Renalytix plc(RNLX) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis for the period ended September 30, 2024 Item 1. Consolidated Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Renalytix plc, including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Shareholders' Equity (Deficit), and Statements of Cash Flows, along with detailed notes explaining the company's business, accounting policies, and financial instruments for the period ended September 30, 2024 Consolidated Balance Sheets This table presents the company's financial position, including assets, liabilities, and shareholders' deficit, as of September 30, 2024, and June 30, 2024 | Metric | Sep 30, 2024 (in thousands) | Jun 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $909 | $4,680 | -$3,771 | | Total current assets | $2,879 | $6,118 | -$3,239 | | Total assets | $4,794 | $7,972 | -$3,178 | | Total current liabilities | $12,013 | $11,495 | +$518 | | Total liabilities | $16,113 | $15,826 | +$287 | | Total shareholders' deficit | $(11,319) | $(7,854) | -$3,465 | Consolidated Statements of Operations and Comprehensive Loss This table details the company's revenues, expenses, and net loss for the three months ended September 30, 2024, and 2023, including comprehensive loss | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :--------------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Revenue | $522 | $459 | +$63 | +14% | | Cost of revenue | $422 | $502 | -$80 | -16% | | Gross profit (loss) | $100 | $(43) | +$143 | -332% | | Research and development | $921 | $2,787 | -$1,866 | -67% | | General and administrative | $3,271 | $6,059 | -$2,788 | -46% | | Total operating expenses | $4,192 | $8,846 | -$4,654 | -53% | | Loss from operations | $(4,093) | $(8,889) | +$4,796 | -54% | | Net loss | $(4,728) | $(10,154) | +$5,426 | -53% | | Net loss per ordinary share—basic | $(0.04) | $(0.11) | +$0.07 | -64% | | Comprehensive loss | $(5,314) | $(10,037) | +$4,723 | -47% | Consolidated Statements of Shareholders' Equity (Deficit) This table outlines changes in the company's shareholders' equity (deficit) for the three months ended September 30, 2024, and 2023 | Metric | Balance at July 1, 2024 (in thousands) | Balance at Sep 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------- | :------------------------------------- | | Ordinary Shares Amount | $478 | $515 | | Additional paid-in capital | $204,893 | $206,705 | | Accumulated other comprehensive loss | $(1,443) | $(2,029) | | Accumulated deficit | $(211,782) | $(216,510) | | Total shareholders' deficit | $(7,854) | $(11,319) | Consolidated Statements of Cash Flows This table presents the cash inflows and outflows from operating, investing, and financing activities for the three months ended September 30, 2024, and 2023 | Cash Flow Activity | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :----------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Net cash used in operating activities | $(3,836) | $(9,504) | +$5,668 | -60% | | Net cash provided by investing activities | $23 | $0 | +$23 | N/A | | Net cash used in financing activities | $0 | $(1,065) | +$1,065 | -100% | | Net decrease in cash and cash equivalents | $(3,771) | $(10,791) | +$7,020 | -65% | | Cash and cash equivalents, end of period | $909 | $13,891 | -$12,982 | -93% | Notes to Consolidated Financial Statements (unaudited) This section provides detailed explanations of the company's business, significant accounting policies, and financial instruments supporting the consolidated financial statements 1. Business and risks This note describes Renalytix's core business, its FDA-approved kidneyintelX.dkd test, and key operational and financial risks - Renalytix focuses on optimizing kidney disease management using its FDA-approved, Medicare-reimbursed kidneyintelX.dkd prognostic testing service, which employs an AI-enabled algorithm combining diverse data inputs to generate patient risk scores[24] - The company has largely completed its reorganization from development to commercial sales activities, leading to substantially lower operating costs and a growing doctor prescription rate for kidneyintelX.dkd[25] - Key risks include securing additional capital, compliance with regulations, competitor innovations, dependence on key personnel, and protecting proprietary technology, with significant investment needed for sales and marketing[26] 2. Liquidity and Going Concern This note addresses the company's recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern, and outlines recent financing efforts - The company has incurred recurring losses and negative cash flows since inception, with an accumulated deficit of $216.5 million as of September 30, 2024, leading to substantial doubt about its ability to continue as a going concern[27][30] - Post-September 30, 2024, Renalytix closed an equity financing round of approximately $14.9 million (net of expenses) and restructured existing long-term debt[28][30] - Management believes the recent financing, cost reductions, and increasing testing sales will enable the company to achieve profitable operations within the next two years, contingent on achieving specific testing volumes, expanding reimbursement, and continued expense management[28][29] 3. Basis of presentation and summary of significant accounting policies This note details the basis of financial statement preparation, consolidation principles, operating segments, and critical accounting policies - Consolidated financial statements are prepared in conformity with U.S. GAAP, including Renalytix plc and its wholly-owned subsidiaries, with all inter-company balances and transactions eliminated[32][33] - The company manages its operations as a single operating segment, focused on improving kidney disease diagnosis, prognosis, clinical care, patient stratification for drug trials, and drug target discovery[36] - Significant accounting policies include the use of estimates for fair value of share-based awards and bonds, and expensing research and development costs as incurred[34][35][53] 4. Revenue This note explains the company's revenue recognition policies, primarily for testing services, and provides a breakdown of revenue types - Testing services revenue is recognized at a point in time upon completion of the testing process (when results are reported) and control passes to the customer[68] | Revenue Type | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | | :----------------------- | :----------------------------------------- | :----------------------------------------- | | Testing services revenue | $500 | $500 | | Pharmaceutical services revenue | $0 | $0 | 5. Fair value measurements and the fair value option This note describes the company's fair value hierarchy for financial instruments and the valuation methods used for equity securities and convertible notes - Fair value measurements are categorized into a three-tier hierarchy: Level 1 for quoted prices in active markets, Level 2 for observable inputs other than quoted prices, and Level 3 for unobservable inputs[71] | Financial Instrument | Fair Value (Sep 30, 2024, in thousands) | Fair Value (Jun 30, 2024, in thousands) | Fair Value Level | | :------------------- | :-------------------------------------- | :-------------------------------------- | :--------------- | | Equity securities (VericiDx) | $776 | $698 | Level 1 | | Convertible notes | $8,242 | $8,490 | Level 3 | - The fair value of convertible notes is determined using a scenario-based analysis, with changes in fair value recorded in earnings, except for changes due to instrument-specific credit risk, which are presented in other comprehensive income[72][73] 6. Property and equipment, net and intangibles This note provides details on the company's property, equipment, and intangible assets, including software, and their respective net values and amortization schedules | Asset Category | Sep 30, 2024 (in thousands) | Jun 30, 2024 (in thousands) | | :----------------------- | :-------------------------- | :-------------------------- | | Property and equipment, net | $202 | $216 | | Software, net | $869 | $869 | | Year | Expected Software Amortization Expense (in thousands) | | :--- | :---------------------------------------------------- | | 2025 | $141 | | 2026 | $150 | | 2027 | $133 | | 2028 | $133 | | 2029 | $133 | | Thereafter | $179 | | Total | $869 | 7. Accrued expenses and other current liabilities This note presents a breakdown of the company's accrued expenses and other current liabilities as of September 30, 2024, and June 30, 2024 | Category | Sep 30, 2024 (in thousands) | Jun 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Consulting and professional fees | $694 | $1,109 | -$415 | | Research and development | $215 | $892 | -$677 | | Payroll and related benefits | $259 | $388 | -$129 | | License and royalty expense | $831 | $787 | +$44 | | Other | $163 | $178 | -$15 | | Total | $2,162 | $3,354 | -$1,192 | 8. Convertible Notes This note details the outstanding principal, fair value, and amendments of the company's amortizing senior convertible bonds - As of September 30, 2024, $11.7 million of the $21.2 million principal amount of amortizing senior convertible bonds remained outstanding, compared to $12.7 million at June 30, 2024[84] - The fair value of the Bonds was $8.2 million at September 30, 2024. During the three months ended September 30, 2024, the company recognized a $0.8 million loss from fair value adjustment (non-instrument specific credit risk) and a $0.1 million decrease in fair value related to instrument-specific credit risk[85] - The convertible notes have undergone several amendments, including adjustments to the conversion price and changes to amortization payment deferral/acceleration rights, and were partially repaid through cash and issuance of ADSs/ordinary shares[81][83] 9. Leases This note outlines the company's lease liabilities, remaining lease terms, and discount rates, along with recent changes in its lease arrangements | Lease Metric | Sep 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------- | | Operating lease liabilities, current | $11 | | Operating lease liabilities, non-current | $0 | | Total lease liabilities | $11 | | Remaining lease term - operating leases | 0.1 years | | Discount rate - operating leases | 10% | - The company consolidated its Utah lab operations in November 2023, converting it to office space, and will maintain it on a month-to-month term after October 2024. Other leases in New York City are classified as short-term[89][90][91] 10. Commitments and contingencies This note describes the company's contractual commitments, including lease payments and employment agreements, and confirms the absence of material legal proceedings - Commitments include lease payments (disclosed in Note 9), employment agreements with key executives, and a defined contribution 401(k) retirement plan for U.S. employees[94][95][96] | Retirement Plan Contributions | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | | :---------------------------- | :----------------------------------------- | :----------------------------------------- | | 401(k) contributions | $100 | $200 | - The company is not currently a party to any material legal proceedings and has no contingency reserves for litigation liabilities[97] 11. License and services agreements This note details key license agreements with Mount Sinai and Joslin Diabetes Center, outlining exclusive rights, milestone payments, and royalty structures - The ISMMS License Agreement grants Renalytix exclusive rights to Mount Sinai's patent rights and know-how for kidney functional decline detection, with commercial milestone payments of $1.5 million and $7.5 million upon achieving $50 million and $300 million in worldwide net sales, respectively, plus 4% to 5% royalties[98] - The Joslin Agreement provides a worldwide exclusive license for diagnosing and predicting kidney disease using specific biomarkers, with commercial milestone payments of $0.3 million and $1.0 million upon achieving $2.0 million and $10.0 million in worldwide net sales, respectively, plus 5% royalties[101][102] - The clinical trial agreement with Wake Forest University Health Sciences to evaluate KidneyIntelX was amended in August 2024 to end all study visits, leading to a release of $0.4 million in accruals during Q1 2024[104] 12. Shareholders' equity This note provides information on the company's authorized and outstanding ordinary shares and confirms no cash dividends have been declared - As of September 30, 2024, the company had 173,841,695 ordinary shares authorized and 165,925,513 shares issued and outstanding[105] - No cash dividends have been declared or paid since inception through September 30, 2024[105] 13. Share-based compensation This note details the share-based compensation expense by category and the unrecognized compensation cost related to unvested options | Expense Category | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :----------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Research and development | $66 | $97 | -$31 | -32% | | General and administrative | $187 | $424 | -$237 | -56% | | Cost of revenue | $1 | $3 | -$2 | -67% | | Total | $254 | $524 | -$270 | -51.5% | - The company's Equity Incentive Plan (EIP) allows for grants of options, restricted share awards, and other share-based awards, with 16,898,553 shares available for future issuance as of September 30, 2024[106] - As of September 30, 2024, there was $1.27 million in unrecognized compensation cost related to unvested options, to be recognized over a weighted average period of 1.64 years[113] 14. Related-party transactions This note discloses amounts due to and expenses incurred with related parties, including the Icahn School of Medicine at Mount Sinai - Amounts due to Icahn School of Medicine at Mount Sinai (ISMMS), a shareholder and partner, totaled $2.5 million as of September 30, 2024, down from $4.2 million at September 30, 2023[122] | Related Party Expenses | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :--------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | EKF Diagnostic Holdings | $0 | $10 | -$10 | -100% | | ISMMS | $100 | $700 | -$600 | -86% | 15. Net loss per ordinary share This note presents the basic and diluted net loss per ordinary share and explains the exclusion of anti-dilutive securities from calculations | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | Change (YoY) | Change % (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------- | :------------- | | Net loss per ordinary share—basic | $(0.04) | $(0.11) | +$0.07 | -64% | | Net loss per ordinary share—diluted | $(0.04) | $(0.11) | +$0.07 | -64% | - Potentially dilutive securities, including stock options, restricted stock units, and convertible notes, were excluded from the diluted weighted-average shares outstanding calculation for both periods as their inclusion would have been anti-dilutive[123][124] 16. Subsequent Events This note describes significant events occurring after September 30, 2024, including equity financing, debt restructuring, and accounts payable conversion - On September 30, 2024, the company announced commitments to raise £11.8 million (approximately $14.9 million net of expenses) through an equity subscription, which closed in two tranches in October and November 2024[126][173] - The company restructured its existing convertible notes, converting approximately £2.97 million to equity (33 million ordinary shares) and the remaining balance into new unsecured convertible notes with a maturity date of July 31, 2029[126][169][170] - An accounts payable balance of $750,000 with a professional adviser was restructured, with $425,000 converted to equity and the remaining $325,000 converted into a long-term unsecured promissory note[126][171] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Renalytix's business, focusing on its FDA-approved kidneyintelX.dkd prognostic test, and discusses financial results and liquidity for the three months ended September 30, 2024 Overview This section introduces Renalytix's core business, its FDA-authorized kidneyintelX.dkd test, and its transition to commercial sales - Renalytix developed kidneyintelX.dkd, the first FDA-authorized in vitro prognostic test using an AI-enabled algorithm to assess the risk of progressive decline in kidney function for patients with Type 2 diabetes and Stage 1-3b Chronic Kidney Disease[131][132] - The test is Medicare reimbursed at $950 per test, effective August 1, 2024, and is being deployed through partnerships with healthcare systems and insurance payors[132] - The company has transitioned from primarily R&D to commercializing its testing services, funding operations through equity and debt financings[133] Macroeconomic Considerations This section discusses potential negative impacts of global conflicts, inflation, and rising interest rates on the company's business growth and operations - Unfavorable macroeconomic conditions, such as global conflicts (Ukraine-Russia, Middle East), increased inflation, and rising interest rates, may negatively affect the company's business growth and results of operations[135] - The full impact of these macroeconomic conditions may not be reflected in current results but could harm the business if economic uncertainty increases or the global economy worsens[135] Our Key Agreements This section outlines the company's exclusive license agreements with Mount Sinai Health System and Joslin Diabetes Center for kidney disease diagnosis technology - The company has a worldwide, royalty-bearing, exclusive license agreement with Mount Sinai Health System for patents and know-how related to AI application for kidney disease diagnosis, with commercial milestones at $50 million and $300 million net sales, and 4-5% royalties[136][137] - Renalytix also holds a worldwide, royalty-bearing, exclusive license agreement with Joslin Diabetes Center for technology related to diagnosing and predicting kidney disease, with commercial milestones at $2 million and $10 million net sales, and 5% royalties[139][141] Recent Developments This section highlights key operational and financial updates, including FDA approval, sales strategy changes, Nasdaq delisting, and recent equity financing - Launched FDA-approved kidneyintelX.dkd testing services and began receiving Medicare reimbursement under a formal Local Coverage Determination[143] - Implemented a revamped sales and customer service strategy focusing on healthcare systems and a "direct-to-doctor" approach, leading to quarter-over-quarter sales growth and repeat doctor testing[143] - Delisted from Nasdaq, with ADSs now quoted on the OTCQB Venture Market, and anticipates transitioning to Foreign Private Issuer (FPI) status for potential annual savings of up to $2.5 million[144][162] - Subsequent to quarter end, completed an over-subscribed equity capital raise of approximately $14.9 million, net of expenses, exceeding the initial funding target[144] Components of Results of Operations This section defines the primary drivers of the company's financial results, including revenue sources, cost of revenue, operating expenses, and non-operating items - Revenues are primarily from kidneyintelX.dkd testing services, deployed through partnerships with healthcare systems and insurance payors[145] - Cost of revenue includes direct costs for testing services such as labor, lab consumables, and sample collection[146] - Research and development expenses, expensed as incurred, cover KidneyIntelX technology development and clinical studies, while General and administrative expenses include personnel costs, professional fees, and marketing[147][148][150] - Non-operating items include foreign currency gains/losses, fair value adjustments to the VericiDx investment and convertible notes, and other income/expense (e.g., interest income, grant income, realized loss on asset sales)[151][152][153][154] Consolidated Results of Operations This table summarizes the company's key financial performance metrics, including revenue, gross profit, operating expenses, and net loss, for the three months ended September 30, 2024, and 2023 | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :--------------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Revenue | $522 | $459 | +$63 | +14% | | Gross profit (loss) | $100 | $(43) | +$143 | -332% | | Total operating expenses | $4,192 | $8,846 | -$4,654 | -53% | | Net loss | $(4,728) | $(10,154) | +$5,426 | -53% | | Net loss per ordinary share—basic | $(0.04) | $(0.11) | +$0.06 | -58% | Comparison of three months ended September 30, 2024 and 2023 This section provides a detailed year-over-year analysis of the company's financial performance for the three months ended September 30, 2024, and 2023 Revenue This table compares the company's revenue for the three months ended September 30, 2024, and 2023 | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Revenue | $522 | $459 | +$63 | +14% | Cost of Revenue This table compares the company's cost of revenue for the three months ended September 30, 2024, and 2023 | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :-------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Cost of revenue | $422 | $502 | -$80 | -16% | Research and Development Expenses This table compares the company's research and development expenses for the three months ended September 30, 2024, and 2023, highlighting key drivers of change | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :------------------------------ | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Research and development expenses | $921 | $2,787 | -$1,866 | -67% | - The decrease was primarily driven by a $1.7 million reduction in external R&D projects and studies with Mount Sinai and Wake Forest, and a $0.2 million decrease in consulting and professional fees[160] General and Administrative Expenses This table compares the company's general and administrative expenses for the three months ended September 30, 2024, and 2023, detailing factors contributing to the change | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :----------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | General and administrative | $3,271 | $6,059 | -$2,788 | -46% | - The decrease was driven by a $1.5 million reduction in compensation and related benefits (including share-based payments and bonuses) due to decreased headcount, and further decreases in consulting, insurance, and marketing costs[161] - The company anticipates annual cost savings of up to $1.5 million from reduced regulatory filing, professional fees, listing fees, and insurance costs following its Nasdaq delisting and expected transition to Foreign Private Issuer (FPI) status[162] Foreign Currency Gain This table compares the company's net foreign currency gain for the three months ended September 30, 2024, and 2023 | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :----------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Foreign currency gain, net | $37 | $289 | -$252 | -87% | Fair Value Adjustments to VericiDx Investment This table compares the fair value adjustments to the VericiDx investment for the three months ended September 30, 2024, and 2023 | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :------------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Fair value adjustment to VericiDx investment | $97 | $(447) | +$544 | -122% | Fair Value Adjustment on Convertible Notes This table compares the fair value adjustment on convertible notes for the three months ended September 30, 2024, and 2023, and explains the drivers of change | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :----------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Fair value adjustment to convertible notes | $(762) | $(1,207) | +$445 | -37% | - The change in fair value was driven by a decrease in term to maturity, an increase in the risk-free rate, and changes in the company's stock price[165] Other (Expense) Income This table compares the company's net other (expense) income for the three months ended September 30, 2024, and 2023, detailing its components | Metric | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :------------------------ | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Other (expense) income, net | $(5) | $100 | -$105 | -105% | - The 2024 expense included $0.014 million of interest income and $0.024 million of grant income, offset by a $0.042 million realized loss on the sale of VericiDx shares[166] Liquidity and Capital Resources This section discusses the company's financial position, including recurring losses and recent capital raises, and its ability to fund future operations - The company has incurred net losses and negative cash flows since inception, with an accumulated deficit of $216.5 million as of September 30, 2024, leading to substantial doubt about its ability to continue as a going concern[167][176][180][182] - Subsequent to September 30, 2024, the company raised approximately $14.9 million (net of expenses) through equity financing and restructured existing long-term debt, which is expected to substantially reduce monthly cash burn and fund operations towards cash flow positive[168][172][173][179][185] - The ability to continue as a going concern is contingent on achieving certain testing volumes, expanding reimbursement policies, and continued management of operating and commercial expenses[181] Cash Flows This table summarizes the company's cash flow activities from operations, investing, and financing for the three months ended September 30, 2024, and 2023 | Cash Flow Activity | 3 Months Ended Sep 30, 2024 (in thousands) | 3 Months Ended Sep 30, 2023 (in thousands) | Change (YoY, in thousands) | Change % (YoY) | | :----------------------------------- | :----------------------------------------- | :----------------------------------------- | :------------------------- | :------------- | | Net cash used in operating activities | $(3,836) | $(9,504) | +$5,668 | -60% | | Net cash provided by investing activities | $23 | $0 | +$23 | N/A | | Net cash used in financing activities | $0 | $(1,065) | +$1,065 | -100% | - The decrease in cash used in operating activities was primarily due to a lower net loss of $4.7 million (vs. $10.1 million in 2023) and reduced noncash charges, including fair value adjustments and stock-based compensation[187][188] Recent Accounting Pronouncements This section outlines the company's adoption and evaluation of recent accounting standards updates, including their expected impact on financial statements - The company implemented ASU 2016-13 (Credit Losses) in fiscal year beginning July 1, 2023, with no material impact on consolidated financial statements[64] - ASU 2020-06 (Accounting for Convertible Instruments) is not expected to have a material impact on the consolidated financial statements[65] - The company is currently evaluating the impact of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures), effective for fiscal year ending June 30, 2025, and annual periods beginning after December 15, 2024, respectively[66][67] JOBS Act Transition Period This section explains the company's status as an "emerging growth company" under the JOBS Act and its election to use extended transition periods for accounting standards - As an "emerging growth company" under the JOBS Act, Renalytix has elected to use the extended transition period for complying with new or revised accounting standards, potentially affecting comparability with other public companies[193] - The company relies on exemptions from certain requirements, including providing an auditor's attestation report on internal controls (Sarbanes-Oxley Section 404(b)) and complying with PCAOB rules on mandatory audit firm rotation[194] Critical Accounting Estimates This section describes the key accounting estimates requiring significant management judgment, such as research and development expenses, share-based compensation, and convertible notes - Critical accounting estimates involve significant management judgment and assumptions, affecting reported amounts of assets, liabilities, and expenses, with actual results potentially differing from estimates[195] - Key areas requiring estimates include research and development expenses (expensed as incurred, with accruals based on estimated progress), share-based compensation (fair value estimated using Black-Scholes model), and convertible notes (accounted for at fair value using scenario-based analysis)[197][198][200][205] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Renalytix is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Renalytix is exempt from providing quantitative and qualitative disclosures about market risk[207] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of September 30, 2024, and details the remediation of a previously disclosed material weakness - The company's disclosure controls and procedures were evaluated and concluded to be effective as of September 30, 2024[209] - A previously disclosed material weakness in accounting for the mark-to-market adjustment for convertible debt has been remediated by engaging a third-party advisory firm and implementing senior management review controls[212][213][214] - No other changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the quarter ended September 30, 2024[215] PART II. OTHER INFORMATION This section provides additional information not included in the financial statements, covering legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings Renalytix is not currently involved in any material legal proceedings - The company is not currently subject to any material legal proceedings[218] Item 1A. Risk Factors This section refers readers to the company's 2024 Annual Report for a comprehensive discussion of risk factors and reiterates going concern doubts - Readers should carefully consider the risk factors detailed in the company's 2024 Annual Report on Form 10-K and other SEC filings, as these could materially affect the business, financial condition, or future results[219] - Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and working capital deficiency, despite recent capital raises, and its ability to obtain necessary funding remains critical[220] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchase of Equity Securities There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the quarter ended September 30, 2024 - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred during the quarter ended September 30, 2024[221] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the quarter ended September 30, 2024 - No defaults upon senior securities occurred during the quarter ended September 30, 2024[221] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to Renalytix[221] Item 5. Other Information No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the quarter ended September 30, 2024 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended September 30, 2024[222] Item 6. Exhibits, Financial Statement Schedules This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and references to previously filed documents - The report includes certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1), Inline XBRL documents (Exhibits 101.INS, 101.SCH, 104), and references to previously filed documents such as the Articles of Association and Deposit Agreement[225][226] SIGNATURES The report was signed on November 19, 2024, by James McCullough, Chief Executive Officer, and Joel R. Jung, Interim Chief Financial Officer - The report was signed on November 19, 2024, by James McCullough, Chief Executive Officer, and Joel R. Jung, Interim Chief Financial Officer[230]