delays in enrollment due to travel or quarantine policies, the existing body of safety and efficacy data with respect to the study candidate, the perceived risks and benefits of gene therapy approaches for the treatment of certain diseases, the number and nature of competing existing treatments for our target indications, the number and nature of ongoing trials for other product candidates in development for our target indications, perceived risk of the delivery procedure, patients with pre-existing conditions that preclude their participation in any trial, the proximity of patients to clinical sites and the eligibility criteria for the study.
Currently, several of our product candidates, including DC-11, our genetically-modified allogeneic dendritic therapeutic vaccination platform for solid tumors, ENOB-HV-12, our therapeutic HIV vaccine, and ENOB-HV-01, our autologous HIV curative treatment are all currently in various stages of pre-clinical development with ongoing and planned pre-clinical studies in conjunction with research institutions and third parties.
Currently, several of our product candidates, including RENB-DC-11, our genetically-modified allogeneic dendritic therapeutic vaccination platform for solid tumors, RENB-HV-12, our therapeutic HIV vaccine, and RENB-HV-01, our autologous HIV curative treatment are all currently in various stages of pre-clinical development with ongoing and planned pre-clinical studies in conjunction with research institutions and third parties.
If we are unable to rebuild the trust of our collaborators, research institutions and investors, and if further negative publicity continues, we could experience a substantial negative impact on our business. We have experienced claims and litigation as a consequence of these matters, including shareholder class actions in connection with a decline in our stock price and litigation with Mr.
If we are unable to rebuild the trust of our collaborators, research institutions and investors, and if further negative publicity continues, we could experience a substantial negative impact on our business. We have experienced claims and litigation as a consequence of these matters, including stockholder class actions in connection with a decline in our stock price and litigation with Mr.
An adverse outcome could subject us to significant liabilities to third parties and force us to curtail or cease the research and development of our technology. 25 Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates.
An adverse outcome could subject us to significant liabilities to third parties and force us to curtail or cease the research and development of our technology. 27 Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates.
Additionally, we may in the future require a Chief Medical Officer, and if we are unable to hire a CMO, our business operations and the continued development of our product candidates may suffer. In addition, we are dependent on our continued ability to attract, retain and motivate highly qualified additional management and scientific personnel.
Additionally, we may in the future require a Chief Medical Officer, and if we are unable to hire a full-time CMO, our business operations and the continued development of our product candidates may suffer. In addition, we are dependent on our continued ability to attract, retain and motivate highly qualified additional management and scientific personnel.
In addition, we expect to rely on clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to control their actual performance. 22 Risks Related to Our Intellectual Property We have licensed a significant portion of our intellectual property from our licensors.
In addition, we expect to rely on clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to control their actual performance. 24 Risks Related to Our Intellectual Property We have licensed a portion of our intellectual property from our licensors.
In addition, two shareholders filed shareholder derivative action lawsuits purportedly on behalf of the Company against certain of our executive officers and the members of our Board of Directors alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also setting out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement.
In addition, two stockholders filed stockholder derivative action lawsuits purportedly on behalf of the Company against certain of our executive officers and the members of our Board of Directors alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and also setting out claims for breach of fiduciary duty, contribution and indemnification, aiding and abetting, and gross mismanagement.
The loss of the services of any of the foregoing, or of any of our key employees or scientific advisory board members could impede the achievement of our research, development, regulatory approvals, and commercialization objectives.
The loss of the services of any of the foregoing, or of any of our key employees or scientific advisory board members could impede the achievement of our research, development, regulatory approval, and commercialization objectives.
The arrest and indictment of Serhat Gümrükcü, has, and could in the future, subject us to regulatory proceedings and litigation by governance agencies and private litigants brought against us, that regardless of their merits, could harm our reputation, divert management’s attention from our operations and result in substantial legal fees and other costs.
The arrest and indictment of Serhat Gümrükcü, a co-founder of the Company, has, and could in the future, subject us to regulatory proceedings and litigation by governance agencies and private litigants brought against us, that regardless of their merits, could harm our reputation, divert management’s attention from our operations and result in substantial legal fees and other costs.
The recent negative publicity has had and may continue to have a negative impact on our business and may have a long-term effect on our relationships with our customers, partners and collaborators.
Negative publicity has had and may continue to have a negative impact on our business and may have a long-term effect on our relationships with our customers, partners and collaborators.
A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in clinical studies, even after seeing promising results in earlier preclinical studies or clinical studies. 19 Regulatory agencies evaluate these data carefully before they will approve clinical testing in humans.
A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in clinical studies, even after seeing promising results in earlier preclinical or clinical studies. 21 Regulatory agencies evaluate non-clinical data carefully before they will approve clinical testing in humans.
Although no treatment-related serious adverse events (“SAEs”) have been observed in any clinical trials of any of our product candidates to date, if treatment-related SAEs or other undesirable side effects or safety concerns, or unexpected characteristics attributable to our product candidates are observed in any future clinical trials, they may adversely affect or delay our clinical development and commercialization of the effected product candidate, and the occurrence of these events could have a material adverse effect on our business and financial prospects.
If treatment-related serious adverse events (“SAEs”) or other undesirable side effects or safety concerns, or unexpected characteristics attributable to our product candidates are observed in any future clinical trials, they may adversely affect or delay our clinical development and commercialization of the effected product candidate, and the occurrence of these events could have a material adverse effect on our business and financial prospects.
As a result, we have not been profitable and have incurred significant operating losses in every reporting period since our inception. For the years ended June 30, 2022 and 2021, respectively, we reported a net loss of $113.4 million and $26.7 million.
As a result, we have not been profitable and have incurred significant operating losses in every reporting period since our inception. For the years ended June 30, 2023 and 2022, respectively, we reported a net loss of $39.7 million and $113.4 million.
We are a pre-clinical-stage biotechnology company. Investment in biotechnology related to genetically modified cells is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to prove effective, gain regulatory approval or become commercially viable.
Investment in biotechnology related to genetically modified cells is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to prove effective, gain regulatory approval or become commercially viable.
We had an accumulated deficit of $204.3 million and $90.9 million as of June 30, 2022 and 2021, respectively. We do not expect to generate revenues for the foreseeable future. We expect to continue to incur significant expenses and operating losses for the foreseeable future.
We had an accumulated deficit of $244.0 million and $204.3 million as of June 30, 2023 and 2022, respectively. We do not expect to generate revenues for the foreseeable future. We expect to continue to incur significant expenses and operating losses for the foreseeable future.
From time to time, we may be subject to legal proceedings, regulatory investigations or disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
If we fail to become profitable, we may suspend or cease operations. From time to time, we may be subject to legal proceedings, regulatory investigations or disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
If we are not able to retain our management and to attract, on acceptable terms, additional qualified personnel necessary for the continued development of our business, we might not be able to sustain our operations or grow. We have limited corporate infrastructure and may experience difficulties in managing growth. As of June 30, 2022, we had 22 full time employees.
If we are not able to retain our management and to attract, on acceptable terms, additional qualified personnel necessary for the continued development of our business, we might not be able to sustain our operations or grow. We have limited corporate infrastructure and may experience difficulties in managing growth.
Our consolidated financial statements as of June 30, 2022 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of June 30, 2022, we had cash and cash equivalents of $9.2 million and an accumulated deficit of $204.3 million.
Our consolidated financial statements as of June 30, 2023 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of June 30, 2023, we had cash and cash equivalents of $1.9 million and an accumulated deficit of $244.0 million.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain for our stockholders for the foreseeable future.
We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain for our stockholders for the foreseeable future.
In addition, if we are unable to assure a sufficient quantity of the drug for patients with rare diseases or conditions, we may lose any FDA Orphan Drug designation to which the product otherwise would be entitled.
In addition, if we are unable to assure a sufficient quantity of the drug for patients with rare diseases or conditions, we may lose any FDA Orphan Drug designation to which the product otherwise would be entitled. We may, in the future, choose to seek FDA Orphan Drug designation for one or more of our current or future product candidates.
Item 1A. Risk Factors RISK FACTORS Investing in our common stock involves a high degree of risk.
Investing in our Common Stock involves a high degree of risk.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more clinical research or development programs, which would adversely impact our potential revenues, future results of operations and financial condition.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more clinical research or development programs, which would adversely impact our potential revenues, future results of operations and financial condition. 19 We are a pre-clinical biotechnology company and may never be able to successfully develop marketable products or generate any revenue.
Any of these occurrences may harm our business, financial condition, and results of operations. Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.
Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.
Investors should carefully consider all of the risk factors and uncertainties described below, in addition to the other information contained in this Annual Report on Form 10-K, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before investing in our common stock.
Investors should carefully consider all of the risk factors and uncertainties described below, in addition to the other information contained in this Annual Report on Form 10-K, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before investing in our Common Stock. 17 The risks described below may not be the only ones relating to our Company and additional risks that we currently believe are immaterial may also affect us.
In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years.
Even if we obtain Orphan Drug designation from the FDA for a product candidate, there are limitations to the exclusivity afforded by such designation. In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. 23 If we do not obtain required intellectual property licenses or rights, we could encounter delays in our product development efforts while we attempt to design around other patents or even be prohibited from developing, manufacturing or selling products requiring these rights or licenses.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
As our development and commercialization plans and strategies develop, we may need additional managerial, scientific, operational, financial, and other resources. Our management may need to divert a disproportionate amount of its attention away from our day-to-day operations and devote a substantial amount of time to managing these growth activities.
Our management may need to divert a disproportionate amount of its attention away from our day-to-day operations and devote a substantial amount of time to managing these growth activities.
Our stock price has fluctuated in the past and can be expected to be volatile in the future. From July 1, 2021 through June 30, 2022, the reported sale price of our Common Stock has fluctuated between $12.55 and $1.93 per share.
Our stock price has fluctuated in the past and can be expected to be volatile in the future. From September 29, 2022 through September 29, 2023, the reported sale price of our Common Stock has fluctuated between $4.47 and $0.40 per share.
If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected.
There is also a risk that legal disputes may arise as to the rights to technology developed in collaboration with other parties, all with attendant risk, distraction, expense, and lack of predictability. 25 If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected.
If we fail to become profitable, we may suspend or cease operations. We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forgo future development and other opportunities, or even terminate our operations. 18 We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
In addition, any delays in our clinical trials could increase our costs, cause a drop in our stock price, slow down the approval process and jeopardize our ability to commence product sales and generate revenues. Further, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in commencing or completing clinical trials.
In addition, any delays in our clinical trials could increase our costs, cause a drop in our stock price, slow down the approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition, and results of operations.
In these circumstances, the market price of our common stock could decline, and investors may lose all or a part of their investment. Risks Related to Our Financial Results and Capital Needs We have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing losses for the foreseeable future.
Risks Related to Our Financial Results and Capital Needs We have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing losses for the foreseeable future. We are a pre-clinical-stage biotechnology company.
There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for our stockholders to resell their stock. We have incurred and will continue to incur increased costs as a result of being a public company and our management expects to devote substantial time to public company compliance programs.
These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock. 29 We have incurred and will continue to incur increased costs as a result of being a public company and our management expects to devote substantial time to public company compliance programs.
The rules and regulations applicable to public companies have substantially increased our legal and financial compliance costs and make some activities more time-consuming and costly.
The rules and regulations applicable to public companies have substantially increased our legal and financial compliance costs and make some activities more time-consuming and costly. To the extent these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.
To the extent these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. 28 Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the sole source of potential gain for our stockholders.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the sole source of potential gain for our stockholders. We have never declared or paid cash dividends on our capital stock.
The risks described below may not be the only ones relating to our Company and additional risks that we currently believe are immaterial may also affect us. If any of these risks, including those described below, materialize, our business, competitive position, reputation, financial condition, results of operations, cash flows and future prospects could be seriously harmed.
If any of these risks, including those described below, materialize, our business, competitive position, reputation, financial condition, results of operations, cash flows and future prospects could be seriously harmed. In these circumstances, the market price of our Common Stock could decline, and investors may lose all or a part of their investment.
If global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business. 21 Our gene therapy product candidates are still in development and will require extensive clinical testing before we are prepared to submit an application for marketing approval to regulatory authorities.
In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. 23 Our gene therapy product candidates are still in development and will require extensive clinical testing before we are prepared to submit an application for marketing approval to regulatory authorities.
Removed
If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forego future development and other opportunities, or even terminate our operations. 16 We are a pre-clinical biotechnology company and may never be able to successfully develop marketable products or generate any revenue.
Added
Item 1A. Risk Factors RISK FACTORS Risk Factor Summary The following is a summary of the risks and uncertainties that could cause our business, financial condition or operating results to be harmed.
Removed
In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would harm our business.
Added
We encourage you to carefully review the full risk factors contained in this report in their entirety for additional information regarding these risks and uncertainties. · We have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing losses for the foreseeable future. · There is substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing. · We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts. · Raising additional capital may cause dilution to our existing stockholders or restrict our operations. · We are a pre-clinical biotechnology company and may never be able to successfully develop marketable products or generate any revenue.
Removed
For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
Added
We have a very limited relevant operating history upon which an evaluation of our performance and prospects can be made. There is no assurance that our future operations will result in profits.
Removed
If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could harm our business. The COVID-19 pandemic has also resulted in the FDA imposing preventive measures, including postponements of non-U.S. manufacturing and product inspections.
Added
If we cannot generate sufficient revenues, we may suspend or cease operations. · From time to time, we may be subject to legal proceedings, regulatory investigations or disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results. · Negative publicity has had and may continue to have a negative impact on our business and may have a long-term effect on our relationships with our customers, partners and collaborators. · The Transaction with Gedi Cube may not be completed and failure to complete the Transaction could negatively impact the price of our Common Stock and have other adverse effects. · We are highly dependent on the services of third parties to conduct research and development of our pipeline, and our failure to maintain the services of such third parties could harm our business. · The results of pre-clinical studies or earlier clinical studies are not necessarily predictive of future results, and if we fail to demonstrate efficacy in our pre-clinical studies and/or clinical trials in the future our future business prospects, financial condition and operating results will be materially adversely affected. · Our reliance on third parties, such as university laboratories, contract manufacturing organizations and contract or clinical research organizations, may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our agreements with them. 16 · We have limited experience in drug development and may not be able to successfully develop any drugs, which would cause us to cease operations. · We have licensed a portion of our intellectual property from our licensors.
Removed
There is also a risk that legal disputes may arise as to the rights to technology developed in collaboration with other parties, all with attendant risk, distraction, expense, and lack of predictability.
Added
If we breach any of our license agreements with these licensors, or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business. · If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected · If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be negatively impacted and our business would be harmed. · Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts. · Our stock price has been and will likely continue to be volatile and may decline regardless of our operating performance. · Sales of a substantial number of shares of our Common Stock in the public market could cause our stock price to fall. · Trading of our Common Stock may be volatile and sporadic, which could depress the market price of our Common Stock and make it difficult for our stockholders to resell their shares. · Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall. · We have limited corporate infrastructure and may experience difficulties in managing growth. · We rely upon information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively. · If serious adverse events or other undesirable side effects or safety concerns attributable to our product candidates occur, they may adversely affect or delay our clinical development and commercialization of some or all of our product candidates. · We have no manufacturing experience, and the failure to comply with all applicable manufacturing regulations and requirements could have a materially adverse effect on our business.
Removed
These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock. 27 We previously received notices of failure to satisfy a continued listing rule from Nasdaq, and we may in the future fail to comply with applicable Nasdaq rules.
Added
Risks Related to Transaction with Gedi Cube The Transaction with Gedi Cube may not be completed and failure to complete the transaction could negatively impact the price of our Common Stock and have other adverse effects.
Removed
On each of October 17, 2022, November 23, 2022, and February 16, 2023, we received a notice, or the Notices, from the Listing Qualifications Department of Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5250(c)(1), or the “Rule”, because we did not timely file our Form 10-K for the period ended June 30, 2022 and our Form 10-Q for the period ended September 30, 2022 and December 31, 2022 with the SEC.
Added
On September 28, 2023, the Company signed a Purchase Agreement to acquire Gedi Cube, a cutting-edge health AI company, in which the Company will acquire all the issued and outstanding stock of Gedi Cube.
Removed
The Rule requires listed companies to timely file all required periodic financial reports with the SEC. Today we filed our Form 10-K for the period ended June 30, 2022, but have not yet filed our Form 10-Q for the periods ended September 30, 2022 and December 31, 2022, and therefore we have not regained compliance with the Rule.
Added
Completion of the transaction is subject to, among other matters, satisfaction of the closing conditions provided for in the Purchase Agreement and approval of the transaction by the Company’s stockholders. There can be no assurance that the Transaction will be consummated on the terms or timeframe currently contemplated, or at all.
Removed
We were unable to file the Annual Report on Form 10-K for the period ended June 30, 2022 and the Quarterly Report on Form 10-Q for the periods ended September 30, 2022 and December 31, 2022 by their initial deadlines, due to the reasons described in the Notifications of Late Filing on Form 12b-25, filed with the SEC on September 29, 2022 and November 15, 2022.
Added
If the Transaction is not completed for any reason, the ongoing business of Renovaro may be materially adversely affected and, without realizing any of the benefits of having completed the Transaction, we would be subject to a number of risks, including the following: ● we may experience negative reactions from the financial markets, including negative impacts on the price of our Common Stock; ● we may experience negative reactions from our customers, suppliers, vendors, landlords, commercial collaborators and other business relationships; ● we will still be required to pay certain significant costs relating to the transaction, such as legal, accounting, investor relations and printing fees; ● the Purchase Agreement places certain restrictions on the conduct of the business pursuant to the terms of the Purchase Agreement, which may delay or prevent us from undertaking business opportunities that, absent the Purchase Agreement, may have been pursued; ● matters relating to the transaction (including integration planning) require substantial commitments of time and resources by our management, which may have resulted in the distraction of our management from ongoing business operations and pursuing other opportunities that could have been beneficial to us.
Removed
While we were able to file the Annual Report on Form 10-K for the period ended June 30, 2022 within the extension period provided pursuant to SEC rules, we have not yet filed the Form 10-Q for the periods ended September 30, 2022 and December 31, 2022, and there can be no assurance that we will be able to remain compliant with the Rule or with other Nasdaq listing requirements in the future.
Added
If we do not obtain required intellectual property licenses or rights, we could encounter delays in our product development efforts while we attempt to design around other patents or even be prohibited from developing, manufacturing or selling products requiring these rights or licenses.
Removed
If we are unable to regain compliance with the Rule or with any of the other continued listing requirements, Nasdaq may take steps to delist our securities, which could have adverse consequences, including a limited availability of market quotations for our securities, reduced liquidity for our securities, a limited amount of news and analyst coverage and a decreased ability to issue additional securities or obtain additional financing in the future.
Added
As of June 30, 2023, we had 12 full time employees and we rely on third-party contractors for the provision of professional, scientific, regulatory, and other services. As our development and commercialization plans and strategies develop, we may need additional managerial, scientific, operational, financial, and other resources.
Removed
Trading of our Common Stock may be volatile and sporadic, which could depress the market price of our Common Stock and make it difficult for our stockholders to resell their shares. There is currently a limited market for our Common Stock and the volume of our Common Stock traded on any day may vary significantly from one period to another.
Added
Even if we pursue a transaction, such transaction may not be consistent with our stockholders’ expectations or may not ultimately be favorable for our stockholders, either in the shorter or longer term.
Removed
Trading in our stock is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The availability of buyers and sellers represented by this volatility could lead to a market price for our Common Stock that is unrelated to operating performance.
Removed
In July 2022, the Company began to streamline the organization to focus around two of its therapies (oncology and HIV therapeutic vaccine). The Company has tailored its workforce to focus on these therapies. As of February 2023, we have 11 full-time employees, and we rely on third-party contractors for the provision of professional, scientific, regulatory, and other services.
Removed
We may, in the future, choose to seek FDA Orphan Drug designation for one or more of our current or future CNS product candidates. Even if we obtain Orphan Drug designation from the FDA for a product candidate, there are limitations to the exclusivity afforded by such designation.
Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
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2022 filing
2023 filing
Biggest changeThe lease was terminated early without penalties or additional costs as of September 30, 2022. 1927 Paseo Rancho Castilla, Los Angeles, CA 90032 Headquarters As of August 26, 2022, the Company entered into a short-term lease with option to extend at the new premier incubator, LA BioSpace on the California State University, Los Angeles campus located at 1927 Paseo Rancho Castilla, Los Angeles, CA 90032. 2080 Century Park East, Suite 906 Los Angeles, CA 90067 The Company entered into a Lease Agreement on June 19, 2018 for our corporate headquarters located at Century City Medical Plaza.
Biggest changeItem 2. Properties The Company currently leases the following properties: Location Use Terms 2080 Century Park East, Suite 906 Los Angeles, CA 90067 Headquarters The Company entered into a Lease Agreement on June 19, 2018 for our corporate headquarters located at Century City Medical Plaza. We have a ten-year lease that was for approximately 2,453 square feet at this location.
We have a ten-year lease that was for approximately 2,453 square feet at this location. In February 2019, we extended our corporate headquarters to encompass the adjoining suite for approximately 1,101 square feet, bringing the total workspace to 3,554 square feet.
In February 2019, we extended our corporate headquarters to encompass the adjoining suite for approximately 1,101 square feet, bringing the total workspace to 3,554 square feet.
Removed
Item 2. Properties The Company currently leases the following properties: Location Use Terms 5901 W. Olympic Blvd, Suite 419 Los Angeles, CA 90036 Physical office space On November 13, 2017, the Company entered into a Lease Agreement for a term of five years and two months from November 1, 2017. The Leased Premises consist of approximately 2,325 rentable square feet.
Removed
The base rent for such leased premises increases by 3% each year over the term, and ranges from approximately $8,719 per month for the first year to $10,107 per month for the two months of the sixth year.
Removed
The Company was entitled to $70,800 in tenant improvement allowance in the form of free rent applied over 10 months in equal installments from January 2018.
Removed
On June 25, 2022, the Company subleased the 3,554 square feet for a period of 3.5 years with an option to renew for the remaining term of the lease that ends as of June 19, 2028. The base rent is $17,770 per month and will increase by 3% each year over the term of the sub-lease.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2022 filing
2023 filing
Biggest changeOn December 28, 2022, the Company received a demand letter on behalf of Weird Science LLC (“Weird Science”), William Anderson 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 alleging that the Company breached the February 16, 2018 Investor Rights Agreement between the Company, Weird Science, and RS Group ApS.
Biggest changeOn 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.
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.
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 allegations in the Complaint relate to an earlier action filed by the Company and Enochian 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.
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.
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. The defendants have not yet responded to the complaint.
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.
Item 3. Legal Proceedings Securities Class Action Litigation . On July 26, 2022 and July 28, 2022, securities class action complaints were filed by purported stockholders of ours in the United States District Court for the Central District of California against us and certain of our current and former officers and directors.
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 ours in the United States District Court for the Central District of California against us and certain of our current and former officers and directors.
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. The defendants have not yet responded to either complaint. State Derivative Litigation .
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.
The Company denies these allegations and intends to vigorously defend against this claim. On March 1, 2021, former Enochian BioSciences 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, Enochian BioSciences Denmark ApS, and certain directors and officers. In the Complaint, Mr.
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.
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.” The defendants have not yet answered the allegations set forth in the Company’s Complaint.
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 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, G Tech Bio LLC, SG & AW Holdings LLC, and Seraph Research Institute.
The Company intends to contest this matter but expresses no opinion as to the likelihood of a favorable outcome. 36 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, SG&AW Holdings LLC, and SRI.
The defendants have not yet responded to the complaints. 34 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.
The Company intends to contest this matter 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 November 29, 2022, the Company filed a motion for summary judgment with respect to the sole remaining claim of malicious prosecution. The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
The Company denies the allegations set forth in the Complaint and will continue to vigorously defend against the remaining claim.
Removed
Specifically, the demand letter alleges that the Company “breached its obligations under the Investor Rights Agreement to provide the requisite thirty days’ notice” to Holders of Registrable Securities in connection with SEC Form S-3 filings on July 13, 2020 and February 11, 2022 and demands over $64 million in damages.
Added
Item 3. Legal Proceedings Securities Class Action Litigation .
Added
On November 22, 2022, the Manici Action was voluntarily dismissed without prejudice, but the Chow action remains pending. The defendants did not respond to the complaint in the Manici action and have not yet responded to the complaint in the Chow action.
Added
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.
Added
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 Court also set a status conference for November 6, 2023. The defendants have not yet responded to the complaint.
Added
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. We will continue to pursue our claims against these defendants.
Added
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.
Added
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”).
Added
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.
Added
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 denies Plaintiffs’ allegations and intends to vigorously defend against the claim.
Added
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 a various issues identified in the Demand.
Added
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.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+4 added−0 removed2 unchanged
2022 filing
2023 filing
Biggest changeThe actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. Recent Sales of Unregistered Securities None. Company Purchases of Equity Securities None.
Biggest changeThe actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders of our Common Stock Our Common Stock trades on the Nasdaq Capital Market under the symbol “ENOB”. As of February 27, 2023, the Company had 55,705,521 shares of Common Stock issued and outstanding and approximately 190 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders of our Common Stock Our Common Stock trades on the Nasdaq Capital Market under the symbol “RENB”. As of September 29, 2023, the Company had 65,698,144 shares of Common Stock issued and outstanding and approximately 194 stockholders of record.
Added
Recent Sales of Unregistered Securities On June 20, 2023, the Company entered into a purchase agreement (the “ Purchase Agreement ”) with Lincoln Park Capital Fund, LLC (“ Lincoln Park ”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park up to Twenty Million Dollars ($20,000,000) of shares of its Common Stock over the 36-month term of the Purchase Agreement.
Added
Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement (the “ Registration Rights Agreement ”).
Added
On June 20, 2023, we issued 696,021 shares of Common Stock (the “Commitment Shares”) to Lincoln Park as a fee for its commitment to purchase shares of our Common Stock under the Purchase Agreement.
Added
The issuance and sale of the Commitment Shares was made in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder. No other shares were issued in the fourth quarter that were not previously included in a Current Report on Form 8-K. Company Purchases of Equity Securities None.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
46 edited+33 added−20 removed36 unchanged
2022 filing
2023 filing
Biggest changeFor the Years Ended June 30, Increase/(Decrease) 2022 2021 $ % Operating Expenses General and administrative $ 14,329,801 $ 7,557,990 6,771,811 90 % Research and development 8,372,800 15,720,262 (7,347,461 ) (47 )% Indefinite life intangible assets impairment charge 93,253,000 93,253,000 100 % Depreciation and amortization 123,590 123,535 55 0 % Total Operating Expenses 116,079,191 23,401,787 92,677,404 396 % LOSS FROM OPERATIONS (116,079,191 ) (23,401,787 ) (92,677,404 ) (396 )% Other Income (Expenses) Change in fair value of contingent consideration 2,896,627 (3,048,033 ) 5,944,660 (195 )% Interest expense (372,844 ) (379,608 ) 6,764 (2 )% Gain (loss) on currency transactions 9 (32,634 ) 32,643 (100 )% Interest and other income 122,041 13,179 108,862 826 % Total Other Income (Expenses) 2,645,833 (3,447,096 ) 6,092,929 (177 )% Loss Before Income Taxes (113,433,358 ) (26,848,883 ) (86,584,475 ) 322 % Income Tax (Expense) Benefit (34 ) 125,276 (125,310 ) (100 )% NET LOSS $ (113,433,392 ) $ (26,723,607 ) (86,709,785 ) 324 % 39 For the Years Ended June 30, Increase/(Decrease) 2022 2021 $ % Net Loss $ (113,433,392 ) $ (26,723,607 ) $ (86,709,785 ) (324 )% Other Comprehensive Income (Loss) Foreign Currency Translation, net of taxes (19,602 ) 30,582 (50,184 ) (164 )% Other Comprehensive Loss $ (113,452,994 ) $ (26,693,025 ) $ (86,759,969 ) (325 )% Revenues We are a pre-clinical stage pre-revenue biotechnology company.
Biggest changeFor the Years Ended June 30, Increase/(Decrease) 2023 2022 $ % Operating Expenses General and administrative $ 15,318,198 $ 14,329,801 988,397 7 % Research and development 4,165,197 8,372,800 (4,207,603 ) (50 )% Indefinite life intangible assets impairment charge 18,960,000 93,253,000 (74,293,000 ) (80 )% Depreciation and amortization 113,496 123,590 (10,094 ) (8 )% Total Operating Expenses 38,556,891 116,079,191 (77,522,300 ) (67 )% LOSS FROM OPERATIONS (38,556,891 ) (116,079,191 ) 77,522,300 (67 )% Other Income (Expenses) Loss on extinguishment of contingent consideration liability (419,182 ) (419,182 ) 100 % Change in fair value of contingent consideration 2,896,627 (2,896,627 ) (100 )% Interest expense (580,344 ) (372,844 ) (207,500 ) 56 % Gain (loss) on currency transactions (1,019 ) 9 (1,028 ) (11,422 )% Interest and other income (126,620 ) 122,041 (248,661 ) (204 )% Total Other Income (Expenses) (1,127,165 ) 2,645,833 (3,772,998 ) (143 )% Loss Before Income Taxes (39,684,056 ) (113,433,358 ) 73,749,302 (65 )% Income Tax (Expense) Benefit (34 ) 34 (100 )% NET LOSS $ (39,684,056 ) $ (113,433,392 ) 73,749,336 (65 )% 41 For the Years Ended June 30, Increase/(Decrease) 2023 2022 $ % Net Loss $ (39,684,056 ) $ (113,433,392 ) $ 73,749,336 (65 )% Other Comprehensive Income (Loss) Foreign Currency Translation, net of taxes 554 (19,602 ) 20,156 (103 )% Other Comprehensive Loss $ (39,683,502 ) $ (113,452,994 ) $ 73,769,492 (65 )% Revenues We are a pre-clinical stage pre-revenue biotechnology company.
Equity On July 8, 2020, we entered into a purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC, (“LPC”), pursuant to which LPC is committed to buy, and we had the right, but not the obligation, to sell to LPC up to an aggregate of $20,000,000 of our Common Stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement, including a limitation on the number of shares of Common Stock we can put to LPC and the pricing parameters for the sales.
Equity On July 8, 2020, we entered into a purchase agreement (the “2020 Purchase Agreement”) with Lincoln Park Capital Fund, LLC, (“LPC”), pursuant to which LPC is committed to buy, and we had the right, but not the obligation, to sell to LPC up to an aggregate of $20,000,000 of our Common Stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement, including a limitation on the number of shares of Common Stock we can put to LPC and the pricing parameters for the sales.
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 June 30, 2022, we have incurred substantial losses.
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 June 30, 2023, we have incurred substantial losses.
Going Concern and Management’s Plans The financial statements included elsewhere herein for the year ended June 30, 2022, 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.
Going Concern and Management’s Plans The financial statements included elsewhere herein for the year ended June 30, 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.
Interest on the Convertible Notes commenced accruing on the date of issuance at six percent (6%) per annum, computed on the basis of twelve 30-day months, and is compounded monthly on the final day of each calendar month based upon the principal and all accrued and unpaid interest outstanding as of such compound date.
Interest on the Convertible Notes commenced accruing on the date of issuance at six percent (6%) per annum, computed on the basis of twelve 30-day months, and was compounded monthly on the final day of each calendar month based upon the principal and all accrued and unpaid interest outstanding as of such compound date.
Our most critical accounting estimates are detailed below, and our significant accounting policies are more fully described in Note 1 of the accompanying consolidated financial statements. Intangible Assets - The Company has both definite and indefinite life intangible assets. 43 Definite life intangible assets relate to patents.
Our most critical accounting estimates are detailed below, and our significant accounting policies are more fully described in Note 1 of the accompanying consolidated financial statements. Intangible Assets - The Company has both definite and indefinite life intangible assets. 45 Definite life intangible assets relate to patents.
The following table sets forth our revenues, expenses and net income for the years ended June 30, 2022 and 2021. The financial information below is derived from our audited consolidated financial statements included elsewhere in this Annual Report.
The following table sets forth our revenues, expenses and net income for the years ended June 30, 2023 and 2022. The financial information below is derived from our audited consolidated financial statements included elsewhere in this Annual Report.
Our Business Enochian BioSciences Inc. is 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 HIV and Hepatitis B virus (HBV) infection. 36 To date, our operations have been funded by sales of our securities and debt financing.
Our Business Renovaro BioSciences Inc. is 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 HIV and Hepatitis B virus (HBV) infection. 38 To date, our operations have been funded by sales of our securities and debt financing.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. On an ongoing basis, we evaluate our critical accounting policies and estimates.
We may 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 ENOB-DC11, ENOB-HV-12, ENOB-HV-01, ENOB-HV-21 and ENOB-HB-01. The availability of any required additional funding cannot be assured.
We may 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-DC-11, RENB-HV-12, RENB-HV-01, RENB-HV-21 and RENB-HB-01. The availability of any required additional funding cannot be assured.
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. 37 Management has reduced overhead and administrative costs by streamlining the organization to focus around two of its therapies (oncology and HIV therapeutic vaccine).
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. 39 Management has reduced overhead and administrative costs by streamlining the organization to focus around two of its therapies (oncology and HIV therapeutic vaccine) in order to reduce operating costs.
For the year ended June 30, 2022, the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value, due to changes in the projected economic benefits to be realized from these assets.
For the years ended June 30, 2023 and 2022, the carrying value of the licenses acquired as an IPR&D asset exceeded its fair value, due to changes in the projected economic benefits to be realized from these assets.
We plan to use our cash and cash equivalents to fund research and development, specifically to open an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA (the first step in the drug review process by the FDA) for ENOB-DC11, ENOB-HV-12, ENOB-HV-01, ENOB-HV-21 and ENOB-HB-01.
We plan to use our cash and cash equivalents to fund research and development, specifically to open an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA (the first step in the drug review process by the FDA) for RENB-DC-11, RENB-HV-12, RENB-HV-01, RENB-HV-21 and RENB-HB-01.
The interest was payable in cash on a semi-annual basis. For the years ended June 30, 2022 and 2021, the interest expense amounted to $72,875 and $72,967, respectively. Effective December 30, 2022, Company amended and restated the Convertible Notes (the “Amended and Restated Secured Notes”).
The interest was payable in cash on a semi-annual basis. For the years ended June 30, 2023 and 2022, the interest expense amounted to $210,543 and $72,875, respectively. Effective December 30, 2022, Company amended and restated the Convertible Notes (the “Amended and Restated Secured Notes”).
The Company accounts for options in accordance with the provisions of FASB ASC Topic 718, Compensation – Stock Compensation . Stock based compensation costs for the vesting of options and RSUs granted to certain employees, officers, directors, and consultants for the years ended June 30, 2022 and 2021 were $5,490,602 and $1,444,798, respectively (see Note 8 to the Financial Statements).
The Company accounts for options in accordance with the provisions of FASB ASC Topic 718, Compensation – Stock Compensation . Stock based compensation costs for the vesting of options and RSUs granted to certain employees, officers, directors, and consultants for the years ended June 30, 2023 and 2022 were $3,535,051 and $5,490,602, respectively (see Note 8 to the Financial Statements).
For the year ended June 30, 2022, the Company issued 497,340 shares of Common Stock for proceeds of $4,676,399 (see Note 8 of the Financial Statements.) As of October 17, 2022, we no longer have access to this Purchase Agreement. Pursuant to a private placement offering, the Company issued 1,275,719 shares of Common Stock resulting in proceeds of $5,000,800.
For the year ended June 30, 2022, the Company issued 497,340 shares of Common Stock for proceeds of $4,676,399 (see Note 8 of the Financial Statements.) As of October 17, 2022, we no longer have access to this Purchase Agreement.
Therefore, the Company recorded an impairment loss of $93,253,000 during the year ended June 30, 2022 (see Note 4 to the financial statements.) The carrying value of IPR&D and goodwill at June 30, 2022, were $61,571,000 and $11,640,000, respectively.
Therefore, the Company recorded impairment losses of $18,960,000 and $93,253,000 during the years ended June 30, 2023 and 2022, respectively (see Note 4 to the financial statements). The carrying value of IPR&D and goodwill at June 30, 2023, were $42,611,000 and $11,640,000, respectively.
Funding that we may receive during fiscal 2023 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. COVID-19 The COVID-19 pandemic continues to evolve.
Funding that we may receive during fiscal 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. 40 RESULTS OF OPERATIONS Year ended June 30, 2023 compared to the year ended June 30, 2022.
The largest contributors to the increase in operating expenses for the year ended June 30, 2022, were the non-cash intangible asset impairment of $93,253,000 (see Note 4 to the Financial Statements) and the increase in general and administrative expenses of $6,771,811 partially offset by the decrease in research and development expenses of $7,347,462 compared to the year ended June 30, 2021.
The largest contributors to the decrease in operating expenses for the year ended June 30, 2023, were the decrease in the non-cash intangible asset impairment of $74,293,000 (see Note 4 to the Financial Statements) and the decrease in research and development expenses of $4,207,603 partially offset by the increase in general and administrative expenses of $988,397 compared to the year ended June 30, 2022.
The annual fair value analysis performed on goodwill supported that goodwill is not impaired as of June 30, 2022 (see Note 4 to the financial statements.) For indefinite-lived intangible assets, such as licenses acquired as an In-Process Research and Development (“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 indefinite-lived intangible assets, such as licenses acquired as an In-Process Research and Development (“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.
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 Measurement.
No impairment was recorded during the year ended June 30, 2023. 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 Measurement.
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. Operating Expenses Our operating expenses for the years ended June 30, 2022 and 2021 were $116,079,191 and $23,401,787, respectively, representing an increase of $92,677,404 or 396%.
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. Operating Expenses Our operating expenses for the years ended June 30, 2023 and 2022 were $38,556,891 and $116,079,191, respectively, representing a decrease of $77,522,300 or 67%.
The weighted-average assumptions used to estimate the fair value of the stock options granted using the Black-Scholes option-pricing model are the expected term of the award, the underlying stock price volatility, the risk-free interest rate, and the expected dividend yield. The Company records stock-based compensation for services received from non-employees in accordance with ASC 718, Compensation—Stock Compensation Non-Employees .
The weighted-average assumptions used to estimate the fair value of the stock options granted using the Black-Scholes option-pricing model are the expected term of the award, the underlying stock price volatility, the risk-free interest rate, and the expected dividend yield. The Company accounts for forfeitures as they occur.
Net cash used in investing activities for the years ended June 30, 2022 and 2021 was $(5,156) and $(48,892), respectively, representing a decrease of $43,736. The decrease is primarily due to less purchases of equipment in the current year.
Net cash used in investing activities for the years ended June 30, 2023 and 2022 was $29,774 and $5,156, respectively, representing an increase of $24,618. The increase is primarily due to purchases of equipment in the current year.
The increase in net loss was primarily due to the non-cash intangible asset impairment of $93,253,000, and $6,771,811 increase in general and administrative expenses, offset by a decrease in research and development costs of $7,347,462 and an approximate increase in the change in fair value of contingent consideration of $5,944,660. 40 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.
The decrease in net loss was primarily due to the decrease of non-cash intangible asset impairment of $74,293,000, the decrease in research and development costs of $4,207,603 and the decrease in the change in fair value of contingent consideration of $2,896,627 partially offset by the $988,397 increase in general and administrative expenses. 42 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.
Cash Flows Year ended June 30, 2022 compared to the year ended June 30, 2021 42 Following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities: For the Years Ended June 30, 2022 2021 Net Cash Used in Operating Activities $ (15,732,336 ) $ (20,610,723 ) Net Cash Used in Investing Activities (5,156 ) (48,892 ) Net Cash Provided by Financing Activities 4,250,464 32,601,553 Effect of exchange rates on cash (5,240 ) 26,111 Net Increase (Decrease) in Cash $ (11,492,268 ) $ 11,968, 049 At June 30, 2022, we had cash and cash equivalents of $9,172,142, a decrease of $11,492,268, when compared to the June 30, 2021 balance of $20,664,410.
Cash Flows Year ended June 30, 2023 compared to the year ended June 30, 2022 44 Following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities: For the Years Ended June 30, 2023 2022 Net Cash Used in Operating Activities $ (11,774,549 ) $ (15,732,336 ) Net Cash Used in Investing Activities (29,774 ) (5,156 ) Net Cash Provided by Financing Activities 4,515,056 4,250,464 Effect of exchange rates on cash (8,395 ) (5,240 ) Net (Decrease) in Cash $ (7,297,662 ) $ (11 ,492,268 ) At June 30, 2023, we had cash and cash equivalents of $1,874,480, a decrease of $7,297,662, when compared to the June 30, 2022 balance of $9,172,142.
As of June 30, 2022, we had cash and cash equivalents of $9,172,142, an accumulated deficit of $204,345,197, and total liabilities of $12,013,815. We have incurred losses from continuing operations, have used cash in our continuing operations, and are dependent on additional financing to fund operations.
As of June 30, 2023, we had cash and cash equivalents of $1,874,480, an accumulated deficit of $244,029,253, and total liabilities of $11,798,685. We have incurred losses from continuing operations, have used cash in our continuing operations, and are dependent on additional financing to fund operations.
As of June 30, 2022, the Company had $9,172,142 in cash and working capital of $3,114,170 as compared to $20,664,410 in cash and working capital of $19,013,100 as of June 30, 2021.
As of June 30, 2023, the Company had $1,874,480 in cash and working capital of $(8,457,693) as compared to $9,172,142 in cash and working capital of $3,114,170 as of June 30, 2022.
(see Note 6 to the Financial Statements.) On March 30, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $5,000,000 (the “Promissory Note”) to the “Holder”.
There were no Amended and Restated Secured Notes outstanding as of June 30, 2023 (see Note 6 to the Financial Statements). On March 30, 2020 (the “Issuance Date”), the Company issued a Promissory Note in the principal amount of $5,000,000 to Paseco ApS (the “Holder”).
On December 24, 2021, certain of our warrant holders exercised warrants to purchase 100,000 shares of Common Stock for total proceeds to the Company of $130,000.
No underwriter or placement agent was engaged by the Company for this private placement (see Note 8 of the Financial Statements). 43 Warrant Exercises On December 24, 2021, certain of our warrant holders exercised warrants to purchase 100,000 shares of Common Stock for total proceeds to the Company of $130,000.
The increase in other income was due primarily to the change in the fair value of the contingent consideration in the amount of $5,944,660, which resulted from the mark to market adjustment on the remaining contingent consideration liability and the contingent shares issued during the period.
The decrease in other income was due primarily to the change in the fair value of the contingent consideration in the amount of $2,896,627, which resulted from the mark to market adjustment on the remaining contingent consideration liability and the contingent shares issued during the prior year, in addition to the loss on extinguishment of contingent consideration liability of $419,182 in the year ended June 30, 2023.
Net cash used in operating activities for the years ended June 30, 2022 and 2021 was $15,732,336 and $20,610,723, respectively, representing a decrease of $4,878,387. The decrease is primarily related to the increase in our net loss as adjusted for non-cash items, and by changes in our operating assets and liabilities of $1,415,111.
Net cash used in operating activities for the years ended June 30, 2023 and 2022 was $11,774,549 and $15,732,336, respectively, representing a decrease of $3,957,787. The decrease is primarily related to the changes in our operating assets and liabilities of $4,305,157.
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 consultants’ required service period, which is generally the vesting period (see Note 8 to the Financial Statements.) Recently Enacted Accounting Standards For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “Note 1: Recent Accounting Pronouncements” in the financial statements included elsewhere in this Annual Report.
Recently Enacted Accounting Standards For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “Note 1: Recent Accounting Pronouncements” in the financial statements included elsewhere in this Annual Report.
The Company effected the issuances of the shares of Common Stock from March 15, 2021 to June 9, 2021. The private placement was made directly by the Company in reliance upon Regulation S of the Securities Act of 1933.
The private placement was made directly by the Company to persons who are not U.S. persons in reliance upon Regulation S of the Securities Act of 1933.
Off-Balance Sheet Arrangements As of June 30, 2022, and 2021, we had no off-balance sheet arrangements. We are not aware of any material transactions which are not disclosed in our consolidated financial statements.
The prior year net cash from financing activities primarily consisted of $4,676,399 in proceeds from the issuance of Common Stock related to equity line draws. Off-Balance Sheet Arrangements As of June 30, 2023, and 2022, we had no off-balance sheet arrangements. We are not aware of any material transactions which are not disclosed in our consolidated financial statements.
Net Loss Net loss for the years ended June 30, 2022 and June 30, 2021 was $113,433,392 and $26,723,607, respectively, representing an increase in net loss of $86,709,785 or 324%.
Net Loss Net loss for the years ended June 30, 2023 and June 30, 2022 was $39,684,056 and $113,433,392, respectively, representing a decrease in net loss of $73,749,336 or 65%.
The Company has tailored its workforce to focus on these therapies. In addition, management has extended its $1.2 million convertible notes 12 months out to be payable on February 28, 2024, and the Company intends to attempt to secure additional required funding through equity or debt financing.
The Company has also tailored its workforce to focus on these therapies. Management intends to try to convert its debt to equity. The Company intends to attempt to secure additional required funding through equity or debt financing (see Recent Developments for most recent funding).
If the carrying value of the reporting unit exceeds its fair value, we record an impairment loss for such excess.
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 is not impaired as of June 30, 2023 (see Note 4 to the financial statements).
The decrease in cash of $11,492,268 is primarily due to the cost of operations primarily related to general and administrative expenses of $8,715,609, net of non-cash items, in addition to research and development costs of $8,372,800, partially offset by funding totaling $4,811,312 related to drawdowns from the LPC equity line, and the exercise of warrants and options during the period.
The decrease in cash of $7,297,662 is primarily due to the cost of operations of $11,774,549, partially offset by funding totaling $4,515,056 related to private placements, and the exercise of warrants and options during the period.
The fair value measurements are highly sensitive to changes in these inputs and significant changes in these inputs could result in a significantly higher or lower fair value (see Note 1 to the Financial Statements.) Stock-Based Compensation - The Company has granted stock options, restricted share units (“RSUs”) and warrants to certain employees, officers, directors, and consultants.
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 June 30, 2023 (see Note 1.) Stock-Based Compensation - The Company has granted stock options, restricted share units (“RSUs”) and warrants to certain employees, officers, directors, and consultants.
The decrease was partially offset by increases in costs with CDMO and CRO partners totaling $3,093,160. Other Income (Expenses) Net other income (expenses) for the years ended June 30, 2022 and 2021 was $2,645,833 and $(3,447,096), respectively, representing an increase of $6,092,929 or 177%.
Other Income (Expenses) Net other income (expenses) for the years ended June 30, 2023 and 2022 was $(1,127,165) and 2,645,833, respectively, representing a decrease of $3,772,998 or 143%.
Recent Developments On July 15, 2022, certain of our warrant holders exercised warrants to purchase 1,250,000 shares of Common Stock for total proceeds to the Company of $1,625,000, with corresponding earn-out distribution in the same amount in connection with the acquisition of Enochian BioPharma, Inc., which was distributed on October 12, 2022, based on the share price on that date of $2.21.
On July 14, 2022, certain of our warrant holders exercised warrants to purchase 1,250,000 shares of Common Stock for total proceeds to the Company of $1,625,000 (see Note 8 to the Financial Statements).
Research and development expenses for the years ended June 30, 2022, and 2021, were $8,372,800 and $15,720,262, respectively, representing a decrease of $7,347,461 or 47%. The decrease in research and development expenses is primarily related to $10,760,000 in fees related to the Coronavirus and Influenza License Agreement that was incurred in the prior period.
Research and development expenses for the years ended June 30, 2023, and 2022, were $4,165,197 and $8,372,800, respectively, representing a decrease of $4,207,603 or 50%.
Net cash provided by financing activities for the years ended June 30, 2022 and 2021 was $4,250,464 and $32,601,553, respectively, representing a decrease of $28,351,089. The net cash provided by financing activities in the current year consists primarily of $4,676,399 in proceeds from issuance of Common Stock related to equity line draws.
Net cash provided by financing activities for the years ended June 30, 2023 and 2022 was $4,515,056 and $4,250,464, respectively, representing an increase of $264,592.
General and administrative expenses for the years ended June 30, 2022 and 2021, were $14,329,801 and $7,557,990, respectively, representing an increase of $6,771,811, or 90%. The increase in general and administrative expenses is primarily related to increases of $4,045,804 in stock-based compensation, $1,485,613 in salaries and related costs, $353,853 related to recruiting expenses, and $351,928 in legal fees.
General and administrative expenses for the years ended June 30, 2023 and 2022, were $15,318,198 and $14,329,801, respectively, representing an increase of $988,397, or 7%.
Pursuant to the third amendment, the Company’s obligations under the Promissory Note were secured by the Security Agreement.
Pursuant to the third amendment, the Company’s obligations under the Promissory Note were secured by the Security Agreement. All accrued interest payable from May 30, 2023 to the maturity date was payable on May 30, 2023 in either cash or shares of our Common Stock. The Holder elected the interest be paid in cash (the “Interest Payment”) .
Removed
This non-cash transaction impacted stockholders’ equity in the amount of $2,762,500 (see Note 11 of the Financial Statements.) Subsequent to June 30, 2022, the Company became involved in a number of legal proceedings. Please see above Item 3 - Legal Proceedings for details of such matters.
Added
Recent Developments Definitive Agreement with GEDi Cube On September 28, 2023, Renovaro Biosciences Inc., 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”).
Removed
Regaining Compliance with Nasdaq Listing Requirements On each of October 17, 2022, November 23, 2022, and February 16, 2022, we received a notice, or the Notices, from the Listing Qualifications Department of Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5250(c)(1), or the “Rule”, because we did not timely file our Form 10-K for the period ended June 30, 2022 and our Form 10-Q for the periods ended September 30, 2022 and December 31, 2022 with the SEC.
Added
Upon the terms and subject to the conditions set forth in the Purchase Agreement, Renovaro 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 Renovaro.
Removed
The Rule requires listed companies to timely file all required periodic financial reports with the SEC. Today we filed our Form 10-K for the period ended June 30, 2022 but have not yet filed our Form 10-Q for the periods ended September 30, 2022 nor December 31, 2022, and therefore we have not regained compliance with the Rule.
Added
On September 28, 2023, the board of directors of Renovaro, and the board of managers of GEDi Cube unanimously approved the Purchase Agreement. The completion of the Transaction is subject to the satisfaction or waiver of customary closing conditions. The Purchase Agreement contains certain termination rights for both Renovaro and GEDi Cube (See Note 11-Subsequent Events).
Removed
We were unable to file the Annual Report on Form 10-K for the period ended June 30, 2022 and the Quarterly Report on Form 10-Q for the periods ended September 30, 2022 and December 31, 2022 by their initial deadlines, due to the reasons described in the Notifications of Late Filing on Form 12b-25, filed with the SEC on September 29, 2022 and November 15, 2022.
Added
August 2023 Private Placement On August 1, 2023, the Company closed a private placement of 280,505 units,(the “Units”), each such Unit consists of (i) one share of the Company’s Series A Convertible Preferred Stock, $0.0001 par value per share and (ii) one common stock purchase warrant to purchase five shares of the Company’s common stock, $0.0001 par value per share at a price per Unit equal to $7.13 for aggregate proceeds to the Company of $2,000,000 in cash.
Removed
While we were able to file the Annual Report on Form 10-K for the period ended June 30, 2022 within the extension period provided pursuant to Nasdaq rules, we have not yet filed the Form 10-Q for the periods ended September 30, 2022 and December 31, 2022, and there can be no assurance that we will be able to remain in compliance with the Rule or with other Nasdaq listing requirements in the future.
Added
In addition, the Company issued 280,505 Units in connection with the conversion of $2,000,000 of promissory note, as further described below under the heading “Amendment and Conversion of Previously Issued Promissory Note”.
Removed
If we are unable to regain compliance with the Rule or with any of the other continued listing requirements, Nasdaq may take steps to delist our securities, which could have adverse consequences, including a limited availability of market quotations for our securities, reduced liquidity for our securities, a limited amount of news and analyst coverage and a decreased ability to issue additional securities or obtain additional financing in the future.
Added
In connection with the Private Placement, the Company sold an aggregate of 561,010 shares of Preferred Stock, which are initially convertible into an aggregate of 5,610,100 shares of Common Stock . In connection with the Private Placement, the Company sold Warrants to purchase an aggregate of 2,805,050 shares of Common Stock, which represents 50% warrant coverage.
Removed
COVID-19 may cause delays in our research activities. To date, the COVID-19 pandemic has not materially affected our operations. However, it has caused delays in the conduct of experiments due to limitations in resources and supply chain issues, in particular for those conducting experiments.
Added
The Warrants are exercisable for five years from the date of issuance and have an exercise price of $0.65 per share, payable in cash.
Removed
There have also been increases in the cost to conduct animal studies due to staffing and other limitations. The full extent to which the COVID-19 pandemic may impact our business and operations is subject to future developments, which are uncertain and difficult to predict.
Added
Amendment and Conversion of Previously Issued Promissory Note On July 31, 2023, the Company and the holder of the Previously Issued Promissory Note agreed to amend the Promissory Note (the “Fourth Amendment”), to provide the holder with limited conversion rights in connection with the Private Placement (the “Conversion Right”).
Removed
We continue to monitor the impact of the COVID-19 pandemic on our business and operations and will seek to adjust our activities as appropriate. 38 RESULTS OF OPERATIONS Year ended June 30, 2022 compared to the year ended June 30, 2021.
Added
Per the terms of the Fourth Amendment, the Holder could elect to convert $2,000,000 of the outstanding principal balance of the Promissory Note into the Units being offered in the Private Placement at the price per Unit being paid by the investors in the Private Placement.
Removed
No underwriter or placement agent was engaged by the Company for this private placement (see Note 8 of the Financial Statements.) On June 14, 2021, the Company and certain institutional investors entered into a securities purchase agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell to such investors an aggregate of 3,866,668 shares of Common Stock, in a registered direct offering, for gross proceeds of approximately $29 million (the “Financing”).
Added
As mentioned above, on August 1, 2023, Paseco ApS, the holder of a $5,000,000 promissory note issued by the Company, (the “Promissory Note”) notified the Company of its election to exercise the Conversion Right.
Removed
The purchase price for each share of Common Stock was $7.50. The Company agreed not to issue or enter into any agreement to issue Common Stock from June 14, 2021 until ninety (90) days after the closing of the Financing. The Company entered into a letter agreement dated June 14, 2021 (the “Letter Agreement”) with H.C.
Added
Therefore, $2,000,000 of the outstanding principal balance of the note was converted into 280,505 Units, comprised of an aggregate of (i) 280,505 shares of Preferred Stock and (ii) Warrants to purchase an aggregate of 1,402,525 shares of Common Stock. A principal balance of $3,000,000 remained outstanding under the Promissory Note after the foregoing conversion.
Removed
Wainwright & Co., LLC, as exclusive placement agent (the “Placement Agent”), pursuant to which the Placement Agent agreed to act as the exclusive placement agent for the Financing. The Company agreed to pay the Placement Agent an aggregate fee equal to 7.0% of the gross proceeds raised in the Financing.
Added
The Units issued in connection with the conversion were issued pursuant to Regulation S.
Removed
The Company also agreed to pay the Placement Agent certain expenses. The Company paid $2,090,000 in commissions and incurred offering expenses, and issuance costs of $66,011, resulting in net proceeds of $26,843,999 in connection with the Financing.
Added
The increase in general and administrative expenses is primarily related to increases of $2,738,140 in legal fees, $865,911 in salaries and related costs, $566,448 in accounting fees and $302,130 in insurance costs, partially offset by the decrease of $1,847,551 in stock-based compensation, $495,000 in security costs, $363,984 in recruiting expenses, $153,541 in corporate fees and $116,648 in travel expenses.
Removed
The Financing closed on June 16, 2021 (see Note 8 of the Financial Statements.) 41 Warrant Exercises For the year ended June 30, 2021, the Company issued 63,122 shares of Common Stock for total proceeds of $82,056 upon the exercise of warrants.
Added
The decrease in research and development expenses is primarily related to $3,261,500 in fees related to a collaborating partner that was incurred in the prior year in addition to costs with CDMO and CRO partners totaling $766,495 in the prior year.
Removed
The prior year net cash from financing activities primarily consisted of $26,843,998 of net proceeds from the issuance of Common Stock as part of a direct offering, $5,000,800 of proceeds from the issuance of Common Stock through a private placement, and $1,221,350 of proceeds from issuance of Common Stock related to equity line draws.
Added
In consideration for entering into the 2020 Purchase Agreement, we issued 139,567 shares of Common Stock to Lincoln Park as a commitment fee on July 21, 2020.
Removed
There were no assets that use Level 1, 2 or 3 inputs, nor any liabilities that use Level 1 or 2 inputs as of June 30, 2022. Liabilities that use Level 3 inputs held as of June 30, 2022 consisted of a contingent consideration liability related to the February 16, 2018 acquisition of Enochian BioPharma Inc. (the “Acquisition”).
Added
On June 20, 2023, we entered into a purchase agreement (the “2023 Purchase Agreement”) with LPC, pursuant to which the Company may sell and issue to LPC, and LPC is obligated to purchase, up to $20,000,000 of shares of our Common Stock over the 36-month term of the purchase agreement (see Note 8 of the Financial Statements).
Removed
As consideration for the Acquisition, the stockholders of Enochian Biopharma received (i) 18,081,962 shares of common stock, and (ii) the right to receive contingent shares pro rata upon the exercise of warrants, which were outstanding at closing.
Added
Pursuant to a private placement offering in March 2023, the Company issued 2,378,070 shares of Common Stock and warrants to purchase 1,189,036 shares of Common Stock (“Purchase Warrants”) resulting in proceeds of $2,711,0000 in a private placement offering. The Company effected the issuances of the shares of Common Stock from March 13, 2023 to March 29, 2023.
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