Lunai Bioworks Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Statement Notice Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements of Renovaro Inc. (“Renovaro,” and together with its subsidiaries, the “Company”, “we” or “us”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on October 2, 2023. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of the business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Our Business We are a biotechnology company committed to developing advanced allogeneic cell and gene therapies to promote stronger immune system responses potentially for long-term or life-long cancer remission in some of the deadliest cancers, and potentially to treat or cure serious infectious diseases such as Human Immunodeficiency Virus (HIV) and Hepatitis B Virus (HBV) infection. Our Product Development strategy is anchored in the use of “non-self” or allogeneic cells that enhance the immune response that we seek to elicit. Over the past several years, Renovaro has evolved from a company with a single product candidate as a potential cure for HIV (RENB-HV01), adding two additional pipeline candidates for HIV (RENB-HV12 and RENB-HV21), a pipeline for Hepatitis B Virus (HBV) (RENB-HB01), and with a significant expansion into cancer immune therapies to address high unmet needs from difficult-to-treat solid tumors (RENB-DC11.) The oncology platform is now at the forefront of our development activities, beginning with pancreatic cancer and other solid tumors with poor life expectancy, for example triple negative breast, second-line liver, head, neck, and oral among other possible targets. Many operational aspects of our platforms can be quickly adapted to multiple disease states from a single therapeutic approach, potentially streamlining and accelerating development, and regulatory process, as well as manufacturing operations. Moreover, because our product candidates do not require specialized delivery devices and surgical procedures, our potentially groundbreaking interventions could have worldwide applicability. The Company responds quickly to new data and perceived development opportunities and risk assessments. Based on the maturation of our pipelines, the Company makes business decisions to prioritize the programs that could move more rapidly through development and commercial processes. 33 Therapeutic Platforms The Company’s general approach with gene- and/or cell-therapy is to train the immune system to allow a person to better fight diseases. Our vision is for a world free from toxic chemotherapy and healthy longevity for those with cancer and other diseases. The Company is leveraging general principles and advances in the knowledge of the immune response to engineer cells with enhanced attributes to promote the recognition and elimination of diseased cells. Advanced Allogeneic Cell Therapy The strategic benefit of cell therapy platforms is to potentially allow for manufacture of large, “off-the-shelf” banks of therapeutic cells that could be accessed on demand by health care professionals to potentially decrease the time between diagnosis and treatment. In addition, because we focus on cells from donors, the strategy could potentially enhance the ability of the therapeutic candidates to induce a more robust response once injected into patients. The human immune system is designed to recognize and distinguish “self” from “non-self” and destroy “otherness” such as bacteria, viruses, and damaged or diseased cells such as cancer cells. Alloreactivity (reacting against another person’s cells) is the most powerful response the immune system generates. Several of our technologies take advantage of the alloreactivity to hyper stimulate a person’s immune response to better attack a chronic infection (e.g., HIV) or solid tumor. In certain treatments (e.g., HIV and cancer), cells taken from healthy donors are sometimes genetically modified to introduce signaling molecules that are designed to enhance the ability of specific immune cells to recognize diseased cells, and to help recruit other cells that will destroy cancer or virus infected cells. The Company believes that the combination of off-the-shelf allogeneic cells, combined with genetic modifications designed to enhance immune signaling, could potentially generate therapeutic candidates that have unique attributes that will increase the likelihood of success. Cell Therapy enabling technology In addition to the platform described above, Renovaro has an innovative gene therapy approach to enhance the selection and engraftment (uptake) of cells carrying therapeutic attributes. Enhanced uptake or engraftment could play a critical role in some cases to increase the likelihood of therapeutic benefit. This technology was initially developed for autologous cell therapy from a person living with HIV, and genetically modifying those cells so they cannot be infected with most variants of HIV, plus a gene modification to enhance uptake. We have sublicensed under a profit-sharing agreement our technology to potentially increase engraftment for use in CAR-T therapy as a potential cure for HIV. HBV Gene Therapy Renovaro Inc. is exploring various approaches for gene therapy design elements to potentially eliminate virus-infected cells with an innovative molecular mechanism that co-opts the virus’ machinery to induce the death of infected cells rather than reproducing and causing more infection to exacerbate disease. Oncology: RENB-DC11: Genetically modified Allogeneic Dendritic Cell Therapeutic Vaccine as Potential Product for Long-term Remission of Solid Tumors – Starting with Pancreatic Cancer 34 Allogeneic Cell Therapy Platform – Advanced Pre-Clinical Based on learning from peer-reviewed publications of Phase I/IIa trials, we have designed an innovative therapeutic vaccination platform that could potentially be used to induce life-long remission from some of the deadliest solid tumors. The survival rate in pancreatic cancer is currently only 5 to 10 percent at 5 years. Initial preclinical in vitro and proof of concept in vivo studies have been compelling. The platform might also allow for non-specific immune enhancement that could have impact against a broad array of solid tumors. We initially plan to target pancreatic cancer. Other potential targets for later development could include triple-negative breast cancer, liver or mesothelioma. As with HIV, our approach would potentially allow for outpatient therapy without wiping out or significantly impairing the patient’s immune system, as many current approaches require. Renovaro Inc. has initiated a collaboration with Dr. Anahid Jewett from UCLA to study further the in vitro and in vivo effectiveness of the approach in pancreatic cancer. Dr. Jewett created an innovative pancreatic cancer mouse model that comprises the human immune system repertoire in combination with implanted human cancer cells. Multiple experiments in different humanized mouse models are consistently showing with only one cycle of therapy – in humans five to ten are likely - what Dr. Jewett calls “the Holy Grail of cancer research”: 1. 80-90% substantial tumor size reduction (volume and weight) 2. Remnant of tumor sack significantly infiltrated with effector immune cells indicating ongoing killing of cancer. 3. Significant correlation with expected immune response important to fight cancer detected in blood, and 4. No metastases The confirming reproducibility and robustness of the therapeutic response in an aggressive form of human pancreatic cancer in several models is promising. We received FDA input from pre-IND interactions which helped solidify our IND-enabling plan as well as our investigational plan. We are now fully committed to process development/improvements and IND-enabling activities. We believe that we can complete IND-enabling activities in the second half of 2024 which if successful, would enable the start of clinical trials in humans during the second half of 2024. The investigational plan discussed with the FDA includes phase 1 safety testing broadly in all solid tumor types, followed by a phase 2a focusing on a few solid tumor types that are difficult to treat and have poor life expectancy, for example triple negative breast, second-line liver, head and neck cancers. Phase 2b would expand cohorts in cancers with the strongest response in phase 2a. RENB-DC-12--XX: Genetically modified Allogeneic Dendritic Cell Therapeutic Vaccine as Potential Product for Long-term Remission of Additional Indications The technology is a platform that could potentially be adapted to other solid tumors first line and/or salvage therapy, by itself or, potentially, in combination with other cancer treatments. Additional cancer vaccine designs are being evaluated strategically to balance risk and opportunity to advance therapeutic development quickly in cancer indications with few treatment options. Infectious Diseases: HIV: RENB-HV12: HIV Therapeutic Vaccines for Potential Long-term Remission/Cure 35 Allogeneic Cell Therapy Platform - Advanced Pre-Clinical Stage; Non-Human Primate Studies Ongoing. In persons living with HIV who are controlling the spread of virus with anti-retroviral (ARV) treatment, boosting the immune system in a different way than the virus already has through infection, could allow for control of HIV after stopping ARVs. Renovaro Inc. is developing RENB-HV12 that utilizes a novel cellular and immunotherapy approach that could potentially provide therapeutic vaccines for HIV. A non-human study of the therapeutic vaccine in primates at the Fred Hutchinson Cancer Research Center is ongoing. Animals began receiving the first injections of the potential therapeutic vaccine in August, 2022. Preliminary results assessment may potentially be available in the second half of 2023. A Pre-IND request could be submitted in the second half of 2024, with IND submission and the beginning of Phase I clinical trials by mid- to end-2025. RENB-HV01: Autologous Transplant with Genetically Modified Cells : FDA INTERACT Meeting Held February 2020 - Advanced Pre-Clinical Stage We have pioneered a novel enabling technology (ALDH gene modification) that we believe will allow sufficient engraftment of the CCR5 gene-modified Hematopoietic Stem Cell (HSC) to eliminate the need for Antiretroviral Treatment (ART.) Management conducted a successful FDA INTERACT Meeting in alignment with the Company’s experimental plan. Although in vitro and in vivo studies have demonstrated promising results, further development of RENB-HV01 at this time was deemed costly and a long-term undertaking. While the Company plans to return to full development of the approach when resources are available, it has become less attractive and been deprioritized for business reasons, while pipelines that could move more quickly have been prioritized (e.g., RENB-DC11). Therefore, a business decision was made to sub-license the ALDH gene modification. RENB-HV01 was sub-licensed to Caring Cross with a profit share arrangement. Caring Cross is developing a CAR-T approach that they believe, when combined with Renovaro ALDH gene modification, could enhance engraftment of their CAR-T cell therapy and enhance their likelihood of success. RENB-HV21: Immunotherapy with Allogeneic NK/GDT Cells Allogeneic Cell Therapy Platform - Pre-IND conducted - Advanced Pre-Clinical with Human Data through a Collaboration We are also exploring RENB-HV21, an innovative treatment for HIV with allogeneic Natural Killer (NK) and Gamma Delta T-Cells (GDT). It is believed that the GDT cells, a small subset of immune cells that can be infected with HIV, could both be infected by, and be a key factor in controlling the virus. The initial scientific findings were presented during the American Society of Gene & Cell Therapy (ASCGT) Annual Meeting in 2021. Renovaro Inc. has an exclusive license to use the underlying patent to develop RENB-HV21 for potential treatment or cure of HIV. A successful investigator-initiated Pre-IND was completed in October 2021. However, due to a shift in priorities to the Oncology pipeline, Renovaro does not plan to pursue the IND and potential clinical trial in the medium- to long-term. 36 HBV: RENB-HB01: Potential Cure for HBV HBV Gene Therapy - Pre-Clinical RENB-HB01 is in an early pre-clinical phase as we explore various approaches for gene therapy design elements. If those explorations are successful, it is possible we could begin the regulatory process at the earliest in the second half of 2024. However, our highest priority is currently the oncology platform, beginning with pancreatic cancer and other solid tumors with poor life expectancy. Corporate History We were incorporated under the laws of the State of Delaware on January 18, 2011, under the name Putnam Hills Corp. and in 2014 we merged with and changed our name to DanDrit Biotech USA, Inc. In 2018, we acquired Enochian Biopharma and changed our name to Enochian BioSciences Inc. In August 2023, the Company changed its corporate name from Enochian Biosciences Inc. to Renovaro Biosciences Inc. On February 13, 2024, the Company changed its corporate name from Renovaro Biosciences Inc. to Renovaro Inc. Going Concern and Management’s Plans The financial statements included elsewhere herein for the period ended December 31, 2023, were prepared under the assumption that we would continue our operations as a going concern, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. As of December 31, 2023, we had cash and cash equivalents of $243,980, an accumulated deficit of $257,733,402 and a working capital deficit of $11,355,216 and total liabilities of $14,422,584. We have incurred losses from continuing operations, have used cash in our continuing operations, and are dependent on additional financing to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for one year after the date the financial statements are issued. The financial statements included elsewhere herein do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. Management has reduced overhead and administrative costs by streamlining the organization to focus around two of its therapies (oncology and a HIV therapeutic vaccine). The Company has tailored its workforce to focus on these therapies. In addition, the Company intends to attempt to secure additional required funding through equity or debt financing. However, there can be no assurance that the Company will be able to obtain any sources of funding. Such additional funding may not be available or may not be available on reasonable terms, and, in the case of equity financing transactions, could result in significant additional dilution to our stockholders. If we do not obtain required additional equity or debt funding, our cash resources will be depleted and we could be required to materially reduce or suspend operations, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our stockholders losing some or all of their investment in us. Funding that we may receive during the fiscal year 2024 is expected to be used to satisfy existing and future obligations and liabilities and working capital needs, to support commercialization of our products and conduct the clinical and regulatory work to develop our product candidates, and to begin building working capital reserves. 37 On September 28, 2023, the Company, entered into a Stock Purchase Agreement (the “ Purchase Agreement ”) with GEDi Cube Intl Ltd., a private company formed under the laws of England and Wales (“ GEDi Cube ”). Upon the terms and subject to the conditions set forth in the Purchase Agreement, the Company will acquire 100% of the equity interests of GEDi Cube from its equity holders (the “ Sellers ”) and GEDi Cube will become a wholly-owned subsidiary of the Company (the “ Transaction ”). On September 28, 2023, the board of directors of the Company, and the board of managers of GEDi Cube unanimously approved the Purchase Agreement (see Note 9.) On January 25, 2024, the Company held a Special Shareholders’ Meeting, during which the shareholders approved the issuance of the Company’s common stock to the Sekkers and the requisite increase in the amount of the Company’s authorized common stock. The Company is working with the GEDi Cube to close the transaction. Results of Operations for the three and six months ended December 31, 2023, compared to the three and six months ended December 31, 2022 The following table sets forth our revenues, expenses and net loss for the three and six months ended December 31, 2023 and 2022. The financial information below is derived from our unaudited condensed consolidated financial statements. For the Three Months Ended For the Six Months Ended December 31, Increase/(Decrease) December 31, Increase/(Decrease) 2023 2022 $ % 2023 2022 $ % Operating Expenses General and administrative $ 3,616,392 $ 4,013,063 $ (396,671 ) (1 0)% $ 11,906,602 $ 8,569,903 $ 3,336,699 39 % Research and development 620,521 325,959 294,562 90 % 1,187,165 2,931,334 (1,744,169 ) (60 )% Depreciation and amortization 33,162 28,844 4,318 15 % 60,422 57,245 3,177 6 % Total Operating Expenses 4,270,075 4,367,866 (97,791 ) (2 )% 13,154,189 11,558,482 1,595,707 14 % LOSS FROM OPERATIONS (4,270,075 ) (4,367,866 ) 97,791 (2 )% (13,154,189 ) (11,558,482 ) (1,595,707 ) 14 % Other Income (Expenses) Loss on extinguishment of debt — — — 0 % (120,018 ) — (120,018 ) 100 % Loss on extinguishment of contingent consideration liability — — — 0 % — (419,182 ) 419,182 (100 )% Interest expense (274,984 ) (92,892 ) (182,092 ) 196 % (454,255 ) (188,477 ) (265,778 ) 141 % Interest and other income 15,938 3,010 12,928 430 % 24,313 8,633 15,680 182 % Total Other Income (Expenses) (259,046 ) (89,882 ) (169,164 ) 188 % (549,960 ) (599,026 ) 49,066 (8 )% NET LOSS $ (4,529,121 ) $ (4,457,748 ) $ (71,373 ) 2 % $ (13,704,149 ) $ (12,157,508 ) $ (1,546,641 ) 13 % Revenues We are a pre-revenue, pre-clinical biotechnology company. We have never generated revenues and have incurred losses since inception. We do not anticipate earning any revenues until our therapies or products are approved for marketing and sale. 38 Expenses Our operating expenses for the three months ended December 31, 2023 and 2022, were $4,270,075 and $4,367,866 respectively, representing a decrease of $97,791 or approximately 2% . The decrease in operating expenses primarily relates to the decrease in general and administrative expenses of $396,671 partially offset by the increase in research and development expenses of $294,562. Our operating expenses for the six months ended December 31, 2023 and 2022, were $13,154,189 and $11,558,482 respectively, representing an increase of $1,595,707, or approximately 14% . The increase in operating expenses primarily relates to the increase in general and administrative expenses of $3,336,699 partially offset by the decrease in research and development expenses of $1,744,169. General and administrative expenses for the three months ended December 31, 2023, and 2022, were $3,616,392 and $4,013,063, respectively, representing a decrease of $396,671 or approximately 10%. The variance is related to a decrease in legal expenses of $453,934, compensation and related expenses of $353,309, and accounting fees of $133,819, partially offset by an increase in investor relations expenses of $142,183, marketing expenses of $100,183, filing fees of $62,243 and insurance expenses of $60,525. General and administrative expenses for the six months ended December 31, 2023, and 2022, were $11,906,602 and $8,569,903, respectively, representing an increase of $3,336,699 or approximately 39%. The variance is related to an increase in non-cash consulting fees of $4,470,000, investor relations expenses of $241,051, insurance expenses of $178,836, and marketing expenses of $121,183, partially offset by a decrease in compensation and related expenses of $970,649 and legal expenses of $859,497. Research and development expenses for the three months ended December 31, 2023, and 2022, were $620,521 and $325,959, respectively, representing an increase of $294,562 or approximately 90%. The variance is primarily driven by an increase of $129,990 in consumables related to pre-clinical testing and $104,628 in consulting expenses related to regulatory and outsourced consultants. Research and development expenses for the six months ended December 31, 2023, and 2022, were $1,187,165 and $2,931,334, respectively, representing a decrease of $1,744,169 or approximately 60%. The variance is primarily driven by a decrease of $2,188,807 in collaborating partner expenses with CDMO and CROs related to discontinued product candidates, partially offset by an increase in consumables of $239,619 and consulting expenses of $200,655. The Company recorded other expense of $259,046 for the three months ended December 31, 2023, compared to other expense of $89,882 for the three months ended December 31, 2022, representing an increase in other expense of $169,164 or 188%. The variance is primarily due to an increase of $182,092 in interest expense related to the convertible promissory notes and other notes entered into in the current period. The Company recorded other expense of $549,960 for the six months ended December 31, 2023, compared to other expense of $599,026 for the six months ended December 31, 2022, representing a decrease in other expense of $49,066 or 8%. The variance is primarily due to the loss on extinguishment of contingent consideration liability of 419,182 in the prior period, partially offset by an increase of $265,778 in interest expense and by the loss on extinguishment of debt of $120,018 in the current period. 39 Net Loss Net loss for the three months ended December 31, 2023, and 2022, was $4,529,121 and $4,457,748, respectively, representing an increase in net loss of $71,373 or approximately 2%. The increase in net loss was primarily due to a decrease in general and administrative expenses of $396,671, partially offset by an increase in research and development expenses of $294,562 and $182,092 of additional interest expense. Net loss for the six months ended December 31, 2023, and 2022, was $13,704,149 and $12,157,508, respectively, representing an increase in net loss of $1,546,641 or approximately 13%. The increase in net loss was primarily due to an increase in general and administrative expenses of $3,336,699, partially offset by a decrease in research and development expenses of $1,744,169. Liquidity and Capital Resources We have historically satisfied our capital and liquidity requirements through funding from stockholders, the sale of our Common Stock and warrants, and debt financing. We have never generated any sales revenue to support our operations and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee that a market for the therapies or products will develop. We may never be profitable. As noted above under the heading “Going Concern and Management’s Plans,” through December 31, 2023, we have incurred substantial losses. We will need additional funds for (a) research and development, (b) increases in personnel, and (c) the purchase of equipment, specifically to advance towards an Investigational New Drug Application (IND) following Pre-IND readouts from the FDA for RENB-DC11, RENB-HV12, RENB-HV01, RENB-HV21 and RENB-HB01. The availability of any required additional funding cannot be assured. In addition, an adverse outcome in legal or regulatory proceedings in which we are currently involved or in the future may be involved could adversely affect our liquidity and financial position. We may raise such funds from time to time through public or private sales of our equity or debt securities. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely affect our growth plans and our financial condition and results of operations. As of December 31, 2023, the Company had $243,980 in cash and working capital of $(11,355,216) as compared to $1,874,480 in cash and working capital of $(8,457,693) as of June 30, 2023, a decrease of 87% and 34%, respectively. Assets Total assets at December 31, 2023, were $58,018,120 compared to $58,300,796 as of June 30, 2023. The decrease in total assets was primarily due to the decrease in cash of $1,630,500, partially offset by increases in notes receivable of $1,073,625 and prepaids and other assets of $394,620. Liabilities Total liabilities at December 31, 2023, were $14,422,584 compared to $11,798,685 as of June 30, 2023. The increase in total liabilities was primarily related to increases of $2,569,379 in convertible notes payable, net of discount, $484,651 in other current liabilities and $281,095 in accounts payable, partially offset by a decrease of $684,947 in notes payable, net of discount. The following is a summary of the Company’s cash flows (used in) or provided by operating, investing, and financing activities: 40 Six Months Ended December 31, 2023 Six Months Ended December 31, 2022 Net Cash Used in Operating Activities $ (5,923,830 ) $ (6,205,145 ) Net Cash Used in Investing Activities (1,115,209 ) (23,633 ) Net Cash Provided by Financing Activities 5,409,682 1,158,375 Effect of exchange rates on cash (1,143 ) 17,157 Change in Cash and Cash Equivalents $ (1,630,500 ) $ (5,053,246 ) Cash Flows Cash used in operating activities for the six months ended December 31, 2023, and 2022 was ($5,923,830) and ($6,205,145), respectively. Cash used in operating activities during the current period primarily related to the next loss including $1,187,165 in research and development expenses for CDMO and CRO costs, along with approximately $5,554,634 in general and administrative expenses, net of non-cash items, partially offset by an increase in accounts payable of $281,095 due to the timing of cash payments and a $516,296 increase in prepaid expenses. Cash used in investing activities for the six months ended December 31, 2023, and 2022 was ($1,115,209) and ($23,633), respectively. Cash used in investing activities during the current period related to the issuance of notes receivable totaling $1,050,000 in principal and $23,625 of interest accrued as of December 31, 2023 (see Note 3.) Cash provided by financing activities for the six months ended December 31, 2023, was $5,409,682 as compared to cash provided by financing activities of $1,158,375 during the six months ended December 31, 2022. During the six months ended December 31, 2023, the Company received net proceeds of $3,490,000 from issuance of promissory notes, $2,000,000 from a private placement and $341,865 from Common Stock warrants exercised, that were partially offset by $422,183 in repayment of a finance agreement. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Significant Accounting Policies and Critical Accounting Estimates The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. For a summary of our accounting policies, see Note 1 to the unaudited condensed consolidated financial statements. 41 Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information required by this Item.