Audited Full Year Fiscal 2024 Results

Renalytix PLC

21 November 2024

 

Renalytix plc

("Renalytix" or the "Company")

Audited Full Year Fiscal 2024 Results

LONDON and NEW YORK, 21 November 2024 - Renalytix plc (LSE: RENX) (OTCQB: RNLXY), an artificial intelligence-enabled in vitro diagnostics company, focused on optimizing clinical management of kidney disease to drive improved patient outcomes and health care cost reduction, reports audited financial results for the fiscal year ended 30 June 2024.

The Company has now largely completed its reorganization from development activities to commercial sales, and has implemented a new large customer launch of kidneyintelX.dkd post-period end. With growing commercial adoption, significantly lower operating expenses, an 80% reduction of outstanding debt obligations, and an £11.8m funding closed on 4 November 2024, Renalytix is funded and projected to deliver anticipated profitability in two years with no further funding requirements.

kidneyintelX.dkd, is the only kidney prognostic test that is FDA approved; has full Medicare reimbursement granted at $950 per test; is recommended in the international clinical care guidelines; is available to approximately 14m US diabetic kidney disease ("DKD") patients; and is able to address the needs of approximately ~250M DKD patients globally.

Full Year Fiscal 2024 highlights

Continued commercial progress

·    Achieved full Medicare reimbursement at $950 per reportable result in May

·    Launched the FDA-approved kidneyintelX.dkd across all existing customers to replace the KidneyIntelX laboratory developed test

·    Recommended for use in international clinical care guidelines (Kidney Disease Improving Global Outcomes)

·    kidneyintelX.dkd commercial launch begun in September with a large New York-based physician group practice  primary care network serving over 500,000 patients

·    Issued three-year guidance on expected revenue growth: c. $3.2m in FY25, $8.5m in FY26 and $17.5m in FY27

·    Hired new commercial leadership with a track record of diagnostic sales success

·    Revamped customer service and ordering process to improve doctor experience during test ordering

Funded to profitability in two years

·    £11.8m fundraise completed in November, is expected take the Company through profitability and cash-flow break-even in two years

·    Successfully renegotiated senior convertible loan notes and accounts payable removing more than 80% of cash obligations over next three years (c. £485,000 per month)

·    US trading platform moved to OTCQB^® Venture Market and expected re-instatement of Foreign Private Issuer ("FPI") status in January for additional excepted savings of up to £1.9m annually

·    Over-all monthly cash burn expected to be reduced to £560,000 target by the end of FY25

Corporate Highlights

·    Julian Baines, MBE appointed as Executive Chairman

·    Daniel Levangie resigned from Board of Directors

James McCullough, CEO of Renalytix commented: "We now have everything in place to scale test ordering and expand our unique biomarker precision medicine services. The incoming Trump Administration's refocusing of the US Government on chronic disease cost control makes this a particularly enticing time to establish a new, FDA approved standard of care in one of the largest unmet preventative medicine opportunities, chronic kidney disease."    

Investors are advised to read the results for the 12 months ended 30 June 2024, which has been filed with the U.S. Securities and Exchange Commission on Form 10-K.

For further information, please contact:

Renalytix plc	www.renalytix.com
James McCullough, CEO	Via Walbrook PR
Stifel (Nominated Adviser and Joint Broker)	Tel: [phone]
Nicholas Moore / Nick Harland / Ben Good
Oberon Capital (Joint Broker)	Tel: [phone]
Mike Seabrook / Nick Lovering
Walbrook PR Limited	Tel: [phone] or [e-mail]
Paul McManus / Alice Woodings	Mob: [phone]
CapComm Partners
Peter DeNardo	Tel: [phone] or [e-mail]

About Renalytix

Renalytix (LSE: RENX) (OTCQB: RNLXY) is an artificial intelligence enabled in vitro diagnostics and laboratory services company that is the global founder and leader in the field of bioprognosis™ for kidney health. In late 2023, our kidneyintelX.dkd test was recognized as the first and only FDA-authorized prognostic test to enable early-stage CKD (stages 1-3b) risk assessment for progressive decline in kidney function in T2D patients. By understanding how disease will progress, patients and clinicians can take action earlier to improve outcomes and reduce overall health system costs.

Unrecognized and uncontrolled kidney disease remains one of the largest barriers to controlling cost and suffering in the United States and the United Kingdom's medical system, affecting over 14 million and 8 million people, respectively. After five years of development and clinical validation, kidneyintelX.dkd is the only FDA approved prognostic tool capable of understanding a patient's risk with kidney disease early where treatment has maximal effect. kidneyintelX.dkd is now being deployed across large physician group practices and health systems in select regions of the United States. 

The over 10,000 patients that have been tested by kidneyintelX.dkd have produced a substantial body of real-world performance data. In patient populations where kidneyintelX.dkd has been deployed, a demonstrated and significant increase in diagnosis, prognosis, and treatment rates have been recorded. kidneyintelX.dkd now has full reimbursement established by Medicare, the largest insurance payer in the United States, at $950 per reportable result. kidneyintelX.dkd is also recommended for use in the international chronic kidney disease clinical guidelines (KDIGO). 

For more information, visit www.renalytix.com.

CEO Statement

During the prior year we have taken considerable and painful steps to reorganize our Company and complete the transition from a development-phase organization to a commercial growth-phase business. With substantive reductions in operating expenses, restructuring of debt and payable obligations, and in November, the completion of a fresh institutional funding, we now believe that the Company will be able to achieve profitability in 2 years. 

With the positive June Medicare coverage decision, kidneyintelX.dkd has just completed the trifecta of FDA approval, insurance reimbursement and guidelines recommendation. kidneyintelX.dkd is now the only regulated and reimbursed test available for early prognosis, a cornerstone in understanding who is at risk and who to treat with lifetime drug therapy for some 14 million patients with diabetic kidney disease in the United States.  

In the United States, over 80% of our $4.5 trillion national healthcare budget is spent on chronic disease.  Yet the U.S. has one of the poorest life-expectancies in the developed world - a U.S. male can expect to live 10 years less than in Japan or Switzerland. Chronic kidney disease, the third fastest-growing cause of death globally, is one of the principal drivers of this unsustainable dynamic. 

The great news is that new drug therapies such as SGLT2 inhibitors and GLP1 agonists are now available for individuals with diabetes and kidney disease and have dramatically changed the game. However, we simply cannot afford to blanket prescribe these expensive drugs across such large populations at costs approaching $30,000 per year for life.¹ 

kidneyintelX.dkd opens the door to heavily vetted prognostic risk assessment to front-line doctors making critical choices during the short patient visit times allotted.  Indeed, world experts, including in the 2024 clinical guidelines², are now strongly advocating prognosis to enable a personalized approach to treatment and patient identification. And to put this in perspective, kidneyintelX.dkd prognosis can be executed for less than one month's worth of drug therapy cost.

After a multi-year process, the decision in May 2024 by Medicare contractor National Government Services to provide full coverage for kidneyintelX.dkd at $950 per reportable result, is now allowing for settlement of billed tests in under 30 days and an increase to our realized average sales price. Achieving Medicare insurance coverage represents a key commercial milestone given that Medicare and its related insurance plans make up the majority of our addressable patient market in the United States.

We are continuing to perfect the commercial implementation of kidneyintelX.dkd into doctor practice groups using the electronic medical record system to automatically identify eligible patients for testing, accompanied by a doctor best practice alert. Our sales team is now able to walk into this message-integrated environment with doctors already alerted to at-risk patients with the actionable benefits of kidneyintelX.dkd. We are seeing the benefits of this integrated approach to order generation this quarter and expect to leverage this model with additional large group practices in calendar 2025.

The Environment is Heating Up for kidneyintelX.dkd 

Chronic disease and preventative medicine are now taking center stage with regard to policy on both sides of the Atlantic to address unsustainable healthcare costs.

The return of a Trump Administration has already brought the discussion on chronic disease management policy to the forefront. U.S. Health and Human Services Secretary nominee Robert Kennedy has pledged to "end the chronic disease epidemic in the country". The KidneyIntelX prognostic program benefited greatly from the previous Trump Administration's chronic disease regulatory and insurance policy environment. We also note a parallel policy discussion emerging in the United Kingdom with Health Secretary, Wes Streeting's chronic disease platform for revival of NHS. Law makers on both sides of the Atlantic have woken to the fact that without controlling chronic disease, of which kidney disease is a large component, there will be no taming health care budgets. We would expect kidneyintelX.dkd, to have renewed opportunities to support both governments' preventative medicine goals. 

Also, of strategic importance to the kidneyintelX.dkd top line was New York Governor Kathy Hochul's signing into law of Senate Bill1196a/Assembly Bill 1673a ( https://www.governor.ny.gov/news/governor-hochul-takes-action-protect-public-health-signs-legislative-package-support-patients) which requires all insurance companies, including state Medicaid, to cover comprehensive diagnostic biomarker testing for patients beginning January 1^st, 2025. While we will remain cautious about actual government implementation dates, this type of legislation has received broad bi-partisan support and can have a significant positive impact on kidneyintelX.dkd adoption, average testing sales price and revenue recognition. Other states in our commercial focus are also in process of enacting similar legislation and we will provide updates as they become available.  

Reorganized for Expense Reduction and Commercial Execution

In Fiscal year 2024, we completed a substantial reorganization of our business and raised enough money to secure the run through profitability. Our execution was painful, wholly necessary and only available to us now that we have achieved the regulatory, outcomes data and reimbursement trifecta. The Company is now devoting the significant majority of resources to our sales program with much less cash required to operate. Two big moves below have allowed us to target a cash burn rate of £560,000 or less per month by the end of FY25 (June). 

·    Debt and Payables Reduction

Post year end, we have successfully renegotiated the terms of our £8.7 million amortizing senior convertible loan notes. We have improved our accounts payable situation and negotiated with other accounts payable creditors to reduce or write-off their balances. The various actions that we've taken will substantially reduce the Company's monthly cash burn and we estimate that this will remove more than 80% of the total forecasted cash obligations of the Company over the next three years (approximately £485,000 per month).

·    Transfer of U.S. Trading to OTCQB and Re-qualification of Foreign Private Issuer Status

Having considered the benefits versus the costs of maintaining the Nasdaq listing, we have decided to transition U.S. trading of our ADS securities to the OTCQB ^® Venture Market, which is operated by OTC Markets Group, from the NASDAQ Global Market on October 7^th.  In addition, at our next testing date for Foreign Private Issuer ("FPI") status, the Company expects to qualify as an FPI. We anticipate that transferring the trading to OTCQB and re-acquisition of FPI status will provide significant savings of up to £1.9 million p.a.

Financing

Post year end, the Company raised an additional £11.8 million with strong institutional demand that exceeded our initial funding target. Inside management was an important investment player, and we received long-term cornerstones from both large UK and US institutions.

Board changes

It is with great pleasure that Renalytix has secured Julian Baines MBE as our new Executive Chairman. Julian was formerly the Non-Executive Chairman of Renalytix from March 2018 to June 2020. I am also delighted Christopher Mills, our long-serving Chairman will continue on the Board as a Non-Executive Director of the Company.

Thank you for your continued confidence.

James McCullough, Chief Executive Officer

Notes

¹Clinical practice is moving towards the "four pillars" of diabetic kidney disease therapeutic management which includes combination use of ACEi/ARB, SGLT2 inhibitors, Finerenone and GLP1 RAs.  Estimated costs of SGLT2 Inhibitors, Finerenone and GLP1 RA are $12k, $7.9K and $11.6K annually.

²https://kdigo.org/wp-content/uploads/2024/03/KDIGO-2024-CKD-Guideline.pdf

Financial Review

The results presented cover FY24. The presentational currency for Renalytix plc and its subsidiaries (together, the "Group") is the United States Dollar.

INCOME STATEMENT

Revenue

The Group recognized a total of $2.3 million in revenue in the financial year ended 30 June 2024 ("FY24") (financial year ended 30 June 2023 ("FY23"): $3.4 million) which was comprised of $2.15 million in revenue related to testing services  (FY23: $3.12 million) as well as $0.14 million related to pharmaceutical services revenue (FY23: $0.28 million).

Cost of sales

The cost of sales associated with the services performed and commercial testing revenue was $2.1 million for FY24 (FY23: $2.7 million).

Administrative costs

During FY24, administrative expenses totaled $30.7 million (FY23: $43.1 million). The major items of expenditure were general and administrative costs which included $12.1 million in employee-related costs (FY23: $21 million), $7.1 million in subcontractors, legal, accounting, and other professional fees (FY23: $5.9 million), $5.1 million in external R&D Services, lab supplies and lab services (FY23: $8.0 million), $1.4 million in insurance (FY23: $2.7 million), $2 million in depreciation and amortisation (FY23: $2.1 million), $0.7 million in marketing and public relations (FY23: $1.3 million), $1.1 million in IT related costs (FY23: $1.3million), $0.5 million in office related expenses including rent (FY23: $0.4 million), $0.2 million in stock exchange listing and filing fees (FY23: $0.1 million) and $0.5 million in other expenses (FY23: $0.3 million).

Gain (loss) on financial assets at fair value through profit or loss

The Group accounts for the investment in Verici Dx plc ("Verici Dx") equity securities at fair value, with changes in fair value recognized in the income statement. During the year ended 30 June 2024, we recorded a loss of $0.5 million to adjust the Verici Dx investment to fair value. During the year ended 30 June 2023, we recorded a loss of $1.3 million to adjust the Verici Dx investment to fair value.

Fair value adjustment of convertible debt

We elected to account for the convertible notes at fair value with qualifying changes in fair value recognized through the income statement until the notes are settled. This excludes fair value adjustments related to instrument-specific credit risk, which are recognized in OCI. For the year ended 30 June 2024, we recorded a loss of $3.8 million to adjust the convertible notes to fair value. For the year ended 30 June 2023, we recorded a loss of $3.1 million to adjust the convertible notes to fair value.

Finance income (expense)

During the year ended 30 June 2024, we recognized a gain of $0.2 million, which was comprised of $0.2 million of grant income, $0.2 million interest income earned on our cash deposits, and offset by $0.5 million of foreign exchange losses and $0.1 million of realized loss on the sale of Verici Dx shares. During the year ended 30 June 2023, we recognized a gain of $0.5 million, which was comprised of $0.2 million of income related to the dissolution of Kantaro, $0.3 million of income for refunds from Citibank, $0.1 million interest income earned on our cash deposits, and offset by $0.1 million of foreign exchange losses.

BALANCE SHEET

Inventory

Inventory consists of consumable materials used by the labs to carry out KidneyIntelX tests. Inventory on hand at 30 June 2024 totaled $0.3 million (FY23: $0.7 million).

Fixed Assets

Property, plant, and equipment consists of laboratory equipment being used to support testing and product development activities. At 30 June 2024, the group held $0.2 million in net property, plant, and equipment (FY23: $1.0 million).

Intangible assets

The Group held Nil net book value of intangible assets at 30 June 2024 (FY23: $12.5 million). The Group has fully impaired its intangible assets. The intangible assets were made up of payments to Mount Sinai for license fees, patent costs for the intellectual property underlying KidneyIntelX, as well as amounts capitalized as development costs. Intangible assets also included the value of the biomarker business purchased (in exchange for ordinary shares in the Company) from EKF Diagnostics Holdings plc. In addition to impairment charges the intangible assets decreased over the year due to amortization and the impact of foreign exchange translation at year end.

Investment in Verici Dx

At the end of FY24 the group held 8,831,682 shares in Verici Dx, the fair value of the investment in Verici Dx was $0.7 million at 30 June 2024 (FY23: $1.5 million).

Convertible Note

In April 2022, the Company issued amortising senior convertible bonds with a principal amount of $21.2 million due in April 2027 (the "Bonds"). The Bonds were issued at 85% par value with total net proceeds of $18.0 million. The Company elected to account for the Bonds at fair value. As at 30 June 2024, the Bonds had a fair value of $8.5 million. At 30 June 2023, the Bonds had a fair value of $11.9 million. Post year end, the convertible note has been restructured with approximately $3.96 million converted to equity through the issuance of 33,000,000 ordinary shares at 9 pence per share and the balance restructured as a new unsecured convertible bond. The new convertible bond will accrue interest at a rate of 5.5 per cent. per annum, if paid in cash, or 7.5 per cent. per annum, if rolled into the principal amount of the bond, at the discretion of the Company. The New Convertible Bond will have a maturity date of 31 July 2029 and may not be converted before 1 April 2026 except in the event that the Company undertakes a further qualifying equity issuance in the future, in which case the New Convertible Bond may be converted at the placing price thereunder. The New Convertible Bond is callable by the Company at any time prior to maturity.

Cash

The Group had cash on hand of $4.7 million (FY23: $24.7 million). Cash and equivalents are held in several deposit accounts in the US ($2.4 million), UK ($2.1 million) and IRE ($0.1 million).

Consolidated Income Statement

FOR THE YEAR ENDED 30 JUNE 2024

		2024			2023
		$'000			$'000
Continuing Operations
Revenue			2,289			3,403
Cost of Sales			(2,076)			(2,702)
Gross profit			213			701
Administrative expenses			(30,733)			(43,056)
Operating loss			(30,520)			(42,355)
Share of Net loss in Associate accounted for using the equity method			-			(9)
Impairment of Intangibles			(10,472)			-
Gain (loss) on financial assets at fair value through profit or loss			(505)			(1,273)
Fair value adjustment of convertible debt			(3,750)			(3,093)
Finance (expenses) / income - net			(223)			509
Loss before tax			(45,470)			(46,221)
Taxation			-			(2)
Loss for the Year			(45,470)			(46,223)
Earnings per Ordinary share
Basic		$	(0.42)		$	(0.56)
Diluted		$	(0.42)		$	(0.56)

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 JUNE 2024

		2024			2023
		$'000			$'000
Loss for the year			(45,470)			(46,223)
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss
Changes in the fair value of the convertible notes			306			719
Currency translation differences			(270)			(337)
Other comprehensive income for the year			36			382
Total comprehensive loss for the year			(45,434)			(45,841)

Consolidated Statements of Financial Position

AS AT 30 JUNE 2024

		2024			2023
		$'000			$'000
Assets
Non-current assets:
Property, plant and equipment			213			1,027
Right of use asset			-			194
Intangible assets			-			12,511
Other long term assets			71			51
Total non-current assets			284			13,783
Current assets
Inventory		271			718
Security Deposits			77			132
Financial asset at fair value through profit or loss			698			1,460
Trade and other receivables			722			776
Prepaid and other current assets			364			566
Cash and cash equivalents			4,680			24,682
Total current assets			6,812			28,334
Total assets			7,096			42,117
Equity attributable to owners of the parent
Share capital			491			299
Share premium			121,813			104,953
Share-based payment reserve			14,452			13,513
Accumulated other comprehensive income			(1,086)			(1,127)
Retained earnings/(deficit)			(144,654)			(99,184
Total (liability)/equity			(8,984)			18,454
Liabilities
Current liabilities:
Trade and other payables			7,544			11,513
Current lease liabilities			46			156
Note payable current			4,159			4,463
Total current liabilities			11,749			16,132
Non-current liabilities
Note payable non-current		4,331			7,485
Non-current lease liabilities			-			46
Total non-current liabilities			4,331			7,531
Total liabilities			16,080			23,663
Total equity and liabilities			7,096			42,117

Consolidated and Company's Statements of Cash Flows

FOR THE YEAR ENDED 30 JUNE 2024

		2024			2023
		$'000			$'000
Cash flows from operating activities:
Loss before income tax			(45,470)			(46,221)
Adjustments for
Depreciation			184			341
Amortisation			2,255			2,151
Impairment of assets			10,472			-
Impairment of property and equipment			631			-
Share-based payments			1,083			1,560
Share of net loss of associate			-			9
Reversal of Kantaro Liability			-			(55)
Unrealized loss on financial asset at fair value through profit or loss			505			1,273
Realized loss on sale of ordinary shares in Verici Dx			136			-
Fair value adjustment of convertible debt			3,750			3,093
Foreign Exchange gain			(165)			(1,008)
Changes in working capital
Trade and other receivables			54			125
Prepaid assets and other current assets			202			1,298
Related party receivable			55			75
Inventory			447			442
Security Deposits			-			141
Trade and other payables			(3,969)			4,148
Deferred Revenue			-			(46)
Net cash used in operating activities			(29,830)			(32,674)
Cash flows from investing activities:
Proceeds from sale of investments			117			-
Investment in Renalytix Inc			-			-
Net cash generated by investing activities			117			-
Cash flows from financing activities
Repayment of convertible notes			(1,660)			(4,288)
Issue of shares (net of issue costs)			11,817			19,306
Proceeds from the issuance of ordinary shares under employee share purchase plan			93			261
Lease payments			(156)			(160)
Net cash generated from financing activities			10,094			15,119
Net decrease in cash and  cash equivalents			(19,619)			(17,555)
Cash and cash equivalents at beginning of period			24,682			41,333
Effect of exchange rate changes on cash			(383)			904
Cash and cash equivalents at end of period			4,680			24,682

Consolidated Statement of Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2024

						Share-based	Accumulated other
		Share Capital		Share Premium		payment reserve	comprehensive income		Retained deficit		Total Equity
		$'000		$'000		$'000	$'000		$'000		$'000
At 30 June 2022		241		85,444		11,954	(1,509)		(52,961)		43,169
Comprehensive income
Loss for the year		-		-		-	-		(46,223)		(46,223)
Other comprehensive income
Changes in fair value of convertible notes		-		-		-	719		-		719
Currency translation differences		-		-		-	(337)		-		(337)
Total comprehensive income		-		-		-	382		(46,22)		(45,841)
Transactions with Owners
Share-based payments		-		-		1,559	-		-		1,559
Shares issues under ESPP		1		260		-	-		-		261
Shares issued under Securities Purchase Agreement		57		20,240		-	-		-		20,297
Less issue costs		-		(991)		-	-		-		(991)
Total transactions with owners of the parent, recognized directly in equity		58		19,509		1,559	-		-		21,126
At 30 June 2023		299		104,953		13,513	(1,127)		(99,184)		18,454
Comprehensive income
Loss for the year		-				-	-		(45,470)		(45,470)
Other comprehensive income
Changes in fair value of convertible notes		-				-	306		-		306
Currency translation differences		-		(5)		-	(265)		-		(270)
Total comprehensive income		-		(5)		-	41		(45,470)		(45,434)
Transactions with Owners
Share-based payments		-				1,083	-		-		1,083
Shares issues under ESPP		-		93		-	-		-		93
Shares issued for repayment of convertible bond		30		4,978		-	-		-		5,008
Vesting of RSUs		1		138		(144)					(5)
Shares issued under Securities Purchase Agreement		161		13,372		-	-		-		13,533
Less issue costs				(1,716)		-	-		-		(1,716
Total transactions with owners of the parent, recognized directly in equity		192		16,865		939	-		-		17,996
At 30 June 2024		491		121,813		14,452	(1,086)		(144,654)		(8,984)

Notes to the Financial Statements

1. GENERAL INFORMATION AND BASIS OF PRESENTATION

Renalytix Plc (the "Company") is a company incorporated in the United Kingdom. The Company is a public limited company, which is listed on the AIM market of the London Stock Exchange and Nasdaq global market. The address of the registered office is 2 Leman Street, London, United Kingdom, E1W 9US. The Company was incorporated on 15 March 2018 and its registered number is 11257655.

The principal activity of the Company and its subsidiaries (together "the Group") is as a developer of artificial intelligence- enabled diagnostics for kidney disease.

The financial statements are presented in United States Dollars ("USD") because that is the currency of the primary economic environment in which the Group operates.

2. BASIS OF PRESENTATION

The Group and Company's financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

3. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below.

Going concern

The Group and Company fund their day-to-day working capital needs through existing cash reserves. The Directors have evaluated the use of the going concern basis in preparing these financial statements.

The Group has historically experienced recurring losses and negative cash flows. Despite this, significant strides have been made in the commercialisation of kidneyintelX.dkd, and business objectives have been realigned for sharper focus. For the year ending 30 June 2024, the Group recorded a loss of $45.5 million, with cash reserves of $4.7 million at year-end. Substantial steps have been taken to refine the Company's commercial strategy to achieve consistent, scalable results in the coming periods. Key actions taken include:

●	Cost reductions: During the year, the Company significantly reduced its cost base, halving employee numbers from over 80 to around 40 post-year-end, and cutting legal, professional, R&D expenses and other expenses which are not necessary at this stage of the business. In Q1 2025 (quarter ending September 2024), operating expenses were 4.2 million, down over 50% from $8.8 million in Q1 2024 (quarter ending September 2023). The Group projects operating expenses for FY 2025 to be significantly lower than FY 2024's total of $30.7 million.
●	Fundraising: A post-year-end fundraising in November 2024 raised approximately $14.9 million after expenses and substantially restructured the outstanding liabilities on the financial position. Approximately $3.9 million in convertible notes was converted to equity along with a $750K liability converted to a mix of equity and five year long non-amortizing loan. Additionally, the remaining balance of the convertible note was converted to an interest-only non-amortizing loan due July 2029 with interest fixed at 5.5% p.a. if paid in cash or 7.5% p.a. if rolled into the balance of the loan.
●	Commercial Growth: Recent initiatives to expand kidneyintelX.dkd include the rollout of commercial testing with a new health system, Advantage Care Physicians (ACPNY"), with test ordering and processing having commenced in September 2024. Additionally, a significant expansion in patient blood draw options, a simplified test order requisition form to reduce doctor workload, and improvements in customer service and test services billing all offer an improved end-to-end user experience which the Company believes will support continued test volume growth.

Despite these measures, historical losses and ongoing cash needs pose a challenge to the Group's going concern status. The Directors recognize that continued operation may require additional capital to fund operations, support commercial growth, and develop new products. Although there are no immediate plans for further funding via equity or debt, the Group aims to build investor confidence through effective use of the current fundraising and strategic initiatives over the next 12 months.

The Company has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit in retained earnings of $145.5 million as of 30 June 2024. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of kidneyIntelX.dkd or KidneyIntelX technology services income.

The Company's ability to continue as a going concern is contingent upon successful execution of management's intended plan over the next 24 months to improve the Company's liquidity and profitability, which includes, without limitation:

●	The achievement of certain testing volumes in the lab;
●	Continued expansion of reimbursement policies and contracts with commercial payers; and
●	Continued management of operating and commercial expenses.

As a result of the Company's losses and its projected cash needs, along with the limited recent history of test order volume increases, as defined in the accounting literature, substantial doubt exists about the Company's ability to continue as a going concern. Subsequent to 30 September 2024, the Company has successfully raised approximately $14.9 million in new equity capital and restructured the existing long-term debt recorded on the Balance Sheet.  However, the Company does have a history of operating losses and it has been expensive to deliver all of the milestones to commercialize the kidneyintelX.dkd test. Should the company require additional capital it may not be available on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any future financing may adversely affect the holdings or the rights of the Company's shareholders. Should it be necessary, if the Company is unable to obtain funding it could be required to delay, curtail or discontinue research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects.  As such, management has concluded that there is a going concern uncertainty. The consolidated financial statements do not include any adjustments that may result from the outcome of this going concern uncertainty.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

All intra-group balances and transactions, including any unrealized income and expense arising from intra-group transactions, are eliminated in full in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment

Intangible assets

(a) Trademarks, trade names and licenses

Separately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licenses over the contractual license period of 10 to 15 years and is charged to administrative expenses in the income statement.

(b) Development costs and trade secrets

Development costs have a finite useful life and are carried at cost less accumulated amortisation.

Expenditure incurred on the development of new or substantially improved products or processes is capitalized, provided that the related project satisfies the criteria for capitalisation, including the project's technical feasibility and likely commercial benefit. All other research and development costs are expensed to profit or loss as incurred.

Development costs are amortised over the estimated useful life of the products with which they are associated. amortisation commences when a new product is in commercial production. The amortisation is charged to administrative expenses in the income statement. The estimated remaining useful lives of development costs are reviewed at least on an annual basis.

The carrying value of capitalized development costs is reviewed for potential impairment at least annually and if a product becomes unviable and an impairment is identified the deferred development costs are immediately charged to the income statement. Amortisation has not yet commenced.

Trade secrets, including technical know-how, operating procedures, methods and processes, are recognized at fair value at the acquisition date. Trade secrets have a finite useful life and are carried at cost less accumulated amortisation. amortisation has not yet commenced.

Impairment of non-financial assets

Assets that have an indefinite life or where amortisation has not yet commenced are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognized for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognized in the income statement immediately. If goodwill is impaired however, no reversal of the impairment is recognized in the financial statements.

Revenue Recognition

The Group recognizes revenue when a customer obtains control of contracted goods or services. The Group records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. The revenue recognition will be assessed under IFRS 15 - Revenue from Contracts with Customers, to establish the principal and agent in the relationship between the parties and with the end customer.

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

4. INCOME TAX

		2024			2023
Group		$'000			$'000
Deferred tax			-			-
Total deferred tax			-			-
Income tax (charge)/credit			-			-

No deferred asset is calculated on losses in FY24 as the probability of future utilization is considered too remote.

Factors affecting the future tax charge

The standard rate of corporation tax in the UK is 25%.

		2024			2023
		$'000			$'000
Loss before tax			45,470			46,221
Tax Calculated at domestic tax rates applicable to the UK Standard of tax at 25% (2023: 25%)			11,368			11,555
Tax effects of:
Expenses not deductible for tax purposes			(363)			(872)
Losses on which no deferred tax asset is recognized			(94)			(85)
Tax credit for the year			10,911			10,598
Current Year Valuation Allowance			(10,911)			(10,598)
Prior year deferred tax asset			-			-
Reversal of tax asset at 30 June			-			-
Tax expense			-			(2)
Total Income Tax (Expense)/Credit			-			(2)

Net losses can be carried forward indefinitely to offset future taxable profits however management has concluded that the realization of deferred tax assets to be less than probable and recorded a full valuation allowance. No deferred asset is calculated on losses in the UK totaling $154,825,000 where the probability of future utilization is considered too remote.

5. NET LOSS PER SHARE

Basic net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during each period. Diluted net loss per ordinary share includes the effect, if any, from the potential exercise or conversion of securities, such as options which would result in the issuance of incremental ordinary shares. Potentially dilutive securities outstanding as of 30 June 2024 have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive. Therefore, the weighted average number of shares used to calculate both basic and diluted net loss per share are the same.

The following is a reconciliation of basic net loss per share to diluted net loss per share for the fiscal years ended June 30, 2024, and 2023.

		2024				2023
Basic earnings per share		$	(0.42	)		$	(0.56	)
Average shares outstanding - basic			108,179,366				82,210,050
Convertible debt shares			-				-
Adjusted average shares outstanding - diluted			108,179,366				82,210,050
Diluted earnings per share		$	(0.42	)		$	(0.56	)

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of ordinary shares outstanding as they would be anti-dilutive:

		2024				2023
Stock options to purchase ordinary shares			7,473,866				4,968,576
Restricted stock units			7,930				40,340
Conversion of convertible note			3,264,719				5,441,199
			10,746,515				10,450,115

6. INTANGIBLE ASSETS

Group		Trademarks, Trade Names & Licenses			Trade Secrets			Development Costs				Total
		$'000			$'000			$'000				$'000
Cost
At 1 July 2022			9,279			6,275			4,055				19,609
Additions			-			-			-				-
Foreign translation			381			258			144				783
At 30 June 2023			9,660			6,533			4,199				20,392
Amortisation
At 1 July 2022			3,789			1,098			702				5,589
Charge for the year			922			624			432				1,978
Foreign Translation			199			75			40				314
At 30 June 2023			4,910			1,797			1,174				7,881
Net book value
At 30 June 2023			4,750			4,736			3,025				12,511
Cost
At 1 July 2023			9,660			6,533			4,199				20,392
Additions			-			-			-				-
Impairment			(9,687)			(6,551)			(4,209)				(20,447)
Foreign translation			27			18			10				55
At 30 June 2024			-			-			-				-
Amortisation
At 1 July 2023			4,910			1,797			1,174				7,881
Charge for the year			963			651			447				2,061
Impairment			(5,892)			(2,457)			(1,626)				(9,975)
Foreign Translation			19			9			5				33
At 30 June 2024			-			-			-				-
Net book value
At 30 June 2024			-			-			-				-

7. SUBSEQUENT EVENTS

On July 15, 2024, the Company announced the repayment of $1.06 million of the principal amount of the Company's convertible bond and the interest for the period through the issuance of 2,275,000 Ordinary Shares and 4,641,161 American Depositary Shares ("ADSs"). 11,557,322 new ordinary shares of £0.0025 each in the capital of the Company will be issued to settle including conversion of 4,641,161 ADSs (9,282,322 Ordinary Shares with each ADS representing two Ordinary Shares). After settlement of the repayment, the principal remaining under the convertible bond will be reduced by $1.06 million to $11.66 million.

On 30 September 2024 the company announced that it had received commitments from existing and new investors to raise £11.9m through a subscription of 128,738,833 new ordinary shares at 9 pence per share. The company also issued  36,541,666 new ordinary shares at 9 pence per share to convert part of the existing Convertible Debt to equity and convert part of the accounts payable balance to equity. In respect to the convertible bond the company successfully converted £2.97m of the bond to equity via the issue of 33 million new ordinary shares and the remaining balance treated as new unsecured convertible bonds with interest at a rate of 5.5% per annum if paid in cash, or 7.5% per annum if rolled into the principal amount of the debt, at the discretion of the company. The new convertible bond will be non-amortizing, have a maturity date of 31 July 2029 and may not be converted before 1 April 2026.  The bonds are callable at the Company's option at any time prior to maturity.  In respect to the accounts payable balance with a professional adviser, $750,000 has been restructured such that $425,000 of the balance has been converted into equity and $325,000 has been restructured as a long term promissory note, bearing paid-in-kind interest at 5% per annum.  The new note will be due at the earlier of 5 years from the initiation of the note, or accelerated should the Company be acquired prior to maturity.  The Company may prepay the note at any time without penalty.  The equity financing commitments closed in two tranches, the first on October 8, 2024, and the second on November 4, 2024, with all net proceeds received by the company on the closing dates.  All debt restructurings were effective with the second close of the equity financing.   

8. RECONCILIATION OF IFRS TO US GAAP

Since Renalytix's initial listing on Nasdaq, the Company has followed accounting principles generally accepted in the United States of America ('US GAAP'), both for internal as well as external purposes. The information below is unaudited and does not form part of the statutory accounts.

Renalytix Form 10-K, which is based on US GAAP, contains differences from its Annual Report, which is based on IFRS.

The Form 10-K and Annual Report are available on the Company's website (www.renalytix.com). In order to help readers to understand the difference between the Group's two sets of financial statements, Renalytix has provided, on a voluntary basis, a reconciliation from IFRS to U.S. GAAP as follows:

BALANCE SHEET

		GAAP				IFRS				GAAP vs IFRS
		As at 30 June 2024				As at 30 June 2024				Difference
		$'000				$'000				$'000
Assets
Cash			4,680				4,680				-
Accounts receivable			722				722				-
Prepaid expenses and other current assets			716				712				4			(a)
Property, plant and equipment, net			216				213				3			(a)
Intangibles, net			-				-				-			(b)
Investment in Verici Dx			698				698				-
Other assets			940				71				869			(c)
Total assets			7,972				7,096				876
Liabilities and stockholder's equity
Current Liabilities:
Note payable - current			4,159				4,159				-
Accounts payable			2,608				7,544				4,936			(d)
Accrued expenses and other current liabilities			3,354				-				(3,354	)		(d)
Accrued expenses - related party			1,329				-				(1,329	)		(d)
Current lease liability			45				46				1			(e)
Note payable - non current			4,331				4,331				-
Noncurrent lease liabilities			-				-				-
Total Liabilities			15,826				16,080				254
Stockholders' (deficit) equity:
Ordinary shares, £0.0025 par value per share: 161,944,807 shares    authorized; 154,368,191 and 93,781,478 shares issued and    outstanding at June 30, 2024 and June 30, 2023, respectively			478				491				13			(e)
Additional paid in capital			204,893				136,265				(68,628	)		(f)
Accumulated other comprehensive (loss) income			(1,443	)			(1,086	)			357			(g)
Accumulated deficit			(211,782	)			(144,654	)			67,128			(h)
Total stockholders' (deficit) equity			(7,854	)			(8,984	)			(1,130	)
Total liabilities and stockholders' (deficit) equity			7,972				7,096				(876	)

 

a.    Represents other immaterial presentation differences between US GAAP & IFRS

b.    Under IFRS, the acquisition of licenses and subsequent development efforts are capitalized and presented as intangible assets. Under U.S. GAAP, such costs are expensed as incurred until technological feasibility has been achieved or the assets are deemed to have future alternative use. In addition to capitalized software costs which are recorded as property and equipment under US GAAP and Intangibles under IFRS.

c.     Difference is attributable to capitalized software costs which are recorded as other assets under U.S. GAAP and Intangibles under IFRS.

d.    Accounts payable and other current liabilities are presented in the aggregate within the Annual report while broken out separately on the US GAAP 10-K. Difference represents other immaterial presentation differences and audit adjustments.

e.    Represents other immaterial audit adjustments.

f.     Represents cancellation of share premium account and reduction in accumulated deficit under IFRS in anticipation of a distribution of Fractal Dx net assets to the shareholders of Verici Dx in prior year. In addition, stock based compensation is recognized on a straight line basis under U.S. GAAP and a graded vesting basis under IFRS which creates timing differences as to when expenses are recorded.

g.    Represents the difference in weighted average foreign exchange rates and spot rates used for translation of financial statements under IFRS and U.S. GAAP.

h.    Represents cancellation of share premium and reduction in accumulated deficit under IFRS in anticipation of a distribution of FractalDx net assets to the shareholders of Verici Dx and differences noted within the Company's consolidated statement of operations and comprehensive loss.

 

RECONCILIATION OF NET LOSS

	$'000
Net loss in accordance with IFRS		(45,470)
Stock compensation expense		(626)	(i)
Amortisation and impairment of intangibles		12,352	(j)
Other adjustments		288	(k)
Net loss in accordance with US GAAP		(33,456)

i.      Stock based compensation is recognized on a straight line basis under U.S. GAAP and a graded vesting basis under IFRS which creates timing differences as to when expenses are recorded.

j.     Amortisation expense is higher on the IFRS books as a result of the higher intangible asset balance. Under IFRS, the acquisition of licenses and subsequent development efforts are capitalized and presented as intangible assets. Under U.S. GAAP, such costs are expensed as incurred until technological feasibility has been achieved or the assets are deemed to have future alternative use. Impairment charge has also been provided against the asset balance.  

k.    The remaining difference represents the aggregation of post year end audit fee accruals, other immaterial audit adjustments and small accounting standard difference.

 

END