Business Context and Reporting Period
The source filing is a Form 10-Q for Renovaro Biosciences Inc., formerly Enochian Biosciences Inc., covering the three months ended September 30, 2023. This corresponds to the company’s fiscal first quarter of 2024, rather than 2023 Q1. The filing is unaudited and was filed November 14, 2023. The company is a pre-revenue biotechnology developer focused on allogeneic cell and gene therapies for oncology, HIV and HBV.
The filing identifies the registrant as Renovaro Biosciences Inc.; it does not identify “Lunai Bioworks Inc.” as the filing company.
Financial Highlights
| Metric | Three months ended September 30, 2023 | Comparable 2022 period | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No revenue; company remains pre-revenue |
| Operating expenses | $8.884 million | $7.191 million | Up 24% |
| Operating loss | $8.884 million | $7.191 million | Loss increased 24% |
| Net loss | $9.175 million | $7.700 million | Loss increased 19% |
| Basic and diluted loss per share | $0.14 | $0.14 | Reported loss per share unchanged |
| Cash used in operations | $2.777 million | $2.654 million | Use increased $0.124 million |
| Cash and cash equivalents | $0.523 million | $7.972 million at September 30, 2022 | Down from $1.874 million at June 30, 2023 |
- General and administrative expense was $8.290 million, up 82%, primarily due to $4.470 million of non-cash consulting expense, higher accounting and insurance costs, partly offset by lower compensation and legal expense.
- Research and development expense was $0.567 million, down 78%, primarily because of lower CDMO and CRO spending on discontinued product candidates.
- Other expense was $0.291 million, including $0.120 million of loss on extinguishment of debt and $0.179 million of interest expense.
- Comprehensive loss was $9.210 million, including a $34,601 foreign-currency translation loss.
- Total assets were $57.563 million and total liabilities were $10.816 million at September 30, 2023. Working capital was negative $8.189 million.
- Assets included $42.611 million of indefinite-lived in-process research and development and $11.640 million of goodwill. No additional impairment was recorded during the quarter, following a $18.960 million IPR&D impairment charge in fiscal 2023.
Cash Flow, Debt and Financing
- Operating cash use was $2.777 million; investing cash use was $1.058 million, primarily for $1.050 million of notes receivable issued to GEDi Cube-related interests; financing cash provided was $2.563 million.
- The company received $2.000 million from a private placement and $0.750 million of gross proceeds from convertible notes, partly offset by $0.187 million of finance-agreement repayments.
- Current debt at September 30, 2023 included $2.910 million of notes payable, net of discount, and $0.753 million of convertible notes payable, net of discount. A $3.000 million principal balance remained under the secured promissory note after a $2.000 million conversion into preferred-stock units.
- The September 2023 convertible notes carry 12% interest, mature September 5, 2024, and generally convert upon a qualified offering or at maturity, subject to a $4.50 conversion-price floor.
- The company had $1.058 million of notes receivable bearing 6% interest and maturing in February 2024.
- At September 30, 2023, common shares outstanding were 65.698 million. Series A preferred shares outstanding were 561,010, initially convertible into 5.610 million common shares. Warrants outstanding totaled 6.353 million, and plan options outstanding totaled 4.996 million.
Material Changes Versus the Prior Comparable Period
- Net loss increased $1.475 million, driven primarily by higher general and administrative expense.
- R&D spending declined $2.039 million as the company reduced spending on discontinued candidates, while management prioritized oncology and an HIV therapeutic vaccine.
- Cash declined $1.351 million during the quarter, and cash at quarter-end was only $0.523 million.
- The company issued 2.000 million common shares for consulting services and completed a private placement involving Series A preferred stock and warrants.
- In August 2023, $2.000 million of promissory-note principal was converted into preferred-stock units and warrants, generating a $0.120 million extinguishment loss.
- The company changed its corporate name from Enochian Biosciences Inc. to Renovaro Biosciences Inc. in August 2023.
- On September 28, 2023, the company entered into an agreement to acquire 100% of GEDi Cube. Closing remains subject to shareholder, regulatory, listing and other customary conditions. The sellers are expected to receive shares representing approximately 50% of the combined company’s outstanding shares at closing, subject to adjustments, plus potential earn-out shares.
Outlook, Risks and Unusual Items
Management expects to remain pre-revenue until product candidates receive regulatory approval and become commercialized. The company states that it does not expect revenue in the near term and may never become profitable.
- The financial statements contain a substantial doubt regarding the company’s ability to continue as a going concern for one year after issuance. Management expects to seek additional debt or equity financing, but states that financing may be unavailable or available only on unfavorable terms.
- Management intends to focus resources on RENB-DC11, an oncology platform beginning with pancreatic cancer, and RENB-HV12, an HIV therapeutic vaccine. Management expects to complete RENB-DC11 IND-enabling activities in the second half of 2024 and, if successful, begin human clinical trials in the second half of 2024. These are forward-looking targets and are subject to substantial development, regulatory and financing risks.
- RENB-HV12 non-human-primate studies were ongoing. Management discussed potential Pre-IND activity in the second half of 2024 and possible Phase 1 trials by mid-to-late 2025.
- RENB-HV01 and RENB-HV21 have been deprioritized, while HBV development remains early preclinical and lower priority.
- The company disclosed multiple securities, derivative and other lawsuits, including a pending securities class action, stayed federal and state derivative actions, litigation involving a former CFO, and a Delaware action concerning alleged registration-rights breaches. Potential damages are generally unquantified, and the company does not express an opinion on likely outcomes.
- The company has filed claims alleging that certain counterparties manipulated or fabricated study results and that approximately $25 million was paid based on those results. The company continues to pursue these claims.
- Disclosure controls and procedures were deemed ineffective because the company lacks adequate resources to address complex accounting matters. Management identified a material weakness and expects the deficiency to continue until sufficient capital is available to hire appropriate accounting personnel.
- Subsequent to quarter-end, the company raised an additional $1.250 million gross through 12% convertible notes and agreed to issue 1.000 million restricted shares to a newly appointed adviser, subject to vesting.
Most Important Facts to Verify
- Confirm the correct issuer and reporting period: the supplied filing is Renovaro Biosciences Inc. for the quarter ended September 30, 2023, not Lunai Bioworks Inc. or 2023 Q1.
- Assess the company’s ability to obtain financing given $0.523 million of cash, negative working capital, recurring losses and the disclosed going-concern uncertainty.
- Review the terms, dilution potential and maturity risks of the convertible notes, Series A preferred stock, warrants and proposed GEDi Cube transaction.
- Evaluate whether the company can meet its stated IND-enabling and clinical-development milestones, particularly for RENB-DC11 and RENB-HV12.
- Monitor the pending litigation, the company’s claims regarding prior research results, and any potential cash liabilities or operational effects.
- Review remediation plans and progress for the material weakness in disclosure controls and financial reporting.