Lunai Bioworks Inc 8-K/A, filed Apr 24, 2024
Lunai Bioworks Inc. (LNAI)
About this 8-K/A
Lunai Bioworks Inc filed this 8-K/A on April 24, 2024, reporting on events of February 9, 2024.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Amendment No. 1)
CURRENT REPORT
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or 15(d) of the
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INTRODUCTORY NOTE
On February 13, 2024 (the “Closing Date”), Renovaro Inc., a Delaware corporation (the ”Company”), acquired all of the issued and outstanding equity interests of Renovaro Cube Intl Ltd., (fka: GEDi Cube Intl Ltd.) a private company formed under the laws of England and Wales (“Renovaro Cube”), pursuant to that certain Stock Purchase Agreement, dated September 28, 2023, by and among the Company, Renovaro Cube, the sellers party thereto and Yalla Yalla Ltd., in its capacity as the representative of the sellers (the “Acquisition”).
This Current Report on Form 8-K/A amends the Current Report on Form 8-K the Company filed on February 14, 2024, to include Renovaro Cube’s audited financial statements as of and for the years ended December 31, 2023 and 2022 and the unaudited pro forma combined financial information after giving effect to the Acquisition as of December 31, 2023 and for the six months ended December 31, 2023 and the year ended June 30, 2023, required by Items 9.01(a) and 9.01(b) of Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The consolidated financial statements of Renovaro Cube as of December 31, 2023 and 2022 and the related consolidated balance sheets, statements of operations, consolidate statements of changes in stockholders’ deficit and consolidated statements of cash flows for the period from January 1, 2023 to August 23, 2023, period from August 24, 2023 to December 31, 2023, and for the year ended December 31, 2022, together with the accompanying notes thereto are filed as Exhibit 99.1 hereto and are incorporated herein by reference.
(b) Pro Forma Financial Information
The unaudited pro forma condensed combined financial statements of the Company for the six-month period ended December 31, 2023 is filed as Exhibit 99.2 and incorporated by reference herein.
(d) Exhibits.
| EXHIBIT NO. | DESCRIPTION | LOCATION | ||
| 23.1 | Consent of Sadler, Gibb & Associates | Filed herewith | ||
| 99.1 | Audited financial statements of Renovaro Cube Intl Ltd. as of and for the years ended December 31, 2023 and 2022. | Filed herewith | ||
| 99.2 | Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2023, Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended December 31, 2023 and the year ended June 30, 2023 | Filed herewith | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| RENOVARO INC. | ||
| By: | /s/ Mark Dybul, M.D. | |
| Name: Mark Dybul Title: Chief Executive Officer | ||
Date: April 24, 2024
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-261628) and (No. 333-275132) of Renovaro Inc. of our report dated April 24, 2024, relating to the consolidated financial statements of Renovaro Cube Intl Ltd which appears in this Form 8-K/A.
/s/ Sadler, Gibb & Associates, LLC
Draper, UT
April 24, 2024
EXHIBIT 99.1
CONSOLIDATED FINANCIAL STATEMENTS
Renovaro Cube Intl Ltd (fka: Gedi Cube Intl Ltd)
Period from January 1, 2023 to August 23, 2023, Period from August 24, 2023 to
December 31, 2023 & For the years ended December 31, 2023 and 2022
With Reports of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Renovaro Cube Intl Ltd (fka: Gedi Cube Intl Ltd):
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Renovaro Cube Intl Ltd (fka: Gedi Cube Intl Ltd) (“the Company”) (“Successor”) as of December 31, 2023, the related consolidated statements of operations, stockholders’ deficit, and cash flows for the periods from August 24, 2023 to December 31, 2023 for Renovaro Cube Intl Ltd (“Successor”), and the periods from January 1, 2023 to August 23, 2023 for Grace Systems BV (“ Predecessor”(“Grace”)) (and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Successor as of December 31, 2023, and the results of its operations and its cash flows for the period from August 24, 2023 to December 31, 2023 and the results of Predecessor’s operations and cash flows for the period from January 1, 2023 through August 23, 2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has negative cash flows from operations and an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since 2023.
Draper, UT
April 24, 2024
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Grace Systems BV:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Grace Systems BV (“Predecessor”) as of December 31, 2022, the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year ended December 31, 2022 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Predecessor as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Predecessor’s management. Our responsibility is to express an opinion on the Predecessor’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Predecessor in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Predecessor is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Predecessor’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Predecessor’s auditor since 2023.
Draper, UT
December 4, 2023
2
Renovaro
Cube Intl Ltd (fka: Gedi Cube Intl Ltd)
Consolidated Balance Sheets (In Euros)
| Successor | Predecessor | |||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | € | 114,520 | € | 1,583 | ||||
| VAT receivable | 113,486 | 2,189 | ||||||
| Total current assets | 228,006 | 3,772 | ||||||
| Property, plant, and equipment, net | 15,024 | 37,552 | ||||||
| Operating lease right-of-use assets | 652,432 | — | ||||||
| Deposits | 45,358 | — | ||||||
| Total assets | € | 940,820 | € | 41,324 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 397,649 | 77,340 | ||||||
| Accrued expenses | 360,707 | 284,038 | ||||||
| Due to related parties | 69,018 | 14,608 | ||||||
| Current portion of operating lease liabilities | 278,940 | — | ||||||
| Notes payable | 1,561,593 | — | ||||||
| Total current liabilities | 2,667,907 | 375,986 | ||||||
| Operating lease liabilities, net of current portion | 373,492 | — | ||||||
| Total liabilities | € | 3,041,399 | € | 375,986 | ||||
| Stockholders’ Deficit: | ||||||||
| Predecessor Common shares, 0.01 par value; 120 shares authorized; 120 shares issued and outstanding as of December 31, 2022 | ||||||||
| Successor Common shares, ￡1.00 par value; 2,157 shares authorized; 2,157 shares issued and outstanding as of December 31, 2023 | 2,489 | 1 | ||||||
| Additional paid-in capital | (2,489 | ) | 100 | |||||
| Accumulated Deficit | (2,100,579 | ) | (334,763 | ) | ||||
| Total stockholders’ deficit | (2,100,579 | ) | (334,662 | ) | ||||
| Total liabilities and stockholders’ deficit | € | 940,820 | € | 41,324 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
Renovaro
Cube Intl Ltd (fka: Gedi Cube Intl Ltd)
Consolidated Statements of Operations (In Euros)
| Successor | Predecessor | |||||||||||
| Period from August 24, 2023 to December 31, 2023 | Period from January 1, 2023 to August 23, 2023 | Year ended December 31, 2022 | ||||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | € | 371,083 | € | 23,193 | € | 135,398 | ||||||
| Depreciation | 4,744 | 1,733 | 14,591 | |||||||||
| Management and advisory fees | 673,991 | 250,462 | 391,455 | |||||||||
| In process research and development expense | 464,335 | — | — | |||||||||
| Salaries and wages | 563,930 | 30,450 | 82,538 | |||||||||
| Total operating expenses | 2,078,083 | 305,838 | 623,982 | |||||||||
| Loss from operations | (2,078,083 | ) | (305,838 | ) | (623,982 | ) | ||||||
| Other (expense) income | ||||||||||||
| Gain from deconsolidation | — | 176,266 | — | |||||||||
| Interest expense | (29,754 | ) | — | — | ||||||||
| Gain on foreign currency transactions | 7,258 | — | — | |||||||||
| Total other (expense) income | (22,496 | ) | 176,266 | — | ||||||||
| Loss before income taxes | (2,100,579 | ) | (129,572 | ) | (623,982 | ) | ||||||
| Provision for income taxes | — | — | — | |||||||||
| Loss from operations | (2,100,579 | ) | (129,572 | ) | (623,982 | ) | ||||||
| Net loss | € | (2,100,579 | ) | € | (129,572 | ) | € | (623,982 | ) | |||
| Basic and diluted loss per share | € | (974 | ) | € | (1,080 | ) | € | (5,200 | ) | |||
| Weighted Average number of shares of common stock outstanding – Basic and diluted | 2,157 | 120 | 120 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
Renovaro
Cube Intl Ltd (fka: Gedi Cube Intl Ltd)
Consolidated Statements of Changes in Stockholders' Deficit (In Euros)
| Predecessor | ||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||
| Balance at January 1, 2022 | 120 | € | 1 | € | 100 | € | 289,219 | € | 289,320 | |||||||||||
| Net loss | — | — | — | (623,982 | ) | (623,982 | ) | |||||||||||||
| Balance at December 31, 2022 | 120 | € | 1 | € | 100 | € | (334,763 | ) | € | (334,662 | ) | |||||||||
| Net loss | — | — | — | (129,572 | ) | (129,572 | ) | |||||||||||||
| Balance at August 23, 2023 | 120 | € | 1 | € | 100 | € | (464,335 | ) | € | (464,234 | ) | |||||||||
| Successor | ||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||
| Balance at August 24, 2023 | 1,100 | € | 1,269 | € | (1,269 | ) | € | — | € | — | ||||||||||
| Net Loss | — | — | — | (2,100,579 | ) | (2,100,579 | ) | |||||||||||||
| Shares issued as part of acquisition | 1,057 | 1,220 | (1,220 | ) | — | — | ||||||||||||||
| Balance at December 31, 2023 | 2,157 | € | 2,489 | € | (2,489 | ) | € | (2,100,579 | ) | € | (2,100,579 | ) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
Renovaro Cube Intl Ltd (fka: Gedi Cube Intl
Ltd)
Consolidated Statements of Cash Flows (In Euros)
| Successor | Predecessor | |||||||||||
| Period from August 24, 2023 to December 31, 2023 | Period January 1 2023 to August 23, 2023 | Year ended December 31, 2022 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | € | (2,100,579 | ) | € | (129,572 | ) | € | (623,982 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 4,745 | 1,733 | 14,591 | |||||||||
| Amortization of ROU Asset | 79,916 | |||||||||||
| Foreign currency exchange transactions | (7,258 | ) | — | — | ||||||||
| Gain from deconsolidation | — | (176,266 | ) | — | ||||||||
| Acquisition of research & development expense | 464,335 | — | — | |||||||||
| Changes in assets/liabilities: | ||||||||||||
| Prepaid expenses | — | — | — | |||||||||
| Deposits | (45,358 | ) | — | — | ||||||||
| Accounts payable | 376,753 | 24,305 | 76,965 | |||||||||
| Operating lease liabilities | (79,916 | ) | — | — | ||||||||
| Accrued Liabilities | (33,640 | ) | 183,243 | 281,366 | ||||||||
| Due to related parties | 10,135 | 99,728 | 14,500 | |||||||||
| VAT receivable | (109,272 | ) | (4,721 | ) | (2,189 | ) | ||||||
| VAT payable | — | — | (7,408 | ) | ||||||||
| Net cash used in operating activities | (1,440,139 | ) | (1,550 | ) | (246,157 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Property, plant, and equipment, net | (6,846 | ) | — | (1,057 | ) | |||||||
| Net cash used in investing activities | (6,846 | ) | — | (1,057 | ) | |||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from loan payable | 1,539,205 | — | — | |||||||||
| Net cash provided by financing activities | 1,539,205 | — | — | |||||||||
| Effect of exchange rate changes on cash | 22,300 | — | — | |||||||||
| Cash: | ||||||||||||
| Net change during the period | 114,520 | (1,550 | ) | (247,214 | ) | |||||||
| Balance, beginning of period | — | 1,583 | 248,797 | |||||||||
| Balance, end of period | € | 114,520 | € | 33 | € | 1,583 | ||||||
| Supplemental disclosure of cash flow information: | ||||||||||||
| Interest paid in cash | 2,038 | — | — | |||||||||
| Income taxes | — | — | — | |||||||||
| Supplemental disclosure of non-cash activity: | ||||||||||||
| Non-cash amounts of lease liabilities arising from obtaining right-of-use assets | 732,349 | — | — | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
Renovaro
Cube Intl Ltd (fka: Gedi Cube Intl Ltd)
Notes to the Consolidated Financial Statements
Note 1. Organization
Renovaro Cube Intl Ltd (fka: Gedi Cube Intl Ltd), formed June 14, 2023, and its subsidiaries (Grace Systems B.V. and GEDi Cube B.V.) (collectively, the ”Company”), headquartered in the United Kingdom, specialize in data science and data mining and plan to be disruptive in the industry with a broad range of cutting edge software, services, methods, and models to tackle big data challenges. The Company provides services in the field of software development and maintenance, data mining, and data science. The Company focuses on the high-end of advanced and predictive analytics which contributes to our ability to combine big data stores, execute scientific algorithms and visualize analytics to business users. The Company aims to provide and accelerate precision, personalized medicine for longevity powered by mutually reinforcing AI and biotechnology platforms for early diagnosis, better targeted treatments and drug discovery. As of the report date, the Company is in the development stage of its lifecycle and has not yet commenced operations.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The consolidated financial statements include the accounts of Renovaro Cube Intl Ltd (fka: Gedi Cube Intl Ltd), and its subsidiaries. All material inter-company balances and transactions have been eliminated.
On August 23, 2023, Grace Systems B.V. (“Grace”), (“Predecessor”) and Renovaro Cube Intl Ltd (“RENC”), (“Successor”) executed a Share Purchase Agreement (“Agreement”) for the acquisition of 100% of the share capital in Grace, involving a €1 million investment into the Company by RENC. In exchange, existing shareholders of Grace were allocated 49% ownership in RENC through a share-exchange transaction, ensuring their continued involvement in the development and commercialization of Grace’s underlying Intellectual Property (“IP”) and Trade Secrets.
The consolidated financial statements of Successor and Predecessor are not comparable due to the acquisition described above. RENC was incorporated in June 2023 with no operational history and has no prior comparative period financial statements presented. Therefore, the reporting period has been separated by a black line in the consolidated financial statements with the Predecessor representing the pre-Closing Date period (January 1, 2023 through August 23, 2023) and the Successor representing the post-Closing Date period (August 24, 2023 through December 31, 2023). The Company noted that the Predecessor includes financial information related to the Grace Systems (as defined in Note 11), while the Successor includes financial information related to the newly formed company after the asset acquisition.
Business Combinations
The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are included as of and subsequent to the acquisition date.
In analyzing the business combination for proper accounting treatment, management utilized ASC 805 & ASU 2017-01. ASU 2017-01 created a new framework that companies must use to evaluate whether an integrated set of assets and activities is a business and should be accounted for as a business acquisition. FASB defines a business as a set of activities and assets that include an input and a substantive process; however, the fair value of the set is not usually concentrated in single or multiple assets. This set of inputs and processes usually provides goods and services to customers and return to stakeholders (ASC 805-10-55-3A and ASC 805-10-55-4). The new guidance requires an initial screening test to determine if substantially all of the fair value of the assets acquired is concentrated in one asset or a group of similar assets.
7
Gedi Cube Intl Ltd
Notes to the Unaudited Consolidated
Financial Statements
ASC 805 also provides a screen test to assess whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets and allows organizations to assess whether acquired activities or assets are considered a business. The screen test reduces the number of transactions that might otherwise be considered a business combination by providing a method for aggregating similar assets into one acquired asset group. This aggregation provides that substantially all of the assets in the transaction be part of this asset group to qualify under the practical screen.
As discussed in Note 3, the acquisition of Grace Systems by RENC was treated as an asset acquisition.
Going Concern
As of December 31, 2023 (Successor), the Company had cash of approximately €114,520. For the year ended December 31, 2023 (Successor), the Company used €(1,440,139) in cash from operating activities and had an accumulated deficit of €2,100,579. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financials. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders and debt holders. Specifically, continuation is contingent on the Company’s ability to obtain necessary equity or debt financing to continue operations, and ultimately the Company’s ability to generate profit from sales and positive operating cash flows, which is not assured.
These accompanying audited consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.
Use of Estimates
The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates. The most significant estimates and judgments include those related to the asset acquisition, valuation allowance for deferred taxes and the discount rates used in determining right of use assets and related lease liabilities.
Cash and Cash Equivalents
As of December 31, 2023 and December 31, 2022 the Company’s cash balances were €114,520 and €1,583, respectively. Cash is recorded at cost, which approximates fair value. As of December 31, 2023 and December 31, 2022, cash consisted of checking and savings deposits.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, less accumulated depreciation. Maintenance and repairs are charged to expense when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings. Depreciation is recognized using the straight-line method in amounts considered to be sufficient to allocate the cost of the assets to operations over the estimated useful lives of the assets, all of which are 5 years.
8
Gedi Cube Intl Ltd
Notes to the Unaudited Consolidated Financial Statements
Impairment of Long Lived Assets
Long-lived assets, such as property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated. The depreciable basis of assets that are impaired and continue in use are their respective fair values.
Revenue Recognition
Revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price, and (5) recognize revenue when or as the Company satisfies a performance obligation. There was no revenue recognized during the 12 months ending December 31, 2022 and December 31, 2023.
Value Added Tax
The company collects value added tax (“VAT”) on sales (“VAT payable”) and offsets it with deducted VAT from eligible purchases (“VAT receivable”). The standard rate is 21%, with reduced rates applicable to specific goods and services. Amounts are reported quarterly to the tax authorities in April, July, October, and January directly via an online platform or through the use of certain software. In the case of a net payable VAT, the company pays directly to the tax authorities within the month, and if the net VAT is receivable, the company receives a letter from the tax office with a refund date and details, usually within 5 weeks. Periodic VAT returns offer a comprehensive breakdown of both output and input taxes. Submitting a VAT return is mandatory for all companies registered with the Chamber of Commerce in the Netherlands (“KVK”) and the United Kingdom.
Leases
In accordance with ASC Topic 842, the Company determined the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable. The present value of lease payments is determined by using the implicit interest rate in the lease, if that rate is readily determinable; otherwise, the Company develops an incremental borrowing rate based on the information available at the commencement date in determining the present value of the future payments. Rent expense for operating leases is recognized on a straight-line basis, unless the operating lease right of use assets have been impaired, over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the consolidated statements of operations. For operating leases that reflect impairment, the Company will recognize the amortization of the operating lease right-of-use assets on a straight-line basis over the remaining lease term with rent expense still included in selling, general and administrative expenses in the unaudited consolidated statements of operations. The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, insurance, and taxes, which vary based on future outcomes, and thus are recognized in selling, general and administrative expenses when incurred.
9
Gedi Cube Intl Ltd
Notes to the Unaudited Consolidated Financial Statements
Functional Currency
The local currency, Euros, is the functional currency for all of the Company’s activity. Gains and losses from foreign currency transactions are included in net loss for the period.
Income Taxes
Income taxes provide for the tax effects of transactions reported in the consolidated financial statements and consist of primarily deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to net operating losses. The future realization of deferred tax assets is subject to the existence of sufficient future taxable income. Currently, management believes that it is not more likely than not that the Company will realize the benefits of any tax loss carryforwards.
Due to the historical net loss position of the Company, and the lack of sufficient taxable income to realize the deferred tax asset, the Company recorded a full valuation allowance €458,748 and €128,760 as of December 31, 2023 and December 31, 2022.
Segment Information
The Company has one operating segment with one planned business activity as described in Note 1 The Company’s chief operating decision maker is its Managing Director, who manages operations and reviews financial information on a consolidated basis for the purpose of assessing performance and allocating resources.
Net Loss Per Share Calculation
Basic earnings (loss) per common share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. No potentially dilutive debt or equity instruments were issued or outstanding during the period from August 24, 2023 to December 31, 2023 (Successor), for the 12 months ended December 31, 2022, and the period from January 1, 2023 to August 23, 2023.
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, (i) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (ii) eliminates most real estate specific lease provisions, and (iii) aligns many of the underlying lessor model principles with those in the new revenue standard. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted, based on the FASB effective date deferral per ASU 2020-05. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The company utilized the effective date and adopted the provisions of this standard on January 1, 2021.
Other recent accounting pronouncements issued by the FASB do not or are not believed by management to have a material impact on the Company’s present or future financial statements.
10
Renovaro Cube Intl Ltd (fka: Gedi Cube Intl
Ltd)
Consolidated Statements of Cash Flows (In Euros)
Note 3. Share Purchase Agreement- Asset Acquisition
On August 24, 2023, Grace Systems B.V. (“Seller”) and Renovaro Cube Int Ltd (“Buyer”) executed a Share Purchase Agreement (the “Agreement”). Existing shareholders of Grace Systems exchanged their shares for a 49% interest of the Buyer. Additionally, Renovaro Cube Int Ltd made an investment in the Company totaling €1,000,000.
The Buyers acquisition of Grace Systems B.V encompasses the transfer of a vital research and development project focused on an AI platform designed for early cancer detection. This project, known as In-Process Research and Development (“IPR&D”), includes not only the current research but also historical expertise, protocols, designs, and procedures required to facilitate Gedi’s subsequent testing phase, ultimately bringing the project to a revenue-generating stage.
In evaluating the nature of this transaction and the relevant accounting guidance, management evaluated the guidance in paragraphs ASC 805-10-55-5A through 55-5C. As such, management concluded that that the IPR&D AI project qualifies as an identifiable intangible asset within the context of a business combination and represents over 90% of the fair value of the assets acquired, therefore accounting for the acquisition as an asset acquisition. The Company allocated substantially all of the value to the IPR&D asset of date of acquisition noting that the amount was expensed as incurred as it was determined that there is no alternative future use which represents the amount of the assumed net liabilities of the Company of €464,335.
Note 4. Property, Plant, and Equipment, net
Property, plant, and equipment consisted of the following:
| Successor | Predecessor | |||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Computer equipment and software | € | 4,809 | € | 5,866 | ||||
| Computer hardware | 14,959 | 50,665 | ||||||
| Machines and installations | — | 21,196 | ||||||
| 19,768 | 77,727 | |||||||
| Less: Accumulated depreciation | (4,744 | ) | (40,175 | ) | ||||
| Property, plant, and equipment, net | € | 15,024 | € | 37,552 | ||||
The Company uses the straight line method to calculate depreciation expense. Depreciation expense totaled €4,744 and €14,591 for the period from August 24, 2023 to December 31, 2023 (Successor) and for the year ended December 31, 2022 (Predecessor), respectively. On April 24, 2023, Grace Datascience B.V., a subsidiary of Gedi Cube Intl Ltd, entered into bankruptcy proceedings and was deconsolidated from the group financials. The balance of Property, Plant, and Equipment, net on the Grace Datascience B.V. balance sheet immediately prior to the bankruptcy was €22,894. Refer to Note 11 for additional information related to the bankruptcy.
Note 5. Accrued Expenses
Accrued expenses consisted of the following:
| Successor | Predecessor | |||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Accrued payroll | € | 117,837 | € | 32,038 | ||||
| Accrued management fees | 126,000 | 252,000 | ||||||
| Other accrued expenses | 116,870 | — | ||||||
| Total accrued expenses | € | 360,707 | € | 284,038 | ||||
11
Renovaro Cube Intl Ltd (fka: Gedi Cube Intl
Ltd)
Consolidated Statements of Cash Flows (In Euros)
The other accrued expenses seen in the table above relate to accruals for normal operating expenses. On April 24, 2023, Grace Datascience B.V., a subsidiary of Renovaro Cube Intl Ltd, entered into bankruptcy proceedings and was deconsolidated from the group financials. The balance of Accrued Expense on the Grace Datascience B.V. balance sheet immediately prior to the bankruptcy was €65,656 and the total amount was related to accrued payroll. Refer to Note 11 for additional information related to the bankruptcy.
Note 6. Commitments and Contingencies
Operating Lease
The Company leases an office facility in Amsterdam, Netherlands, under a 30 month operating lease agreement commencing on September 1, 2023 with a maturity date of February 28, 2026. In determining lease asset values, the Company considers fixed and variable payment terms, prepayments, incentives, and options to extend, terminate or purchase.
The Company leases an apartment in Amsterdam, Netherlands, under a 23.4 month operating lease agreement commencing on September 19, 2023 with a maturity date of August 31, 2025. In determining lease asset values, the Company considers fixed and variable payment terms, prepayments, incentives, and options to extend, terminate or purchase.
The Company leases a motor vehicle in the Netherlands, under a 48 month operating lease agreement commencing on November 13, 2023 with a maturity date of November 12, 2027. In determining lease asset values, the Company considers fixed and variable payment terms, prepayments, incentives, and options to extend, terminate or purchase.
Right-of-use asset and lease liability for operating leases were recorded in the combined and consolidated balance sheets as follows:
| Successor | Predecessor | |||||||
| Period from August 24, 2023 to December 31, 2023 | December 31, 2022 | |||||||
| Operating leases: | ||||||||
| Operating lease right-of-use asset, net | € | 652,432 | € | — | ||||
| Lease liability, current | 278,940 | — | ||||||
| Lease liability, long term | 373,492 | — | ||||||
| Total operating lease liability | € | 652,432 | € | — | ||||
The weighted average remaining lease term for the operating lease is 2.4 years and the incremental borrowing rate is 6.78% as of December 31, 2023.
As of December 31, 2023, future minimum lease payments required under operating leases are as follows:
| Successor | Predecessor | |||||||
| Period from August 24, 2023 to December 31, 2023 | December 31, 2022 | |||||||
| 2024 | € | 309,477 | € | — | ||||
| 2025 | 300,588 | — | ||||||
| 2026 | 68,391 | — | ||||||
| 2027 | 24,333 | — | ||||||
| Total minimum lease payments | 702,789 | — | ||||||
| Less: effects of discounting | (50,357 | ) | — | |||||
| Present value of future minimum lease payments | € | 652,432 | € | — | ||||
12
Renovaro Cube Intl Ltd (fka: Gedi Cube Intl
Ltd)
Consolidated Statements of Cash Flows (In Euros)
Commitments
On August 1, 2023, the Company entered into an agreement with an independent contractor to provide consulting services to the Company in relation to the contemplated transaction with Renovaro Inc (as defined in Note 14). The consideration for entering into this contract was that the Company would provide the consultant 1,000,000 restricted common shares in Renovaro Inc. upon the completion of the contemplated transaction. As at December 31, 2023 this transaction had not yet been consummated.
On February 9, 2024 the Company allotted 31 ordinary shares of their common stock at nominal value to the independent contractor to satisfy the conversion requirement of these shares into the common stock of Renovaro Inc.
Note 7. Stockholder’ Equity (Deficit)
Common Stock – Predecessor
The Predecessor was formed as a partnership and incorporated on June 3, 2013. Upon the Predecessor’s formation, the Company issued capital in the amount of 120 regular common stock shares with a par value of €0.01. Each common share affords the holder general voting rights as defined in the Shareholders Agreement and summarized below.
Common Stock – Successor
On August 24, 2023, Grace Systems B.V. and Renovaro Cube Int Ltd executed a Share Purchase Agreement. Existing shareholders of Grace Systems exchanged their shares for a 49% interest of Renovaro Cube Int Ltd where the remaining controlling interest was purchased by Renovaro Cube in exchange for consideration.
Common stock of the Successor and Predecessor are outlined below:
| Successor | Predecessor | |||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Common Stock shares outstanding as of August 24, 2023 and January 1, 2022, respectively | 1,100 | 120 | ||||||
| Shares issued as part of acquisition | 1,057 | — | ||||||
| Common Stock shares outstanding as of December 31, 2023 and December 31, 2022, respectively | 2,157 | 120 | ||||||
Note 8. Income Taxes
The Company’s net deferred tax assets are as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | € | 458,748 | € | 128,760 | ||||
| Total deferred tax assets | 458,748 | 128,760 | ||||||
| Valuation allowance | (458,748 | ) | (128,760 | ) | ||||
| Deferred tax assets, net of valuation allowance | € | — | € | — | ||||
13
Renovaro Cube Intl Ltd (fka: Gedi Cube Intl
Ltd)
Consolidated Statements of Cash Flows (In Euros)
The income tax provisions for the year ended December 31, 2023 and 2022 consists of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Foreign | € | — | € | — | ||||
| Current | — | — | ||||||
| Deferred | (341,466 | ) | (127,553 | ) | ||||
| Change in valuation allowance | 341,466 | 127,553 | ||||||
| Income tax provision | € | — | € | — | ||||
As of December 31, 2023, and December 31, 2022, the Company had available a net operating loss carry forward of approximately €458,748 and €128,760, respectively, that may be carried forward indefinitely for years beginning after January 2022.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. As of December 31, 2023 and 2022, the valuation allowance was €458,748 and €128,760, respectively.
A reconciliation of the tatutoryy income tax rate to the Company’s effective tax rate at ‘ecember 31, 2023 and 2022 is as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Statutory income tax rate | 23.5 | % | 25.8 | % | ||||
| Non-deductible costs | -0.57 | % | -3.94 | % | ||||
| Previous tax year adjustment | -5.86 | % | -0.20 | % | ||||
| Small-scale investment deduction | 0.00 | % | 0.00 | % | ||||
| Change in valuation allowance | -17.07 | % | -21.66 | % | ||||
| Income tax provision | 0.00 | % | 0.00 | % | ||||
The Company’s effective tax rates for the periods presented differ from the expected (statutory) rates primarily due to changes in non-deductible costs and the recording of full valuation allowances on deferred tax assets. The Company files income tax returns in England & Wales and the Netherlands, which remains open and subject to examination.
Note 9. Risks and Uncertainties
The Company prepares consolidated financial statements in conformity with U.S. GAAP. It is possible that future requirements could change the current application of U.S. GAAP, resulting in a material adverse impact on the Company’s balance sheets or results of operations. In addition, the future effective tax rates could be unfavorably affected by changes in tax laws or the interpretation of tax laws or by changes in the valuation of our deferred tax assets and liabilities. The Company regularly assess the implementation of applicable accounting principles and the adequacy of provision for income taxes. The final determination of any tax authority, upon examination of the Company’s tax returns, could have an adverse effect on the Company’s operating results and balance sheets.
14
Gedi Cube Intl Ltd
Notes to the Unaudited Consolidated Financial Statements
The Company is in the development stage and faces all of the risks and uncertainties associated with a new and unproven business. The Company’s future is based on an unproven business plan with no historical facts to support projections and assumptions. The Company’s operations are subject to all of the risks inherent in the establishment of a new business enterprise. The likelihood of the Company’s success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the formation of a pre-revenue business. The Company’s lack of a significant and relevant operating history makes it difficult to manage operations and predict future operating results.
Note 10. Related Parties
Due to related party balances consisted of the following:
| Successor | Predecessor | |||||||
| December 31, 2023 | December 31, 2022 | |||||||
| Imbott Group B.V. | € | — | € | 500 | ||||
| Grace Bio Omics B.V. | (182 | ) | 13,608 | |||||
| SEPA Beheer B.V. | 24,200 | 500 | ||||||
| C.K. van Kalken Beheer B.V. | 45,000 | — | ||||||
| € | 69,018 | € | 14,608 | |||||
Related parties include Imbott Group B.V., SEPA Beheer B.V. and C.K. van Kalken Beheer B.V., all of which are stockholders of the Successor, Renovaro Cube Intl Ltd and former stockholders of the Predecessor, Grace Bio Omics B.V., is an affiliated entity by way of mutual owners. The nature of the transactions making up this balance relates to short term loans. The loan related party balances were non-interest bearing.
The apartment lease (as defined in Note 6) was entered into for the use of the CEO of the Company.
Note 11. Deconsolidation
Grace Datascience B.V. Bankruptcy
In April 2023, the Grace Systems B.V. entered into a bankruptcy agreement with the Dutch courts for its wholly owned subsidiary, Grace Datascience B.V. As of the bankruptcy date, Grace Systems is no longer authorized to manage and dispose of Grace Data’s assets where these rights have been transferred to the curator appointed by the Dutch courts to oversee the liquidation of these assets and satisfaction of outstanding liabilities. Based on the guidance prescribed in ASC 810 – Consolidation, Grace Systems elected to deconsolidate Grace Data as of the effective date of bankruptcy which is determined to be April 24, 2023. Grace Systems operations from January 1, 2023 to April 23, 2023 include the operations of Grace Datascience B.V..
The following tables reflect the Company’s balance sheet immediately prior to submission of the subsidiary into bankruptcy in addition to the activity of the subsidiary for the period controlled by Grace Systems.
15
| Grace Datascience B.V. | ||||
| Balance Sheet | ||||
| April 23, 2023 | ||||
| Cash | € | 38 | ||
| Property, plant and equipment, net | 22,894 | |||
| Tax Assets | 2,695 | |||
| Total Assets | 25,627 | |||
| Accounts payable | 80,746 | |||
| Intercompany | 55,491 | |||
| Accrued payroll | 65,656 | |||
| Total Liabilities | 201,893 | |||
| Common Stock | 100 | |||
| Current Year Accumulated Deficit | (41,526 | ) | ||
| Accumulated Deficit | (134,840 | ) | ||
| Total Stockholders Deficit | (176,266 | ) | ||
| Total Liabilities and Stockholders Deficit | € | 25,627 | ||
16
Renovaro
Cube Intl Ltd (fka: Gedi Cube Intl Ltd)
Notes to the Consolidated Financial Statements
| Grace Datascience B.V. | ||||
| Statement of Operations | ||||
| Period January 1 2023 to April 23, 2023 | ||||
| Revenue | € | — | ||
| Cost of Revenue | — | |||
| Gross Profit | — | |||
| Advisory Fees | 6,021 | |||
| Salaries and wages | 30,450 | |||
| Selling, general and administrative | 3,197 | |||
| Depreciation Expense | 1,858 | |||
| Total Operating Expense | 41,526 | |||
| Net Loss | € | (41,526 | ) | |
Note 12. Notes Payable
During August 2023, the Company entered into two Promissory Notes (“Notes”). The first note was for $550,000 which translates to €515,601, the second note was for $500,000 which translates to €476,085. The Company received a total of $1,050,000 from Renovaro Biosciences Inc. (“Renovaro”) to further develop the Company’s IP and technology. Pursuant to the Notes, the Company promised to pay Renovaro the outstanding principal and related accrued interest at a rate of 6% per annum on the maturity date of February 11 and February 18 of 2024, respectively. On February 12, 2024, Renovaro entered into amendments outstanding at December 31, 2023 to extend the maturity dates to August 11, 2024 and August 18, 2024 respectively. For the period from August 24, 2023 to December 31, 2023, the Company accrued interest of €21,071 and is included in interest expense within other expense (income) on the Statements of Operations. The total amount of the Notes and the interest owed to Renovaro as at December 31, 2023 is €972,266.
On November 22, 2023, the Company entered into a loan agreement (the “DMZ Facility”) with DMZ Invest I APS (“DMZ”) pursuant to which DMZ agreed to loan the Company up to £500,000 which translates to €582,777 as at December 31, 2023. This was used to fund the Company’s operations through the Closing with Renovaro. The DMZ Facility has a repayment date occurring the first business day after the first anniversary of the draw down of the loan. The first draw down of the loan occurred on November 27, 2023, resulting in a repayment date of November 28, 2024. The Company will pay interest on the loan at the rate of 10% per annum. Interest is accrued quarterly in arrears on the last business day of March, June, September and December and is payable on the repayment date. For the period from August 24, 2023 to December 31, 2023, the Company accrued interest of €4,327 and is included in interest expense within other expense (income) on the Statements of Operations. The total amount of the Notes and the interest owed to DMZ as at December 31, 2023 is €589,327.
Note 13. Subsidies
The Dutch government has previously implemented the Emergency Bridging Measure for Job Opportunities (NOW) wage subsidy as emergency funding for all companies as a result of the COVID-19 outbreak where qualifying expenses are reimbursed by the authorities. During the twelve months ended December 31, 2022, the Company received and was rewarded €45,333 which was recorded as a reduction to salaries and wages in the Statement of Operations.
17
Renovaro
Cube Intl Ltd (fka: Gedi Cube Intl Ltd)
Notes to the Consolidated Financial Statements
Note 14. Subsequent Events
On January 24, 2024, the Company entered into a Promissory Note in the amount of $143,000 with Renovaro Inc. to use towards operational expenses. Pursuant to the Notes, the Company promised to pay Renovaro Inc. the outstanding principal and related accrued interest at a rate of 12% per annum on the maturity date of July 24, 2024.
On February 13, 2024, the Company consummated the previously announced acquisition by Renovaro Inc. and the other transactions contemplated by the Stock Purchase Agreement (collectively, the “Transaction”). As a result of the Transaction, the Company became a wholly owned subsidiary of Renovaro Inc.
In connection with the closing of the Transaction, on February 13, 2024, the Company filed with the Company’s House of the United Kingdom a Form of Amendment to change its corporate name from “Gedi Cube Intl Ltd” to “Renovaro Cube Intl Ltd”, effective immediately.
On March 14, 2024 Grace Systems as a defendant was served with a judgement by default by the District Court of North-Holland by Stumple Interrnational B.V. and De Projectinrichter B.V. as joint claimants. The claim is in regards to two separate claims to which Grace Systems has never been an involved or contractual party.
The Company filed a write of appeal to dismiss the judgement in March 2024. The Company denies the allegations and intends to vigorously defend against the allegations which they have not yet had the chance to defend in Court. Grace Systems will bring the appeal before the High Court of Amsterdam, the Netherlands on April 30, 2024.
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Unless otherwise indicated, defined terms included below shall have the same meaning as terms defined and included elsewhere on Form 8-K (the “Form 8-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 14, 2024, as amended on April 24, 2024 in the Current Report (the “Form 8-K/A”). Any references to the Proxy Statement included below refers to the proxy statement on file with the SEC dated January 3, 2024 and incorporated herein by reference.
The following unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the Transaction.
The unaudited pro forma condensed combined balance sheet information as of December 31, 2023, is based upon and derived from the unaudited historical financial information of Renovaro and Renovaro Cube (fka: GEDi Cube) and gives effect to the Transaction as if such acquisition had occurred on July 1, 2023.
The unaudited pro forma condensed combined statements of operations for the twelve months ended June 30, 2023, combines the historical audited consolidated statement of operations of Renovaro for the twelve months ended June 30, 2023, with Renovaro Cube’s unaudited financial results for the twelve months ended June 30, 2023, and give effect to the Transaction as if it occurred on July 1, 2022. Renovaro and Renovaro Cube have different fiscal years. Renovaro’s fiscal year ends on June 30, whereas Renovaro Cube’s ends on December 31. Renovaro Cube’s unaudited financial results for the twelve months ended June 30, 2023, have been derived from (i) its unaudited statement of operations for the six months ended June 30, 2023, and (ii) its audited statement of operations for the year ended December 31, 2022 removing its results of operations for the six months ended June 30, 2022 derived from its unaudited statement of operations for the six months ended June 30, 2022. In addition, the unaudited pro forma condensed combined statements of operations for the year ended June 30, 2023, are also based upon and derived from the historical financial information of Grace Systems BV or Grace (Predecessor), which was acquired by Renovaro Cube (Successor) on August 24, 2023, and give effect to the Grace acquisition as if it occurred on July 1, 2022.
The unaudited pro forma condensed combined statements of operations for the six months ended December 31, 2023, combines the historical unaudited consolidated statement of operations of Renovaro for the six months ended December 31, 2023, with Renovaro Cube’s unaudited financial results for the six months ended December 31, 2023 and gives effect to the Transaction as if it occurred on July 1, 2022.
The unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with:
| ● | Renovaro’s audited consolidated financial statements and accompanying notes as of and for the year ended June 30, 2023, as contained in its Annual Report on Form 10-K filed on October 2, 2023, with the SEC. |
| ● | Renovaro’s unaudited condensed consolidated financial statements and accompanying notes as of and for the six-month period ended December 31, 2023, as contained in its Quarterly Report on Form 10-Q filed on February 14, 2024, with the SEC. |
| ● | Renovaro Cube’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2023, and 2022, as are set forth in this Current Report on Form 8-K/A. |
Additional information about the basis of presentation of this information is provided in Note 1 hereto.
The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Transaction had been completed as of the dates set forth above, nor is it indicative of the future results or financial position of the combined company. In connection with the pro forma financial information, Renovaro allocated the purchase price using the closing price on the date of acquisition, February 13, 2024.
Accordingly, the pro forma Transaction price adjustments are preliminary and subject to further adjustments as additional information becomes available and as additional analyses are performed. The unaudited pro forma condensed combined financial information also does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies, or cost savings that may result from the Transaction or any integration costs. The unaudited pro forma condensed combined statements of operations do not reflect certain amounts resulting from the Transaction that were determined to be of a non-recurring nature.
The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X. Renovaro has accounted for the Transaction using the acquisition method of accounting, in accordance with FASB Accounting Standards Codification, or ASC, Topic 805 “Business Combinations”, or ASC 805. Renovaro preliminarily determined that the Transaction constitutes a business combination.
After the closing of the Transaction, Renovaro will complete the valuations necessary to finalize the required purchase price allocation based upon the fair market values as of the actual closing date of the Transaction, at which time the final allocation of the purchase price will be determined. Differences between preliminary estimates in the pro forma financial information presented herein and the final acquisition accounting will occur and could have a material impact on the pro forma financial information.
The unaudited pro forma condensed combined financial information has been prepared by Renovaro in accordance with SEC Regulation S-X Article 11 and is not necessarily indicative of the condensed combined financial position or results of operations that would have been realized had the Transaction been completed as of the dates indicated above, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that Renovaro will experience after the Transaction is completed. In addition, the accompanying unaudited pro forma condensed combined statements of operations do not include any pro forma adjustments to reflect expected cost savings or restructuring actions which may be achievable or the impact of any non-recurring expenses and one-time transaction-related costs that may be incurred as a result of the Transaction.
The Transaction and Effective Time of the Transaction
On February 13, 2024 (the “Closing Date”), the Company consummated the acquisition of Renovaro Cube (fka: GEDi Cube) and the other transactions contemplated by the Stock Purchase Agreement (collectively, the “Transaction”). As a result of the Transaction, Renovaro Cube became a wholly-owned subsidiary of the Company.
Exchange Consideration
Pursuant to the Stock Purchase Agreement, as of the Closing Date, the Company acquired all the issued and outstanding equity interests of Renovaro Cube owned by the Sellers as of the Closing Date (each, a “Renovaro Cube Share” and, collectively, the “Renovaro Cube Shares”) in exchange for which each Seller was entitled to receive (i) as of the Closing Date, such Seller’s pro rata percentage of an aggregate of 70,834,183 shares of common stock, par value $0.0001 per share, of the Company (“Common Stock”), which represents the 67,224,089 shares of Common Stock issued and outstanding as of the Closing Date (minus (a) 1 million shares of Common Stock previously issued to a consultant assisting with the Transaction and (b) 1 million shares of Common Stock previously issued to Avram Miller, a director of the Company, pursuant to his Advisory Agreement, dated October 11, 2023, by and between Mr. Miller and the Company) (the “Closing Consideration”) plus 5,610,100 shares of Common Stock representing the Seller’s Earnout Shares (defined below) resulting from the automatic conversion of the Company’s Series A Convertible Preferred and, (ii) following the Closing Date, such Seller’s pro rata percentage of the shares of Common Stock (the “Earnout Shares” and, together with the Closing Consideration, the “Exchange Consideration”) to be issued to the Sellers upon the exercise or conversion of any of the Company’s derivative securities (subject to certain exceptions) that are outstanding at the Closing Date (the “Closing Derivative Securities”). Each Seller’s pro rata percentage of the Exchange Consideration is equal to the ratio of the aggregate number of Renovaro Cube Shares owned by such Seller divided by the aggregate number of Renovaro Cube Shares issued and outstanding, in each case, as of the Closing Date. No fractional shares of Common Stock were or will be issued in the Exchange Consideration, and no cash was or will be issued in exchange therefor. Any fractional share of Common Stock that a Seller would otherwise be entitled to receive is rounded down to the nearest whole share.
| Table 1 – Earnout Share Breakdown: | Amount | |||
| Estimated Conversion of 561,010 Preferred Shares at a 10:1 ratio | 5,610,100 | |||
| Estimated outstanding warrants at the closing date | 5,827,407 | |||
| Estimated Stock options outstanding at closing date | 5,130,110 | |||
| Estimated Common Stock issuance related to Convertible Notes | 627,601 | |||
| Estimated Earnout Shares related to outstanding Renovaro Derivatives | 17,195,218 | |||
| Table 2 – Estimated Exchange Consideration | Amount | |||
| Renovaro Cube Common Stock outstanding as of December 31, 2023 | 2,157 | |||
| Estimated total Renovaro Cube Common Stock | 2,157 | |||
| Exchange ratio | 38,210 | |||
| Estimated Closing Consideration | 65,224,089 | |||
| Estimated Earnout Shares (see Table 1 above) | 17,195,218 | |||
| Estimated Renovaro Common Stock to be issued | 82,419,307 | |||
| Closing price at date of acquisition (February 13, 2024) | $ | 1.92 | ||
| Estimated Exchange Consideration | $ | 158,245,069 | ||
Accounting for the Transaction
The Transaction is expected to be accounted for as a business combination using the acquisition method with Renovaro as the accounting acquirer in accordance with ASC 805. Under this method of accounting, the Transaction consideration will be allocated to Renovaro Cube’s assets acquired and liabilities assumed based on their estimated fair values at the date of completion of the Transaction, which closed on February 13, 2024. The process of valuing the net assets of Renovaro Cube immediately prior to the Transaction, as well as evaluating accounting policies for conformity, is preliminary.
In addition, the acquisition method of accounting requires the acquirer to recognize the consideration transferred at fair value. Accordingly, the Transaction consideration allocation and related adjustments reflected in this unaudited pro forma condensed combined financial information are preliminary and subject to revision based on a final determination of fair value. Refer to Note 1, “Basis of Presentation” for more information.
As a result of the foregoing, the unaudited pro forma condensed combined financial information is based on the preliminary information available and management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed and the preliminary value of the consideration transferred. The actual accounting may vary based on final analyses of the valuation of assets acquired and liabilities assumed, particularly in regard to indefinite-lived intangible assets, which could be material. Renovaro will finalize the accounting for the Transaction as soon as practicable within the measurement period in accordance with ASC 805 but in no event later than one year from the closing of the Transaction.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of December 31, 2023
| Renovaro Inc. | Renovaro Cube Intl Ltd. | |||||||||||||||||||
| December 31, | December 31, | Pro-Forma | ||||||||||||||||||
| 2023 | 2023 | Adjustments | Notes | Combined | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
| ASSETS | ||||||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||||||
| Cash | $ | 243,980 | $ | 126,683 | $ | — | $ | 370,663 | ||||||||||||
| Notes receivable | 1,073,625 | — | (1,073,625 | ) | [A] | — | ||||||||||||||
| Prepaids and other assets | 1,085,545 | 175,713 | — | 1,261,258 | ||||||||||||||||
| Total Current Assets | 2,403,150 | 302,396 | (1,073,625 | ) | 1,631,921 | |||||||||||||||
| Property and equipment, net | 496,896 | 16,620 | — | 513,516 | ||||||||||||||||
| OTHER ASSETS: | ||||||||||||||||||||
| Definite life intangible assets, net | 32,641 | — | — | 32,641 | ||||||||||||||||
| Indefinite life intangible assets | 42,611,000 | — | 9,019,969 | [B] | 51,630,969 | |||||||||||||||
| Goodwill | 11,640,000 | — | 150,428,247 | [B] | 162,068,247 | |||||||||||||||
| Deposits and other assets | 21,742 | — | — | 21,742 | ||||||||||||||||
| Operating lease right-of-use assets | 812,691 | 721,720 | — | 1,534,411 | ||||||||||||||||
| Total Other Assets | 55,118,074 | 721,720 | 159,448,216 | 215,288,010 | ||||||||||||||||
| TOTAL ASSETS | $ | 58,018,120 | $ | 1,040,736 | $ | 158,374,591 | $ | 217,433,447 | ||||||||||||
| LIABILITIES | ||||||||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||||||||
| Accounts payable – trade | $ | 5,577,917 | $ | 439,879 | $ | — | $ | 6,017,796 | ||||||||||||
| Accrued expenses | 783,601 | 475,207 | (75,000 | ) | [E] | 1,183,808 | ||||||||||||||
| Other current liabilities | 669,384 | — | — | 669,384 | ||||||||||||||||
| Current portion of operating lease liabilities | 218,085 | 308,563 | — | 526,648 | ||||||||||||||||
| Notes payable, net | 3,940,000 | 1,727,434 | (1,120,357 | ) | [A] | 4,547,077 | ||||||||||||||
| Convertible notes payable | 2,569,379 | — | — | 2,569,379 | ||||||||||||||||
| Total Current Liabilities | 13,758,366 | 2,951,083 | (1,195,357 | ) | 15,514,092 | |||||||||||||||
| NON-CURRENT LIABILITIES: | ||||||||||||||||||||
| Contingent Consideration | — | — | 33,014,819 | [B] | 33,014,819 | |||||||||||||||
| Operating lease liabilities, net of current portion | 664,218 | 413,157 | — | 1,077,375 | ||||||||||||||||
| Total Non-Current Liabilities | 664,218 | 413,157 | 33,014,819 | 34,092,194 | ||||||||||||||||
| Total Liabilities | 14,422,584 | 3,364,240 | 31,819,462 | 49,606,286 | ||||||||||||||||
| Commitments and Contingencies | — | — | — | — | ||||||||||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||||||||||||||
| Preferred stock | 56 | — | — | 56 | ||||||||||||||||
| Common Stock | 6,724 | 2,753 | 9,770 | [B][D] | 19,247 | |||||||||||||||
| Additional paid-in capital | 301,349,389 | (2,753 | ) | 126,423,627 | [B] | 427,770,263 | ||||||||||||||
| Accumulated deficit | (257,733,402 | ) | (2,275,057 | ) | 75,000 | [E] | (259,933,459 | ) | ||||||||||||
| Accumulated other comprehensive loss | (27,231 | ) | (48,447 | ) | 46,732 | [A] | (28,946 | ) | ||||||||||||
| Total Stockholders’ Equity | 43,595,536 | (2,323,504 | ) | 126,555,129 | 167,827,161 | |||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 58,018,120 | $ | 1,040,736 | $ | 158,374,591 | $ | 217,433,447 | ||||||||||||
See notes to unaudited pro forma condensed combined financial statements
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended June 30, 2023
| (Audited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
| Renovaro Inc. | Renovaro Cube Intl Ltd. | Adjustments | Notes | Combined | ||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| General and administrative | $ | 15,318,198 | $ | 616,092 | $ | 2,364,562 | [C][D] | $ | 18,298,852 | |||||||||||
| Research and development | 4,165,197 | — | — | 4,165,197 | ||||||||||||||||
| Indefinite life intangible assets impairment charge | 18,960,000 | — | — | 18,960,000 | ||||||||||||||||
| Depreciation and amortization | 113,496 | 10,231 | — | 123,727 | ||||||||||||||||
| Total Operating Expenses | 38,556,891 | 626,323 | 2,364,562 | 41,547,776 | ||||||||||||||||
| LOSS FROM OPERATIONS | (38,556,891 | ) | (626,323 | ) | (2,364,562 | ) | (41,547,776 | ) | ||||||||||||
| Other Income (Expenses) | ||||||||||||||||||||
| Loss on extinguishment of contingent consideration liability | (419,182 | ) | — | — | (419,182 | ) | ||||||||||||||
| Change in fair value of contingent consideration | — | — | — | — | ||||||||||||||||
| Interest expense | (580,344 | ) | — | — | (580,344 | ) | ||||||||||||||
| Gain (loss) on foreign currency transactions | (1,019 | ) | — | — | (1,019 | ) | ||||||||||||||
| Interest income and other income (expense) | (126,620 | ) | 184,636 | — | 58,016 | |||||||||||||||
| Total Other Income (Expenses) | (1,127,165 | ) | 184,636 | — | (942,529 | ) | ||||||||||||||
| NET LOSS | $ | (39,684,056 | ) | $ | (441,687 | ) | $ | (2,364,562 | ) | $ | (42,490,305 | ) | ||||||||
| BASIC AND DILUTED NET LOSS PER COMMON SHARE | $ | (0.71 | ) | $ | (3,681 | ) | $ | — | $ | (0.35 | ) | |||||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING – BASIC AND DILUTED | 56,265,362 | 120 | — | 121,310,755 | ||||||||||||||||
See notes to unaudited pro forma condensed combined financial statements
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 2023
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
| Renovaro Inc. | Renovaro Cube Intl Ltd. | Adjustments | Notes | Combined | ||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| General and administrative | $ | 11,906,602 | $ | 1,742,993 | $ | (75,000) | [E] | $ | 13,574,595 | |||||||||||
| Research and development | 1,187,165 | 502,580 | — | 1,689,745 | ||||||||||||||||
| Depreciation and amortization | 60,422 | 5,135 | — | 65,557 | ||||||||||||||||
| Total Operating Expenses | 13,154,189 | 2,175,708 | (75,000) | 15,329,897 | ||||||||||||||||
| LOSS FROM OPERATIONS | (13,154,189 | ) | (2,175,708 | ) | 75,000 | (15,329,897 | ) | |||||||||||||
| Other Income (Expenses) | ||||||||||||||||||||
| Loss on extinguishment of debt | (120,018 | ) | — | — | (120,018 | ) | ||||||||||||||
| Loss on extinguishment of contingent consideration liability | — | — | — | — | ||||||||||||||||
| Interest expense | (454,255 | ) | (32,205 | ) | 23,625 | [A] | (462,835 | ) | ||||||||||||
| Interest income and other income (expense) | 24,313 | 7,856 | (23,625 | ) | [A] | 8,544 | ||||||||||||||
| Total Other Income (Expenses) | (549,960 | ) | (24,439 | ) | — | (574,309 | ) | |||||||||||||
| NET LOSS | $ | (13,704,149 | ) | $ | (2,275,057 | ) | $ | 75,000 | [E] | $ | (15,904,206 | ) | ||||||||
| BASIC AND DILUTED NET LOSS PER COMMON SHARE | $ | (0.21 | ) | $ | (1,055 | ) | $ | — | $ | (0.12 | ) | |||||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING - BASIC AND DILUTED | 65,166,625 | 2,157 | — | 130,390,714 | ||||||||||||||||
See notes to unaudited pro forma condensed combined financial statements
| 1. | Basis of Presentation |
The historical consolidated financial information of Renovaro has been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the Transaction, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operations and comprehensive loss, are expected to have a continuing impact on the results of operations.
The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the SEC and are intended to show how the Transaction might have affected the historical financial statements. The unaudited pro forma condensed combined financial information set forth herein is based upon the unaudited historical consolidated financial statements of Renovaro and Renovaro Cube. The unaudited pro forma condensed combined financial statements is presented as if the Transaction had been completed on July 1, 2023, with respect to the unaudited pro forma condensed combined balance sheet as of December 31, 2023, and as of July 1, 2022, with respect to the unaudited pro forma condensed combined statements of operations for the twelve months ended June 30, 2023 and the six months ended December 31, 2023 for the Transaction.
Renovaro’s combined financial information has been prepared in accordance with Generally Accepted Accounting Principles in the United States, or GAAP, as issued by the Financial Accounting Standards Board, or FASB. Renovaro Cube’s financial information has been historically prepared in accordance with GAAP.
The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations had the Transaction occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the combined company will experience after the completion of the Transaction. To the extent there are significant changes to the combined company’s business following the completion of the Transaction, the assumptions and estimates set forth in the unaudited pro forma condensed combined financial statements could change significantly.
Renovaro determined the Transaction constitutes a business combination and is accounting for the Transaction using the acquisition method.
| 2. | Pro Forma Adjustments |
The unaudited pro forma adjustments included in the unaudited pro forma condensed combined financial statements are based on preliminary estimates that may change significantly as additional information is obtained. are as follows:
| A. | The elimination of intercompany Notes and related interest income and expense between Renovaro and Renovaro Cube. |
| B. | To record the 100% acquisition of Renovaro Cube through the issuance of 65,224,089 shares of common stock at $1.92 per share (the closing price at February 13, 2024) and contingent consideration of potential issuance of 17,195,218 common shares (see table 1) at the share price of $1.92, and to eliminate the net stockholders’ equity accounts of Renovaro Cube prior to the acquisition. |
| C. | To eliminate management fees paid by Renovaro Cube that are not being carried forward to the combined company. | |
| D. | To record one-time consulting fees of $2,760,000 related to the Transaction that was paid in shares at 10/23/2023 closing price of $2.76. | |
| E. | The elimination of an intercompany expense related to professional services between Renovaro and Renovaro Cube. |