Renalytix plc 6-K, filed Nov 22, 2022
Renalytix plc (RNLXY)
About this 6-K
Renalytix plc filed this 6-K on November 22, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Date of report: November 22, 2022
Commission File Number: 001-39387
Renalytix plc
(Translation of registrant’s name into English)
Finsgate
5-7 Cranwood Street
London EC1V 9EE
United Kingdom
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
☒ Form 20-F ☐ Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K
Annual Report and Notice of Annual General Meeting
On November 10, 2022, Renalytix plc (the “Company”) published its UK Annual Report and Financial Statements for the year ended June 30, 2022 (the “UK Annual Report”) and distributed a letter to shareholders, notice of its annual general meeting (the “AGM”), a form of proxy and the UK Annual Report to its ordinary shareholders.
The UK Annual Report, letter to shareholders, AGM notice and form of proxy are furnished herewith as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively, to this Report on Form 6-K.
The information contained in the UK Annual Report, letter to shareholders, AGM notice and form of proxy shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth by specific reference in such filing.
EXHIBIT INDEX
Exhibit |
Description |
99.1 |
Annual Report and Financial Statements for the year ended June 30, 2022 |
99.2 |
Letter to Shareholders |
99.3 |
Notice of Annual General Meeting |
99.4 |
Form of Proxy |
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, thereunto duly authorized.
RENALYTIX PLC |
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By: |
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/s/ James McCullough |
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James McCullough |
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Chief Executive Officer |
Date: November 22, 2022
Exhibit 99.1
Renalytix plc
Annual Report and
Financial Statements
FOR THE YEAR ENDED 30 JUNE 2022
| Renalytix plc Annual Report and Financial Statements 1
Index
STRATEGIC REPORT |
3-21 |
Chairman & CEO’s Joint Statement |
3 |
Company Overview |
8 |
Operational and Financial Highlights |
9 |
Product Overview and Strategy |
11 |
Financial Review |
13 |
Risk Management Approach |
15 |
Section 172 Statement |
19 |
Corporate Social Responsibility Review |
21 |
CORPORATE GOVERNANCE |
22-52 |
Board of Directors |
22 |
Directors’ Report |
25 |
Corporate Governance Statement |
29 |
Directors’ Remuneration Report and Policy |
32 |
Independent Auditors’ Report |
48 |
FINANCIAL STATEMENTS |
53-87 |
Consolidated Income Statement |
53 |
Consolidated Statement of Comprehensive Income |
54 |
Consolidated and Company’s Statements of Financial Position |
55 |
Consolidated and Company’s Statements of Cashflows |
57 |
Consolidated Statement of Changes in Equity |
59 |
Company’s Statement of Changes in Equity |
61 |
Notes to the Financial Statements |
63 |
Additional Financial Information |
85 |
| Renalytix plc Annual Report and Financial Statements 2
STRATEGIC REPORT
Chairman & CEO’s Joint Statement
TO THE MEMBERS OF RENALYTIX PLC
We are pleased to present our annual report for the twelve months ended 30 June 2022 for Renalytix plc (“Renalytix” or the “Company”).
Our path to success is focused on five major items:
We are making strong progress and expect to meet or exceed each of these items.
Achieving “super-majority” insurance coverage in key regional markets including New York, Illinois and the Carolinas
We expect to cross the threshold of “super-majority” coverage in different key markets over the next several months. We consider a super-majority as greater than 70% of patients with diabetes and kidney disease having insurance coverage for KidneyIntelX testing in a major population region, such as New York City or metropolitan Chicago. Establishing Medicare and Medicaid payment are two crucial pieces as collectively they provide insurance for an estimated 60-70 percent of the KidneyIntelX eligible patient population. We recently reported that we have secured payment for KidneyIntelX testing by Medicare through claims submitted to National Government Services (NGS), the Medicare Administrative Contractor covering our New York laboratory. This is in addition to KidneyIntelX claims now being paid by Medicare Advantage, Medicaid, Blue Cross Blue Shield and other commercial insurance providers.
The Blue Cross Blue Shield (BCBS) system, covering over 114 million members or 1 in 3 Americans, is also core to our 2023 growth strategy. To date, we are pleased to have KidneyIntelX coverage declared by BCBS Illinois (8.1 million members), and Wellmark BCBS (South Dakota and Iowa with two million members). We have always viewed insurance reimbursement as the most significant hurdle to KidneyIntelX adoption and consider our building success in securing Medicare, Medicaid and BCBS payment to be unusually rapid this early in a company’s commercial diagnostic lifecycle. Our expected KidneyIntelX contracted pricing remains at $950, in line with our distinct Medicare CLFS pricing.
Continuing to publish on our growing real-world evidence of KidneyIntelX effectiveness
Published utility study results showed that primary care physicians using KidneyIntelX are six times more likely to prescribe advanced medication to their high-risk patients in early-stage kidney disease where the opportunity to prevent significant kidney damage or kidney failure is greatest. In these studies, the same physician using KidneyIntelX was also three times more likely to make a timely referral to a specialist and three times more likely to initiate more aggressive anti-hypertensive (blood pressure control) strategies.
In other words, these real-world results support that KidneyIntelX is driving behavior change at primary care for high-risk patients – the key to altering the tide on kidney disease progression and reducing dialysis. We expect additional results from our multi-year real-world evidence programs will be in print during the 2nd quarter of fiscal 2023.
FDA De Novo marketing authorization for KidneyIntelX
We continue to work closely and constructively with the FDA on our De Novo Breakthrough Device authorization submission. Notably, we have provided additional comprehensive data which further confirms the performance of KidneyIntelX in risk discrimination for patients with diabetic kidney disease. We now believe we are approaching the completion of the De Novo regulatory process and while there is no guarantee of success until the FDA has made its final determination, we are optimistic based on both the quality of analytic and clinical evidence provided and the
| Renalytix plc Annual Report and Financial Statements 3
high level of engagement we have had with the FDA. Our current expectations are for a decision to be made in calendar Q1 2023 but there can be no guarantee on this timescale.
Revenue growth from sequential onboarding of physicians, networks, and hospitals in new locations
We expect revenue test volume will continue to increase through the balance of fiscal year 2023 with increased contribution from different market channels. At Mount Sinai Health System alone, we have now generated nearly 5,000 KidneyIntelX patient results including 835 in the quarter ended June 2022 (Q4 of FY22), and another 974 in the most recent post-period quarter ended September 2022 (Q1 of FY23).
We issued over 1,200 patient KidneyIntelX test reports in the first quarter of fiscal 2023 (ended September 30), which is double the testing rate from a year earlier. With expanded insurance coverage, a growing number of these tests are now billable and revenue recognizable within 30 days.
Continuing to lower net expense
We have continued to reduce Company overhead with a keen eye toward advancing our best commercial opportunities – primarily regions with super-majority insurance coverage in the short term. As stated in August 2022, we have taken action to lower annual expenditures by over $12 million through program, vendor and employee reductions, with additional opportunities to reduce expenditures under review.
In fiscal 2023, the fundamental goals are clear;
The early-stage kidney health market remains wide open, and we believe Renalytix is in a position to alter the cost landscape and maintain better health for some 15 million Americans with diabetes and kidney disease.
ABOUT RENALYTIX
At Renalytix, we are introducing more accurate prognosis and effective care management for the estimated 850 million people worldwide with chronic kidney disease. In the United States alone, chronic kidney disease affects about 37 million people and is responsible for one of the largest cost drivers in the national medical system. Early identification, prognosis and treatment beginning with primary care is essential if we are to stem the growing social cost and suffering associated with kidney disease.
With our lead product, KidneyIntelX, the goal is to drive the focus from kidney disease treatment to kidney health management through a more accurate understanding of a patient’s risk for kidney failure before it happens. KidneyIntelX leads development in the new field of bioprognosis, a biology driven approach to risk assessment that integrates information from a simple blood draw and a patient’s health record to produce an accurate picture of kidney health. A doctor can use KidneyIntelX results to act on patients at high risk of kidney disease progression or failure at an early stage where active management and therapeutics have the best opportunity to impact outcomes and cost before it is too late.
KIDNEYINTELX™
Our novel platform, KidneyIntelX, uses a machine-learning enabled algorithm to process predictive blood biomarkers with key features from a patient’s health record to generate an early and accurate kidney health risk score. The score identifies those patients at the most risk for kidney disease progression and/or failure and further guides ongoing clinical decisions.
KidneyIntelX is initially indicated for use with adults who have diagnosed kidney disease and diabetes – diabetic kidney disease or DKD. Future KidneyIntelX products in development intend to expand the indicated uses to include broader chronic kidney disease, health equity strategies and kidney health monitoring through treatment. Diabetes is the leading cause of chronic kidney disease, representing nearly 40% of its cases, and DKD patients are the highest contributors to emergency room dialysis starts. Unfortunately, many DKD patients are unaware that their kidney disease has been progressing, often uncontrolled, for many years and now find themselves making difficult decisions about late-stage treatments.
KidneyIntelX was designed as an expandable platform able to add indicated uses and a monitoring capability, all within an FDA regulated, insurance reimbursable framework.
OPERATIONAL PROGRESS
| Renalytix plc Annual Report and Financial Statements 4
In the year ended 30 June 2022 (“FY22”) and the immediate post-period, the Company saw KidneyIntelX expand within the Mount Sinai Health System and launch at Wake Forest Baptist Health, CDPHP, VA medical centers and among independent primary care physicians.
A full electronic health record (EHR) integrated deployment of KidneyIntelX with population health support in the Mount Sinai Health System has now yielded actionable reports on nearly 5,000 patients and growing. Utility results from our first real-world deployment at scale is yielding key evidence of the benefits of KidneyIntelX, particularly at the all-important primary care level. Patients and doctors are now clearly seeing benefits in the short-term from advanced risk assessment and follow-on action early in the disease cycle. Our experience with our physician-led health insurance partner, Capital District Physicians’ Health Plan (CDPHP), in upstate New York has been equally robust.
Implementing with the veterans’ affairs (VA) medical system has been slower than planned due to the complexities in introducing a new test and integrating its use into the VA system. However, we have now begun to overcome implementation hurdles and are beginning to see an increasing number of orders and corresponding testing volumes. We remain convinced that KidneyIntelX will play an important role nationally in the VA system which serves an estimated one million veterans with diabetes and kidney disease. Again, insurance coverage remains in place with a nationwide 10-year government insurance contract for KidneyIntelX payment throughout the VA system.
Expert experience is reflected in the design of the KidneyIntelX test report and the newly launched product website: www.kidneyintelx.com. We believe our education and support program will be an important resource to help inform and improve care for early-stage DKD patients and support future hospital system deployments of KidneyIntelX in the United States and abroad, which we believe could be achieved more rapidly as a result of the knowledge we have derived from our hospital system implementations to date.
Financing
In July 2019, we raised gross proceeds of $17.3 million in a follow-on financing on the AIM market, and in July 2020, we raised an additional $85.1 million in gross proceeds through an offering and concurrent dual-listing on the Nasdaq Global Market in the U.S.
In March 2022, we announced the completion of a financing package yielding $26.8 million in gross proceeds for the Company. The financing included an $8.8 million equity subscription plus $21.2 million principal amount of convertible bonds (net cash proceeds of $18 million). We are pleased to have achieved the financing in an extremely challenging capital market environment, which we believe illustrates the strength of our kidney disease testing, monitoring and informed care advantages.
Clinical Evidence
Over the past few years, we have published and presented validation, utility and health economics data supporting KidneyIntelX adoption. Of particular note is the growing body of real-world utility evidence building on KidneyIntelX clinical reporting in different institutions through several thousand patients. Examples of published evidence includes:
Initial Forum |
Cohort |
Findings |
Publication |
ADA 81st Scientific Sessions 2020 |
Mount Sinai & UPenn (n=1,146) |
KidneyIntelX more accurately predicted progressive kidney function decline and kidney failure than clinical metrics alone |
Diabetologia 2021;64, 1504–1515 |
NKF Spring Clinical Meeting 2020 |
Simulation in patients with DKD stages 1-3b (n=100,000) |
Analyses supported payer coverage for early-stage risk assessment and care management in the primary care office; projects significant savings from KidneyIntelX testing at primary care |
Journal of Medical Economics 2021;24:972-982 |
ADA 82nd Scientific Sessions 2021 |
CANVAS (n=1,325) |
KidneyIntelX algorithm published in Diabetologia and currently deployed commercially accurately predicted progression of DKD in this multinational clinical trial cohort |
American Journal of Nephrology 2022;53:21–31 |
ISN World Congress of Nephrology 2021 |
CANVAS (n=1,026) |
KidneyIntelX can be effective at monitoring therapeutic response and improvements in kidney health over time in adults with type 2 diabetes and DKD |
American Journal of Nephrology 2022;53:21–31 |
NKF Spring Clinical Meetings 2021 |
PCPs (n=401) |
KidneyIntelX test had greater relative importance than albuminuria and eGFR to PCPs in making treatment decisions and was second only to eGFR for nephrologist referrals. |
American Journal of Managed Care 2022;28:In Press |
| Renalytix plc Annual Report and Financial Statements 5
ASN Kidney Week 2021 |
Mount Sinai RWE Cohort |
KidneyIntelX testing enhanced patient understanding about kidney disease and revealed |
Journal of the American Society of Nephrology 32: 2021 |
ISN World Congress of Nephrology 2022 |
Sinai/Penn (n=1,146) |
KidneyIntelX provided robust prognostic information for future eGFR trajectories and adverse kidney outcomes beyond prior ascertainment of baseline kidney function, injury, or historical kidney function trajectories. |
Kidney International Reports 2022; 7, S1–S436 |
ADA 83rd Scientific Sessions 2022 |
CANVAS (n=1,325) |
KidneyIntelX provided risk stratification for a triple composite end point that included not only the kidney-specific outcome of progression, but also clinically relevant outcomes of hospitalizations for heart failure and all-cause mortality, even after adjusting for several other risk factors for these outcomes. |
Kidney360 2022, 3;1599-1602 |
ADA 83rd Scientific Sessions 2022 |
Mount Sinai RWE Cohort (n=1,112) |
KidneyIntelX showed utility in driving guideline appropriate use of therapies, including SGLT-2 inhibitors and RAAS inhibitor use, and timely consultation to specialists in high-risk patients. |
Pending |
ASN Kidney Week 2022 |
Systematic Review and Meta-analysis (n=129 studies) |
Systematic review and meta-analysis to summarize the prognostic value of preclinical plasma and urine biomarkers for CKD outcomes (incident CKD, CKD progression, or incident ESKD), including 129 studies in the meta-analysis. Pooled risk ratios (RRs) and 95% confidence intervals (Cis) among some of the most studied CKD biomarkers were 2.17 (1.91 to 2.47) for TNFR1 (31 studies); 2.07 (95% CI, 1.82 to 2.34) for TNFR2 (23 studies); 1.51 (95% CI, 1.38 to 1.66) for KIM-1 (18 studies). |
Journal of the American Society of Nephrology 2022, 33:1657-1672 |
ADA – American Diabetes Association; NKF – National Kidney Foundation; ASN – American Society of Nephrology; ISN – International Society of Nephrology; RWE – Real world evidence; DKD – diabetic kidney disease |
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Intellectual Property
The U.S. Patent and Trademark Office allowed claims extending the use of one of KidneyIntelX’s primary blood biomarkers, sTNFR1, to all patients with diabetes to determine an increased risk of developing progressive kidney disease or kidney failure. We have also completed rights to additional patent applications for use with KidneyIntelX. We continue to build out our intellectual property portfolio and are actively evaluating in-licensing opportunities that will enhance our competitive product positioning.
Current trading and Outlook
Building KidneyIntelX into a standard of care in the United States and a global market with 850 million people with chronic kidney disease requires extensive data production, regulatory approvals, physician and patient education, and of course, comprehensive reimbursement. While it sometimes seems this set of milestones takes a long time to accomplish, we are reminded that Renalytix is still a young company that received its first funding less than four years ago. To have achieved real insurance coverage for KidneyIntelX testing in the complex U.S. market in such a short time we believe is extraordinary. We believe that since the data is comprehensive and showing clear benefit, acceleration of adoption is likely to continue to occur. The social need could not be higher to establish innovative preventative medicine strategies such as KidneyIntelX at the front-end of diabetes and kidney disease.
Operational progress continued into the first quarter of fiscal 2023 with over 1,200 tests performed. More than 80% of these were billable, yielding about $1.0 million revenue for the quarter. These are record amounts for us in quarterly testing volumes and revenue.
We greatly appreciate the patience and continued support of our shareholders through these unusual times.
Christopher Mills James R. McCullough
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Chairman Chief Executive Officer
| Renalytix plc Annual Report and Financial Statements 7
Company Overview
PIONEERING NEXT-GENERATION TECHNOLOGY SOLUTIONS FOR KIDNEY HEALTH
Renalytix is the global founder and leader in the new field of bioprognosisTM for kidney health. The Company has engineered a new solution that enables early-stage chronic kidney disease progression risk assessment. The Company’s lead product, KidneyIntelX, has been granted Breakthrough Designation by the U.S. Food and Drug Administration (FDA) and is designed to help make significant improvements in kidney disease prognosis, transplant management, clinical care, patient stratification for drug clinical trials, and drug target discovery.
Renalytix is focused on optimizing clinical management of kidney disease to drive improved patient outcomes and lower healthcare costs. KidneyIntelX, our first-in-class in vitro diagnostic platform, employs a proprietary algorithm that combines diverse data inputs, including validated blood-based biomarkers, inherited genetics and personalized patient data from electronic health record, or EHR, systems, to generate a unique patient risk score. This patient risk score enables prediction of rapid progressive kidney function decline in chronic kidney disease, or CKD, allowing physicians and healthcare systems to optimize the allocation of treatments and clinical resources to patients at highest risk.
ON A MISSION TO COMBAT A DEVASTATING AND COSTLY DISEASE
Kidney disease is a public health epidemic affecting over 850 million people globally. Managing a CKD population of this scale and the associated healthcare spending presents a unique healthcare system challenge, requiring a solution that provides a clearer understanding of clinical risk tied to specific guideline-driven clinical recommendations. The ability to predict which patients will experience progressive kidney function decline, which includes rapid kidney function decline, or RKFD, sustained significant decline in kidney function, kidney failure, initiation of long-term dialysis or kidney transplant, is critical to changing patient outcomes and health economics. Current methods for risk stratification of patients with CKD lack sufficient precision in predicting progressive kidney function decline, especially at earlier stages of the disease. This can exacerbate the occurrence of unexpected and expensive clinical events. In fact, up to 38% of patients with CKD initiate dialysis with little or no prior clinical specialist consultation, and up to 63% of patients with CKD initiate dialysis in an unplanned fashion with a central venous catheter and/or during emergency hospitalization, which we refer to as “dialysis crash.” This highlights the need for an early mechanism to identify potential instances of rapidly progressing CKD before it becomes critical to the patient’s health and costly to healthcare providers.
We have now validated KidneyIntelX in multiple distinct studies, involving specimens from thousands of patients with DKD. In all studies, KidneyIntelX has demonstrated the ability to more accurately identify which patients would experience rapid progressive kidney function decline over current clinical practice. We believe early risk stratification, using advanced technology implemented in partnership with healthcare systems and insurance payors, can help support a fundamental shift towards optimal treatment for the over 850 million people suffering from kidney disease worldwide.
| Renalytix plc Annual Report and Financial Statements 8
Operational and Financial Highlights
Including post-period events
REGULATORY & REIMBURSEMENT
COMMERCIAL & PARTNERSHIPS
CLINICAL & VALIDATION
| Renalytix plc Annual Report and Financial Statements 9
FINANCE & OPERATIONS
CURRENT QUARTER
| Renalytix plc Annual Report and Financial Statements 10
Product Overview and Strategy
Our novel platform, KidneyIntelX, uses a machine-learning enabled algorithm to process predictive blood biomarkers with key features from a patient’s health record to generate an early and accurate kidney health risk score. The score identifies those patients at the most risk for kidney disease progression and/or failure and further guides ongoing clinical decisions.
OUR STRATEGY
Our goal is to lower healthcare costs and improve patient quality of life by transforming the paradigm for kidney disease risk assessment and clinical management through our KidneyIntelX platform. To achieve this goal, we plan to:
| Renalytix plc Annual Report and Financial Statements 11
Financial Review
The results presented cover FY22. The presentational currency for Renalytix plc and its subsidiaries (together, the “Group”) is the United States Dollar.
INCOME STATEMENT
Revenue
The Group recognized a total of $2.9 million in revenue in the financial year ended 30 June 2022 (“FY22”) which was comprised of $2.7m in revenue related to testing services as well as $0.2 million related to pharmaceutical services revenue.
Cost of Sales
The cost of sales associated with the services performed and commercial testing revenue was $2.1 million for FY22.
Administrative Costs
During FY22, administrative expenses totaled $58.3 million (financial year ended 30 June 2021 (“FY21”): $33.3 million). The major items of expenditure were general and administrative costs of which included $27.6 million in employee- related costs (FY21: $13.8 million), $12.9 million in subcontractors, legal, accounting, and other professional fees (FY21: $9.1 million), $6.4 million in external R&D Services, lab supplies and lab services(FY21: $1.4 million), $4.6 million in insurance (FY21: $4.6 million), $2.1 million in depreciation and amortization (FY21: $2.1 million), $1.9 million in marketing and public relations (FY21: $0.9 million), $1.7 in IT related costs (FY21: $0.6 million), $0.5 million in office related expenses including rent(FY21: $0.3 million), $0.3 million in stock exchange listing and filing fees (FY21: $0.2 million) and $0.3 million in other expenses (FY21: $0.3 million).
Gain (loss) on financial assets at fair value through profit or loss
The Company accounts for the investment in VericiDx equity securities at fair value, with changes in fair value recognized in the income statement. During the year ended 30 June 30 2022, we recorded a loss of $5.9 million to adjust the VericiDx investment to fair value. During the year ended 30 June 30 2021, we recorded a gain of $6.5 million to adjust the VericiDx investment to fair value.
Fair value adjustment of convertible debt
We elected to account for the convertible notes at fair value with qualifying changes in fair value recognized through the income statement until the notes are settled. This excludes fair value adjustments related to instrument-specific credit risk, which are recognized in OCI. For the year ended 30 June 2022, we recorded a gain of $4.0 million to adjust the convertible notes to fair value. There was no fair value adjustment for the year ended 30 June 2021 as we had not issued convertible debt at that time.
Finance Income (Expense)
Finance income (expense) consists of foreign exchange gains or losses. During the year ended 30 June 2022, we recognized a foreign currency gain of $9.6 million due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency. During the year ended 30 June 2021, we recognized foreign currency losses of $8.8 million.
BALANCE SHEET
Inventory
Inventory consists of consumable materials used by the labs to carry out KidneyIntelX tests. During FY22, inventory levels increased due to purchases as the company prepares for increased KidneyIntelX testing volumes. Inventory on hand at 30 June 2022 totaled $1.2 million (FY21: $0.4 million).
Fixed Assets
Property, plant, and equipment consists of laboratory equipment being used to support testing and product development activities. At 30 June 2022, the company held $1.4 million in net property, plant, and equipment (FY21: $1.1 million).
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Intangible Assets
The Group held $14.0 million net book value of intangible assets held at 30 June 2022 (FY20: $18.0 million) includes payments made primarily to Mount Sinai for license and patent costs for the intellectual property underlying KidneyIntelX, as well as amounts capitalized as development costs. Intangible assets also include the value of the biomarker business purchased (in exchange for ordinary shares in the Company) from EKF. Intangible assets decreased period over period due to amortisation and the impact of foreign exchange translation at period end.
Investment in Verici
At the end of FY22 the group held 9,831,681 shares in Verici Dx, the fair value of the investment in Verici Dx was $2.7 million at 30 June 2022 (FY21: $9.3 million)
Convertible Note
In April 2022, the Company issued amortizing senior convertible bonds with a principal amount of $21.2 million in amortizing senior convertible bonds due in April 2027 (the "Bonds"). The Bonds were issued at 85% par value with total net proceeds of $18.0 million. The Company elected to account for the Bonds at fair value. At 30 June 2022, the Bonds had a fair value of $12.3 million.
Cash
The Group had cash on hand of $41.3m (FY21: $65.2m). Cash and equivalents are held in several deposit accounts in the US ($12.7m), UK ($28.3m) and IRE ($0.3m). Our expenditure plans remain sufficiently adaptable to align with available resources.
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Risk Management Approach
We recognize that effective risk management is essential to the successful delivery of the Group’s strategy. As we grow our business, we believe it is important to develop and enhance our risk management processes and control environment on an ongoing basis and ensure it is fit for purpose by identifying and managing risks across the Group in a consistent and robust manner.
Below we describe our risk management approach, the principal risks and uncertainties faced by the Group and the controls in place to manage them.
OVERVIEW OF RISK MANAGEMENT APPROACH
The key principles that guide the Group’s risk management approach are outlined below:
A risk register is maintained and updated periodically. The register includes the risk description, risk owner, mitigation/control description and risk profile.
PRINCIPAL RISKS AND UNCERTAINTIES
Set out below are the principal risks which we believe could materially affect the Group’s ability to achieve its financial and operating objectives and control or mitigating activities adopted to manage them. The risks are not listed in order of significance.
THE GROUP IS DEPENDENT UPON ITS STRATEGIC COLLABORATION WITH THIRD PARTY PARTNERS
The Group is working to develop and commercialize its products in close collaboration with strategic partners. The Group is dependent upon third parties for resources and revenue. Failure by these strategic partners to meet its key contractual obligations or to purchase KidneyIntelX tests, for whatever reason, would likely have a material adverse effect on the Group and its ability to achieve its commercial objectives, potentially including the attainment of sales volumes leading to profitability, and may ultimately result in the Group becoming unviable.
REGULATORY RISK
There can be no guarantee that any of the Group’s products will be able to obtain or maintain the necessary regulatory approvals in any or all of the territories in respect of which applications for such approvals are made. Where regulatory approvals are obtained, there can be no guarantee that the conditions attached to such approvals will not be considered too onerous by the Group or its partners in order to be able to market its products effectively.
The Group seeks to reduce this risk by seeking advice from regulatory advisers, consultations with regulatory approval bodies and by working with experienced partners.
REIMBURSEMENT LEVELS
There is no guarantee that the Company will be able to continue to sell its products or services profitably if the reimbursement level from third party payers, including government and private health insurers, is limited or subsequently withdrawn. Third party payers are increasingly attempting to contain health care costs through measures that could impact the Company including challenging the prices charged for health care products and services, limiting both coverage and the amount of reimbursement for new diagnostics products and services, and denying or limiting coverage for products that are approved by the regulatory agencies but are considered experimental by third party payers.
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The Company understands that due to third party dependency it is extremely difficult to eradicate this risk. However, the Company manages this risk with constant dialogue and educating the third-party payers on the Group’s products and also developing new technologies in order to seek additional reimbursements.
KEY EMPLOYEES
The Company’s future development and prospects depend to a significant degree on the continuing contribution of key members of its Board, Senior Management and Scientific Advisory Board. As a small organization, the Company relies on a core team of staff and is therefore exposed to any significant departures of key personnel. In particular, the Company’s performance depends significantly on the continuing contribution of its CEO, James McCullough, its President, Thomas McLain, its CTO, Fergus Fleming, its CFO, O. James Sterling and its CMO, Michael Donovan.
The Group operates in a highly competitive field and the expertise and skills of key individuals are also applicable in a number of other fields and industries. The high level of demand for such expertise and skills means that there is increasingly intense competition for talent. The departure of any of the key members to pursue other opportunities or because they are no longer able to continue to perform their roles (for whatever reason) could have a negative impact on its operations and could affect the Group’s ability to execute the Group’s business strategy.
To seek to mitigate the potential risk of departures, the Company has adopted a competitive remuneration structure, which includes share-based incentives. The Company has also taken out key- man insurance on James McCullough. However, there can be no assurance that this insurance will be adequate or continue to be available on appropriate terms or at all.
OBSOLESCENCE OF GROUP’S PRODUCTS
Demand for the Group’s products could be adversely impacted by the development of alternative technology and alternative medicines specifically intended for the identification, stratification and/ or treatment of CKD patients. There can be no assurance that the technology and products currently being developed by the Group will not be rendered obsolete. New AI technology may continue to emerge and develop. As a result, there is the possibility that new technology may be superior to, or render obsolete, the technology that the Group currently is developing. Any failure of the Company to ensure that its technology platform and products remain up to date with the latest technology may have a material adverse impact on the Company’s competitiveness and financial performance. The Group’s success will depend, in part, on its or its partners’ ability to develop and adapt to these technological changes and industry trends.
THE GROUP IS SUBJECT TO INCREASINGLY STRINGENT PRIVACY AND DATA SECURITY LEGISLATION
Regulatory, legislative or self-regulatory/standard developments regarding privacy and data security matters could adversely affect the Group’s ability to conduct the Group’s business. The Group is subject to laws, rules, regulations and industry standards related to data privacy and cyber security, and restrictions or technological requirements regarding the collection, use, storage, protection, retention or transfer of data.
For the foreseeable future, the Group will only process data relating to patients in the US and will therefore be subject to various rules and regulations, including those promulgated under the authority of the US Department of Health and Human Services, the Federal Trade Commission, and state cybersecurity and breach notification laws, as well as regulator enforcement positions and expectations.
If the Company begins processing personal data in the context of an establishment in a country that is subject to the GDPR or if it offers products or services to residents of an EU country, it will have to comply with various robust obligations.
Globally, governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, regulations, and standards covering user privacy, data security, technologies that are used to collect, store and/or process data, marketing online, the use of data to inform marketing, the taxation of products and services, unfair and deceptive practices, and the collection (including the collection of information), use, processing, transfer, storage and/or disclosure of data associated with unique individual internet users. New regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase the costs of doing business and could have a material adverse impact on the Group’s operations and cash flows.
Despite the Group’s ongoing efforts to ensure practices are compliant, the Group may not be successful either due to various factors within the Group’s control, such as limited financial or human resources, or other factors outside the Group’s control. It is also possible that local data protection authorities may have different interpretations of the GDPR, leading to potential inconsistencies amongst various EU member states.
| Renalytix plc Annual Report and Financial Statements 15
COMPETITION
The markets in which the Group operates, which include the markets for laboratory developed tests, clinical diagnostic support tools and clinical AI solutions, are potentially highly competitive and rapidly changing.
Competitors may have access to considerably greater financial, technical and marketing resources. The availability and price of the Group’s competitors’ clinical AI development services could limit the demand, and the price the Group is able to charge, for its services. New competing products may enter the market and make the Group’s discoveries and the products developed from those discoveries obsolete.
Alternatively, a competitor’s products may be more effective, cheaper or more effectively marketed than the products developed by the Group, which could have a material adverse effect on the Group’s profitability and/or financial condition.
Technological competition from medical device companies, life science companies, universities and academic medical centres is intense and can be expected to increase. Many competitors and potential competitors of the Group have substantially greater product development capabilities and financial, scientific, marketing and human resources than the Group. The future success of the Group depends, in part, on its ability to maintain a competitive position, including an ability to further progress through the necessary preclinical and clinical trials to support commercialization, marketing authorization where necessary, and coverage and reimbursement. Other companies may succeed in commercializing products earlier than the Group or in developing products that are more effective than those which may be produced by the Group. While the Group will seek to develop its capabilities in order to remain competitive, there can be no assurance that research and development by others will not render the Group’s products obsolete or uncompetitive.
RESEARCH AND DEVELOPMENT RISK
The Group operates in the life sciences sector and will look to exploit opportunities within that sector. The Group is involved in complex clinical development processes and industry experience indicates that there may be a very high incidence of delay or failure to produce the desired results. The Group may not be able to develop new products or to identify specific market needs that can be addressed by technology solutions developed by the Group. The ability of the Group to develop new technology relies, in part, on the recruitment of appropriately qualified staff as the Group grows. The Group may be unable to find a sufficient number of appropriately highly trained individuals to satisfy its growth rate which could affect its ability to develop as planned.
Product development timelines are at risk of delay, particularly since it is not always possible to predict the rate of patient recruitment into clinical trials. There is a risk therefore that product development could take longer than presently expected by the Board. If such delays occur, the Group may require further working capital. The Board shall seek to minimize the risk of delays by careful management of projects.
In addition, research and development may be subject to various requirements, such as research subject protection for individuals participating in clinical evaluations of new laboratory developed tests and products, institutional review board oversight, regulatory authorizations, and design control requirements for FDA and EU-regulated products. Failure to comply with requirements could result in penalties, delay, or prevent commercialisation of products.
FINANCIAL REPORTING AND DISCLOSURE
Due to the nature of the Group there is a requirement to report accurate financial information in compliance with accounting standards and applicable legislation.
This risk is mitigated through the Group’s internal controls over the financial information and reporting, overseen by the local financial heads and then reviewed by the central finance team, including the Chief Financial Officer. The annual financial statements are also subject to audit by the Group’s external auditors.
CYBER SECURITY RISK
The Group uses computers extensively in its operations and has an online presence but does not trade online. It is at risk of attack through hacking or other methods. This risk is mitigated by the use of robust security measures, staff training, and back-up systems.
INTELLECTUAL PROPERTY RISK
The commercial success of the Group and its ability to compete effectively with other companies depends, amongst other things, on its ability to obtain and maintain patents sufficiently broad in scope to provide protection for the Group’s intellectual property rights against third parties and to exploit its products. The absence of any such patents may have a material adverse effect on the Group’s ability to develop its business.
| Renalytix plc Annual Report and Financial Statements 16
The Group mitigates this risk by developing products where legal advice indicates patent protection would be available, seeking patent protection for the Group’s products, maintaining confidentiality agreements regarding Group know-how and technology and monitoring technological developments and the registration of patents by other parties. The commercial success of the Group also depends upon not infringing patents granted, now or in the future, to third parties who may have filed applications or who have obtained, or may obtain, patents relating to business processes which might inhibit the Group’s ability to develop and exploit its own products.
PANDEMIC RISK
The COVID-19 pandemic has created uncertainty in the market. The eventual severity and length of the economic disruption is impossible to forecast. We believe we still have a robust plan in place to mitigate the effect of the disruption on the business including taking the following actions (amongst others):
We have insurance cover in place in case there is a loss of business, although it cannot be guaranteed that cover will be sufficient to protect against all eventualities.
We have not yet seen any material disruption to our business as a result of COVID-19. While the eventual severity and length of the economic disruption stemming from the pandemic is impossible to forecast these models give the Directors reasonable confidence that the business has sufficient resources to continue as a going concern for at least the next 12 months.
| Renalytix plc Annual Report and Financial Statements 17
Section 172 Statement
The Directors are required by law to act in good faith to promote the success of the Company for the benefit of the shareholders as a whole and are also required to have regard to the following:
Please see the Corporate Governance Statement in the Directors’ Report for an overview of the Company’s corporate governance arrangements.
The Chairman and Chief Executive Officer’s joint statement and the section headed “Product Overview and Strategy” in this Strategic Report describes the Group’s activities, strategies and future prospects, including the considerations for long-term decision making. In particular, the Group has made significant progress towards its operational, regulatory and reimbursement goals and is now engaged in commercial roll-out of its lead product, KidneyIntelX in the United States. In addition, the Group is seeing an increase in strategic partnering activities which will continue to build on the validation and commercial use cases for KidneyIntelX.
The Board has a good relationship with the Group’s employees. The Board maintains constructive dialogue with employees through the Chief Executive Officer and other members of the executive team. Appropriate remuneration and incentive schemes are maintained to align employees’ objectives with those of the Group. See further under Employees in the section headed “Corporate Social Responsibility” below.
The Group endeavors to maintain good relationships with its suppliers by contracting on fair business terms, paying within agreed timeframes, and responding promptly to inquiries.
The Group’s operations have minimal environmental impact. Please see Environment in the section headed “Corporate Social Responsibility” below for more details.
The Board recognizes the Group’s duty to be a good corporate citizen. See Social, community and human rights in the section headed “Corporate Social Responsibility” below for more details.
The Board recognizes the importance of maintaining high standards of business conduct. The Group operates a Code of Business Conduct and Ethics applicable to its employees, independent contractors, executive officers and directors. A current copy of the Code of Business Conduct and Ethics is available on our website, which is located at www.renalytix.com.
The Board endeavors to maintain good relationships with its shareholders and treat them equally. This is described in more detail in the Corporate Governance Statement under the heading “Relations with Shareholders.”
There were a number of initiatives and strategic actions undertaken during FY22 which the Directors believe were in the best interests of the Company and all its stakeholders as follows:
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Corporate Social Responsibility
ENVIRONMENT
The Directors consider that the nature of the Group’s activities is not inherently detrimental to the environment. The Group is committed to identifying and minimizing any effect on the environment caused by its operations. As a minimum standard, we will fully comply with all relevant legislation and, wherever possible, look for opportunities to make a positive contribution to the environments in which we operate.
EMPLOYEES
The Group places great value on the involvement of its employees and they are regularly briefed on the Group’s activities. The Group closely monitors staff attrition rates which it seeks to keep at low levels and aims to structure staff compensation levels at competitive rates in order to attract and retain high calibre personnel.
DISABLED EMPLOYEES
Applications for employment by disabled persons are always fully considered, bearing in mind the specific aptitudes of the applicant involved. It is the policy of the Group that the training, career development and promotion of disabled persons, as far as possible, be identical to that of other employees.
SOCIAL, COMMUNITY AND HUMAN RIGHTS
The Board recognizes that the Group has a duty to be a good corporate citizen and to respect and comply with laws, regulations, and where appropriate the customs and culture of the territories in which it operates. The Group encourages employees to take part in charitable activities which are related to our business areas or customers. It contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices.
| Renalytix plc Annual Report and Financial Statements 20
CORPORATE GOVERNANCE
Board of Directors
Christopher Mills
Non-Executive Chairman (Aged 69)
Christopher Mills has served as a member of the Renalytix Board since its inception. Christopher founded Harwood Capital Management in 2011, a successor to its former parent company, J.O. Hambro Capital Management, which he co-founded in 1993. He is Chief Executive and Investment Manager of North Atlantic Smaller Companies Investment Trust plc and Chief Investment Officer of Harwood Capital LLP. He is a Non-executive Director of a number of companies, including EKF Diagnostics.
James McCullough
Chief Executive Officer and Director (Aged 54)
James McCullough has served as Renalytix’s co-founder and Chief Executive Officer since its inception. James has leadership experience building emerging technology companies in both the public and private sectors with specific expertise in the life-sciences industry. James was most recently Chief Executive Officer of Exosome Diagnostics, a venture-backed personalized medicine company developing non-invasive liquid biopsy diagnostics in cancer, which was recently acquired by Bio-Techne Corporation. James is also a managing partner of Renwick Capital, LLC, a management consulting firm specializing in assisting emerging healthcare technology companies with strategic planning and business execution, and was a co-founder of PAIGE.AI, a computational pathology spin-out from the Memorial Sloan Kettering Cancer Center. James received his B.A. from Boston University and an M.B.A. from Columbia Business School. James is currently Chairman of BalletNext, a performing arts company in park city Utah.
Fergus Fleming
Chief Technical Officer and Director (Aged 55)
Fergus Fleming has served as Renalytix’s Chief Technical Officer since its inception. Fergus has over 25 years’ experience in the life sciences sector, including leadership positions with Baxter Healthcare, Boston Scientific, Trinity Biotech plc, and EKF Diagnostics. Fergus has extensive experience in the design and manufacture of interventional medical devices, digital health solutions, in vitro diagnostics instruments and reagents, and electromechanical devices. He has extensive experience managing global projects, including clinical research collaborations, product development, acquisitions, and manufacturing site transfers
| Renalytix plc Annual Report and Financial Statements 21
Erik Lium Ph.D.
Non-Executive Director (Aged 54)
Erik Lium, Ph.D., has served as a member of the Renalytix Board since November 2018. Dr. Lium is the executive vice president of Mount Sinai Innovation Partners and is responsible for advancing Mount Sinai’s research, instruction, and public service missions through strategic research partnerships with industry, the management, transfer and commercialisation of technologies, and fostering the development of start- ups and joint ventures to advance promising early-stage technologies. Dr. Lium also serves as a director of Amathus Therapeutics and as a member of the Investment Review Committee for the Accelerate NY Seed Fund.
Prior to joining Mount Sinai, Dr. Lium served as the assistant vice chancellor of Innovation, Technology & Alliances at the University of California, San Francisco (UCSF), and the UCSF Principal Investigator for the Bay area National Science Foundation I-Corps node. He held previous positions at UCSF, including assistant vice chancellor of Research and director of Industry Contracts, and director of Business Development for the Diabetes Center & Immune Tolerance Network. Dr. Lium served as president of LabVelocity Inc., an Information Services Company focused on accelerating research and development in the life sciences prior to its acquisition in 2004. He pursued post-doctoral research at UCSF, and earned a PhD with honours from the Integrated Program in Cellular, Molecular and Biophysical Studies at Columbia University. Dr. Lium holds a BS in Biology from Gonzaga University.
Chirag R. Parikh, Ph.D., M.D.
Non-Executive Director (Aged 49)
Chirag R. Parikh, Ph.D., M.D., has served as a member of the Board since October 2019. Since July 2018, Dr. Parikh has served as a Professor of Medicine and the Division Director of Nephrology at Johns Hopkins University. Dr. Parikh also served as a faculty member at Yale University where he directed the Program of Applied Translational Research. Dr. Parikh’s research focuses on the translation and validation of novel biomarkers for the diagnosis and prognosis of kidney diseases. He has assembled multi-centre longitudinal prospective cohorts for translational research studies across several clinical settings of acute kidney injury and chronic kidney disease for the efficient translation of novel biomarkers. Dr. Parikh received his medical degree from Seth G.S. Medical College and KEM Hospital in Mumbai, India, and subsequently completed his Nephrology fellowship and a Ph.D. in Clinical Investigation at the University of Colorado Health Sciences Center.
Daniel J. Levangie
Non-Executive Director (Aged 72)
Daniel J. Levangie was appointed to the Company’s board of directors in August 2021. He is an experienced executive and long-serving board director in the diagnostics and medical devices industry. Mr. Levangie is co-founder and manager of ATON Partners, a private investment firm, and president and CEO of CereVasc, LLC, a medical device company. He has also served on the board of directors of Exact Sciences Corporation since 2010. From 2013 through January 2017, Mr.
Levangie served as president of Insulet Drug Delivery Systems and served as a lead director of Insulet Corporation. From 2011 through 2013, Mr. Levangie was chief executive officer of Dune Medical Devices, Inc., and co-founder and managing partner of Constitution Medical Investors, Inc., a Boston-based private investment and product development firm acquired by Roche Diagnostics Corporation in 2013. Previously, he held executive management positions with Cytyc Corporation including executive vice president and chief operating officer, chief executive officer and president until the acquisition of Cytyc by Hologic, in 2007. He served on the board of Hologic from 2007 to 2009. Mr. Levangie holds a B.S. in Pharmacy from Northeastern University.
Timothy J. Scannell
Non-Executive Director (Aged 58)
Timothy J. Scannell was appointed to the Company’s board of directors in March 2022. He also serves on the boards of publicly held Insulet Corporation, Novocure, and Molekule. Additionally, Mr. Scannell serves on the boards of privately held Collagen Matrix, Synaptive Medical, and Cerebral Therapeutics. Mr. Scannell also serves as an Executive Advisor at Stryker, one of the world’s leading medical technology companies. His career at Stryker spans 32 years, during which he held several leadership roles, including President and Chief Operating Officer, Group President of MedSurg & Neurotechnology, President of Spine, and Vice President & General Manager of Stryker Biotech.
Mr. Scannell brings extensive strategic, sales and marketing, and operational skills and experience, with a track record for delivering top tier results. He holds Bachelor of Business Administration and Master of Business Administration degrees from the University of Notre Dame.
Ann Berman
Non-Executive Director – resigned 19 September 2022 (Aged 70)
This report was approved by the Board on 9 November 2022 and signed on behalf of the Board by:
| Renalytix plc Annual Report and Financial Statements 22
Christopher Mills
Chairman
| Renalytix plc Annual Report and Financial Statements 23
Directors’ Report
The Directors present their annual report on the affairs of the Group and Parent Company, together with the consolidated financial statements and auditor’s report for the year ended 30 June 2022. The Corporate Governance Statement set out on pages 29 to 31 forms part of this report.
CORPORATE DETAILS
Renalytix plc is a public limited company incorporated in the under the laws of England & Wales (Registration Number 11257655). The address of the registered office is Finsgate, 5-7 Cranwood Street, London EC1V 9EE.
DIRECTORS
The Directors, who served in office during the year and as date of signing these financial statements were as follows:
Details of the Directors’ membership of committees is shown on page 30. The Company Secretary is Salim Hamir.
PRINCIPAL ACTIVITIES
The principal activity of the Group is the development of artificial intelligence-enabled clinical diagnostic solutions for kidney disease.
GOING CONCERN
The Group and Company meet their day-to-day working capital requirements through the use of cash reserves.
The Directors have considered the applicability of the going concern basis in the preparation of the financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial performance, that the Group and Company should be able to operate within the level of its current funding arrangements.
The Directors believe that the Group and the Company have adequate resources to continue in operation for the foreseeable future. For this reason, they have adopted the going concern basis in the preparation of the financial statements.
FUTURE DEVELOPMENTS AND RESEARCH AND DEVELOPMENT ACTIVITIES
Future developments and research and development activities are discussed in the Strategic Report on pages 3 to 21.
RESULTS AND DIVIDENDS
The Group recorded a loss for the year of $56.7 million (FY21: $31.0 million). When it is commercially prudent to do so and subject to the availability of distributable reserves, the Board may approve the payment of dividends. However, at present, the Directors consider that it is more prudent to retain cash to fund the development of the Group and, as a result, feel it is inappropriate to give an indication of the likely level or timing of any future dividend payment. The Directors do not recommend payment of a dividend in respect of FY22 (FY21: nil).
| Renalytix plc Annual Report and Financial Statements 24
FINANCIAL RISK MANAGEMENT
Financial risk management is discussed in Note 4 of the financial statements.
EMPLOYEE POLICIES
Employee policies are discussed in the Strategic Report on page 21.
POLITICAL CONTRIBUTIONS AND CHARITABLE CONTRIBUTIONS
Neither the Company nor any of its subsidiaries made any political donations or incurred any political expenditure during the year ended 30 June 2022 (FY21: nil).
DIRECTORS’ INTERESTS
The interests in the share capital of the Company of those Directors serving at 30 June 2022 and as at the date of signing of these financial statements, all of which are beneficial, were as follows:
|
On 30 June 2022 Ordinary Shares of 0.25p each |
On 30 June 2021 Ordinary Shares of 0.25p each |
Christopher Mills |
9,726,125 |
9,197,501 |
James McCullough |
2,746,386 |
2,740,110 |
Erik Lium |
- |
- |
Fergus Fleming |
569,481 |
569,481 |
Chirag Parikh |
- |
- |
Ann Berman |
39,586 |
- |
Daniel Levangie |
- |
- |
Timothy Scannell |
68,964 |
- |
Christopher Mills’ shareholding includes shares held through North Atlantic Smaller Companies Investment Trust plc and Oryx International Growth Fund Limited. Christopher Mills is a partner and Chief Investment Officer of Harwood Capital LLP. Harwood Capital LLP is investment manager to North Atlantic Smaller Companies Investment Trust plc and investment adviser to Oryx International Growth Fund Limited.
| Renalytix plc Annual Report and Financial Statements 25
SUBSTANTIAL SHAREHOLDINGS
As at 30 September 2022, the following interests in 3% or more of the issued Ordinary Share capital had been notified to the Company:
Shareholder |
Number of Shares |
Percentage of Issued Share Capital |
Icahn School of Medicine at Mount Sinai |
11,854,374 |
15.9% |
Christopher Mills |
9,726,125 |
13.0% |
James McCullough |
2,746,386 |
3.7% |
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with UK-adopted international accounting standards and the parts of the Companies Act 2006 that applies to companies applying UK-adopted international accounting standards. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS’ INDEMNITIES
The Company has entered into deeds of indemnity for the benefit of each Director of the Company in respect of liabilities to which they may become liable in their capacity as Director of the Company and of any Company in the Group. Those indemnities are qualifying third party indemnity provisions for the purposes of section 234 of the Companies Act 2006 and have been in force during the whole of the financial period and up to the date of approval of the financial statements.
INDEPENDENT AUDITORS
PKF Littlejohn LLP has expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.
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CORPORATE GOVERNANCE
The Company’s statement of corporate governance can be found in the Corporate Governance Statement on pages 29 to 31 of these financial statements. The Corporate Governance Statement forms part of this Report of the Directors and is incorporated into it by cross-reference.
ANNUAL GENERAL MEETING
The resolutions to be proposed at the forthcoming Annual General Meeting are set out in a separate notice sent to the shareholders.
RECOMMENDATION
The Board considers that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and it is unanimously recommended that shareholders support these proposals as the Board intends to do in respect of their own holdings.
This report was approved by the Board on 9 November 2022 and signed on behalf of the Board by:
Christopher Mills
Chairman
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Corporate Governance Statement
COMPLIANCE
The Company recognizes the value of good corporate governance in every part of its business. The Board has adopted the corporate governance principles of the 2018 Quoted Companies Governance Code (the “QCA Code”) and the Company has continued to comply with the QCA Code throughout the reporting period. The Board believes that this corporate governance framework is appropriate for the Company, having regard to its size and nature. Details of the QCA Code can be obtained from the Quoted Companies Alliance’s website (www.theqca.com).
Details of how the Group seeks to address the principles underlying the QCA Code and how it leverages its principles to support the long-term success of the Group can be found on the Company’s website.
BOARD COMPOSITION AND RESPONSIBILITY
The Board currently comprises two Executive Directors and five Non-Executive Directors.
It is the Board’s opinion that the Ann Berman and Dan Levangie are independent and have been independent in character and judgement and that there were no relationships or circumstances which could materially affect or interfere with the exercise of her independent judgement during the course of FY22.
All Directors are subject to election by Shareholders at the first Annual General Meeting after their appointment, and are subject to re-election at least every three years. Non-Executive Directors are appointed for a specific term of office which provides for their removal in certain circumstances, including under section 168 of the Companies Act 2006. The Board does not automatically re-nominate Non-Executive Directors for election by Shareholders. The terms of appointment of the Non- Executive Directors can be obtained by request to the Company Secretary.
The Board’s primary objective is to generate value for the Group by identifying and assessing business opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved for Board decisions include strategic long-term objectives and the capital structure of major transactions. The implementation of Board decisions and day to day operations of the Group are delegated to senior management.
There is a division of responsibilities between the Non-Executive Chairman, who is responsible for the overall strategy of the Group and running the Board, and the Chief Executive Officer, who is responsible for implementing the strategy and day to day running of the Group. He is assisted by the Chief Technical Officer, who is a Board member, and Chief Financial Officer who is not a Board member.
BOARD MEETINGS
Eighteen full Board meetings were held during the year, as well as four additional meetings with select executive directors and non-executive directors to approver certain matters. The Directors’ attendance record during their period of office is as follows:
Christopher Mills (Non-Executive Chairman) |
19/19 |
James McCullough (Chief Executive Officer) |
22/22 |
Erik Lium (Non-Executive Director) |
18/19 |
Fergus Fleming (Chief Technology Officer) |
22/22 |
Chirag Parikh (Non-Executive Director) |
19/19 |
Dan Levangie (Non-Executive Director) |
15/18 |
Ann Berman (Non-Executive Chairman) |
18/18 (Resigned on 19 September 2022) |
Timothy Scannell (Non-Executive Director) |
7/7 |
| Renalytix plc Annual Report and Financial Statements 28
During the year, the Board conducted an evaluation of the performance of the Board and that of the Chairman, as well as the effectiveness of the Board Committees. The Board intends to develop further its evaluation of the performance of the Board and Committees on an annual basis. The evaluation will include Board composition, experience, dynamics and the Board’s role and responsibilities for strategy, risk review and succession planning. The evaluations will involve a detailed questionnaire and individual discussions between the Non-Executive Chairman and the Directors.
AUDIT COMMITTEE
The Audit Committee comprises of Ann Berman, who acted as chair, Daniel Levangie and Erik Lium. The Audit Committee, among other things, determines and examines matters relating to the financial affairs of the Company including the terms of the engagement of the Company’s auditors and, in consultation with the auditors, the scope of the audit. It receives and reviews the reports from management and the Company’s auditors relating to the half yearly and annual forward statements and the accounting and the internal control systems in use throughout the Company.
The committee has met formally six times during the year ended 30 June 2022. There have been no significant matters communicated to the Committee by the auditors and no interaction with the Financial Reporting Council.
Since the year end Ann Berman resigned in September 2022 as Non-Executive Director of the Company and Daniel Levangie will act as a chair.
REMUNERATION COMMITTEE
The Remuneration Committee comprised Daniel Levangie, who acted as chair, and Erik Lim and Ann Berman. The Remuneration Committee reviews and makes recommendations in respect of the Executive Directors’ remuneration and benefits packages, including share options and the terms of their appointment. The Remuneration Committee also make recommendations to the Board concerning the allocation of share options to employees under the intended share option schemes.
The Committee has met twice during the year ended 30 June 2022.
NOMINATION COMMITTEE
For the fiscal year ended 30 June 2022, the Nomination Committee comprised Ann Berman, who acted as chair, and Chirag Parikh. The Nomination Committee reviews and recommends nominees as new Directors to the Board. Since the year end Ann Berman has resigned as Non-Executive Director of the Company and Timothy Scannell will replace Ann and act as a chair.
INTERNAL CONTROL
The Directors are responsible for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance regarding the reliability of financial information used within the business and for publication and that the assets are safeguarded. There are inherent limitations in any system of internal control and accordingly even the most effective system can provide only reasonable, but not absolute, assurance with respect to the preparation of financial reporting and the safeguarding of assets.
The Group, in administering its business, has put in place strict authorization, approval and control levels within which senior management operates. These controls reflect the Group’s organizational structure and business objectives. The control system includes clear lines of accountability and covers all areas of the organization. The Board operates procedures which include an appropriate control environment through the definition of the above organization structure and authority levels and the identification of the major business risks.
INTERNAL FINANCIAL REPORTING
The Directors are responsible for establishing and maintaining the Group’s system of internal reporting and as such have put in place a framework of controls to ensure that on-going financial performance is measured in a timely and correct manner and that risks are identified as early as is practicably possible. There is a comprehensive budgeting system and monthly management accounts are prepared which compare actual results against both the budget and the previous year. They are reviewed and approved by the Board and revised forecasts are prepared on a regular basis.
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RELATIONS WITH SHAREHOLDERS
The Company reports to Shareholders twice a year. The Company dispatches the notice of its Annual General Meeting, together with a description of the items of special business, at least 21 clear days before the meeting. Each substantially separate issue is the subject of a separate resolution and all Shareholders have the opportunity to put questions to the Board at the Annual General Meeting.
The Chair(s) of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which may be relevant to their work. However, due to the ongoing COVID-19 pandemic, the Committee Chairs will not be in attendance at this year’s Annual General Meeting. The Chairman advises the meeting of the details of proxy votes cast on each of the individual resolutions after they have been voted on in the meeting. The Chairman and the Non- Executive Directors intend to maintain a good and continuing understanding of the objectives and views of the Shareholders.
Shareholders May Contact the Company as Follows:
Tel: +44 (0)20 7933 8790 (from USA: +1-646-217-4999) Email: investors@renalytix.com
CORPORATE SOCIAL RESPONSIBILITY
The Board recognizes that the Group has a duty to be a good corporate citizen and is conscious that its business processes minimize harm to the environment, that it contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices. The Group is subject to the requirements of the Modern Slavery Act 2015 and published the required statement on its website. The directors consider that the nature of the Group’s activities is not inherently detrimental to the environment. The Group is committed to minimizing any effect on the environment caused by its operations.
The Corporate Governance Statement was approved by the Board on 9 November 2022 and signed on its behalf by:
Salim Hamir
Company Secretary
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Director’s Remuneration Report and Policy
For the Year Ended 30 June 2022
STATEMENT OF COMPLIANCE
This report does not constitute a Directors’ Remuneration Report in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the Companies (Miscellaneous Reporting) Regulations 2018, and the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 which do not apply to the Company as it was not a quoted company (as defined in the Companies Act 2006) as at the end of the financial year. This report sets out the Group policy on Directors’ remuneration, including emoluments, benefits and other share-based awards made to each Director.
REMUNERATION COMMITTEE REPORT DANIEL J. LEVANGIE
CHAIR OF THE REMUNERATION COMMITTEE
Dear shareholder,
As the Chair of the Remuneration Committee (the “Committee”), I am pleased to present, on behalf of the board of directors (the “Board”) of Renalytix PLC (the “Company” or “Renalytix”), the Directors’ remuneration report for the year ended 30 June 2022 (the “Directors’ Remuneration Report”).
The Company’s Annual Report and Accounts, along with the Directors’ Remuneration Report, will be subject to an advisory vote at the forthcoming Annual General Meeting on 19 December 2022 (the “AGM”) and the remuneration policy section of the Directors’ Remuneration Report will be subject to a binding vote at the AGM.
Introduction
During the period covered by this Directors’ Remuneration Report, we maintained the remuneration programs and policies that the Committee established during the financial year 2022 and implemented strategic compensation initiatives designed to incentivise and retain key employees in the Company.
As we move into 2023 and beyond, the Committee’s role will be to ensure that Directors and senior executives at Renalytix are appropriately compensated and incentivised to deliver growth to shareholders in a long-term and sustainable manner. The Committee seeks to accomplish this by establishing remuneration programs that are grounded in market practice, are effective at driving proper management behaviors, clearly link pay and performance and are cost efficient overall.
Corporate Governance Standards
As a public company, we are subject to corporate governance standards and regulations applicable in the United States and the United Kingdom.
The Global Marketplace for Talent
Renalytix is a biopharmaceutical company with operations in Europe and the United States. The Company plans to expand its operations in both geographic regions in line with the growth of its clinical and manufacturing activities and its plans to commercialize its products in these geographies. Given that the market for experienced directors and biopharmaceutical executive management talent, particularly in the United States, is very competitive, the Committee references the US market as the leading indicator for remuneration levels and practices. This will help attract and retain directors and motivate the superior executive management talent needed to successfully manage the Company’s complex global operations. Being consistent in this market view of the United States as the primary benchmark for remuneration practices for directors and executive directors (CEO and CTO) is key for the Company as it builds its global operations in a manner designed to deliver sustainable long-term growth and shareholder value.
| Renalytix plc Annual Report and Financial Statements 31
Committee decisions have been taken in light of the extensive benchmarking for director and executive director compensation conducted in 2022, which included a review of compensation practices of comparable companies to Renalytix in the US and Europe. In taking any actions, the Committee is mindful of the general UK compensation framework, including investor bodies’ guidance, and the UK Corporate Governance Code, and has incorporated these into its remuneration programs, policies and decisions where it believes they best serve the long-term interests of shareholders.
Remuneration Program Highlights
While I recommend that you carefully read the disclosure on our programs and policies that follows this letter to help with the understanding of our approach to director compensation, I want to highlight the following aspects of our program below:
Conclusion
The Committee believes the proposals put forth in this report will properly motivate our directors and our CEO to deliver sustainable growth and shareholder value over the long term and do so in a responsible and cost efficient manner.
I hope that you find the information in this report helpful, and look forward to the AGM, where we hope to have your support.
Daniel J. Levangie
Chair of the Remuneration Committee
9 November 2022
| Renalytix plc Annual Report and Financial Statements 32
DIRECTORS’ REMUNERATION POLICY
This part of the Directors’ remuneration report sets out the Directors’ remuneration policy for the Company’s directors and executive directors and has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013.
The remuneration policy was approved by shareholders in a binding vote at our AGM on 19 December 2021 and took effect from the date of approval.
The policy applies for a maximum period of three years (or until a revised policy is approved by shareholders) and will therefore next need to be approved in a binding vote at the AGM in 2024.
Renalytix’s remuneration policy has been designed to:
EXECUTIVE DIRECTOR REMUNERATION POLICY TABLE
The table below sets out, for each element of pay, a summary of how remuneration of executive directors is structured and how it supports the Company’s strategy.
Executive Directors |
|||
Purpose and Link to Strategy |
Operation |
Maximum Opportunity |
Performance Metrics |
BASE SALARY |
|||
To attract, retain and motivate executive directors of the highest calibre who are capable of delivering the Company’s strategic objectives, reflecting the individual’s experience and role within the Company. Base salary is designed to provide an appropriate level of fixed income to avoid an over- reliance on variable pay elements that could encourage excessive risk taking. |
Salaries are normally reviewed annually, and changes are generally effective from 1 October. The annual salary review of the Executive Directors takes into consideration a number of factors, including: • scope of the individual’s responsibilities; • abilities, experience and performance of the individual; • business performance; • salary increases awarded to the overall employee population; • market competitiveness and US and UK market practice; and • the underlying rate of inflation. |
Executive Director level salaries are determined considering industry benchmarking data. There is no prescribed maximum annual salary or salary increase. Base salary increases are awarded at the discretion of the Committee; however, the Committee is guided by the general increase for the broader employee population but may decide to award a lower increase for Executive Directors or exceed this to recognize, for example, an increase in the scale, scope or responsibility of the role and/or take account relevant market movements. Salary increases will normally Executive Director level salaries are approved by the Board in line with corporate performance and are consistent with positions held. |
No formal metrics, although any increases take account of Company performance and the individual performance of the Executive Director. |
BENEFITS |
|||
Benefits in kind offered to Executive Directors are provided on a market- competitive basis, to assist with their recruitment and retention. |
The Company aims to offer benefits that are in line with the Executive Directors’ local market and those offered to the wider workforce. |
There is no defined maximum value for benefits, but the Committee will consider the aggregate value of any such benefits when determining what should be offered. |
Not performance related. |
| Renalytix plc Annual Report and Financial Statements 33
Executive Directors |
|||
Purpose and Link to Strategy |
Operation |
Maximum Opportunity |
Performance Metrics |
PENSION |
|||
The Company aims to provide a contribution towards life in retirement. |
Depending on their location and comparable benefits offered to local employees, Executive Directors may be eligible to receive employer contributions to a defined contribution pension scheme or a cash supplement in lieu of such contributions, or a mixture of both. |
The maximum employer pension contribution or cash in lieu amount will be a percentage of annual base salary aligned with that provided to other senior executives in the Executive Director’s location. |
Not performance related. |
ANNUAL BONUS |
|||
An annual bonus rewards the achievement of objectives that support the Company’s corporate goals and delivery of the business strategy |
Bonuses are determined based on objectives that are agreed with the Committee, and the Board, at the start of each financial year although the Committee retains the discretion to amend objectives during the year if it considers that objectives are no longer appropriate. Different performance measures and weightings may be used each year, as agreed with the Committee, to take into account changes in the business strategy. Bonuses are normally paid in cash (but may be paid in the form of an equity award, at the discretion of the Committee). |
Executive Director level bonuses are approved by the Board in line with corporate performance and are consistent with positions held. |
Performance measures are determined by the Committee each year and may vary to ensure that they promote the Company’s business strategy and shareholder value. The annual bonus will be based on corporate measures, including, but not limited to, financial and/or strategic measures. Bonus measures are reviewed at least annually and the Committee has the discretion to change the measures or to introduce new measures when it deems appropriate. |
EQUITY INCENTIVE PLAN (‘EIP’) |
|||
To attract, motivate, retain and reward for long-term, sustainable performance linked to corporate strategy and provide alignment with shareholders’ interests. |
Equity awards granted to Executive Directors may take the form of options, restricted shares, performance share units, restricted share units, or other forms of awards granted in accordance with the discretionary EIP that may be in place from time to time. The Executive Directors received a grant under the EIP’s predecessor plan upon listing on AIM and it is intended that top- up awards shall be issued under the EIP from time to time in the discretion of the Committee. |
There is no maximum opportunity for equity incentives. However, the Committee will generally assess the position at similar sized comparator companies prior to making any award to ensure that any awards are aligned to the market. |
Vesting of equity awards is generally subject to continued employment and may also be subject to the achievement of performance conditions aligned with the Company’s strategic plan. Measures, their weightings and the period over which performance is tested will be determined by the Committee. The Committee will select the most appropriate form of EIP for awards each year and/or each individual grant. Vesting of equity awards may be accelerated in part or in full in connection with certain corporate events such as a change of control. |
ALL EMPLOYEE EQUITY PLANS |
|||
| Renalytix plc Annual Report and Financial Statements 34
Encourages employee share ownership and therefore increases alignment of interests with shareholders. |
The Company may, from time to time, operate tax-advantaged share plans for which Executive Directors would be eligible on the same basis as all other eligible employees. |
Within the limits of the relevant legislation. |
Not performance related. |
| Renalytix plc Annual Report and Financial Statements 35
Notes to the Executive Director Remuneration Policy Table
Legacy arrangements
For the duration of this Remuneration Policy, the Company will honour any commitments made in respect of current or former Directors before the date on which either: (i) the Remuneration Policy becomes effective; or (ii) an individual becomes a Director, even where not consistent with the Remuneration Policy set out in this report or prevailing at the time such commitment is fulfilled. For the avoidance of doubt, all outstanding historic awards that were granted in connection with, or prior to, our IPO on NASDAQ remain eligible to vest based on their original or modified terms.
Clawback Provisions
The Company does not currently have a policy on recoupment and clawback, but the Committee will keep this under review.
Shareholding Requirements
Executive directors are not currently required to build and retain a shareholding, but the Committee will keep this under review.
NON-EXECUTIVE DIRECTOR REMUNERATION POLICY TABLE
The table below sets out, for each element of pay, a summary of how remuneration of non-executive directors is structured and how it supports the Company’s strategy.
Chair and Non-Executive Directors |
|||
Purpose and Link to Strategy |
Operation |
Maximum Opportunity |
Performance Metrics |
CASH FEES AND BENEFITS |
|||
Set at a level that is sufficient to attract and retain high calibre non- executives who contribute to the business. |
The Chair and the Non- Executive Directors receive fees paid in cash. Fees are paid and reviewed annually. Non-Executive Directors ordinarily do not participate in any pension, bonus or performance-based share incentive plans. Travel, accommodation and other business-related expenses incurred in carrying out the role as well as fees for tax advice associated with completion of international tax returns will be paid by the Company including, if relevant, any gross- up for tax and/or social security contributions. Tax equalization and/or relocation benefits may be provided to Non-Executive Directors who are required to relocate or become tax resident in a new jurisdiction. |
When reviewing fee levels and benefits, account is taken of market movements in the fees and benefits of Non-Executive Directors, Board Committee responsibilities and ongoing time commitments. Actual fee levels are disclosed in the annual Directors’ Remuneration Report for the relevant financial year. |
Not performance related. |
| Renalytix plc Annual Report and Financial Statements 36
Chair and Non-Executive Directors |
|||
Purpose and Link to Strategy |
Operation |
Maximum Opportunity |
Performance Metrics |
EQUITY-BASED AWARDS |
|||
To facilitate share ownership and provide alignment with shareholders. |
Non-Executive Directors may receive equity awards under any equity incentive plan operated by the Company from time to time which permits their participation with careful consideration being given to ensuring their independence. Non-Executive Directors may receive an initial equity award upon appointment or election. Initial equity awards will normally vest over a specified period of time, subject generally to continued service. Vesting of equity awards may be accelerated in part or in full in connection with certain corporate events such as a change of control. In addition, Non-Executive Directors may be granted an equity award each year which may vest in full upon grant or over time subject to continued service. If a new Non-Executive Director joins the Board following the date of grant of this annual grant in any calendar year, such Non-Executive Director may be granted a pro rata portion of the next annual grant to reflect his or her service during the relevant part of the relevant year. |
There is no maximum number of equity incentive awards that may be awarded to individuals each year. However, when reviewing award levels, account is taken of market movements in equity incentive awards, Board committee responsibilities, ongoing time commitments and the general economic environment. |
Non-executive directors do not participate in performance-based equity incentives. |
REMUNERATION FOR NEW APPOINTMENTS
Where it is necessary to appoint or replace an Executive Director, the Committee has determined that the new Executive Director will receive a compensation package in accordance with the provisions of the approved remuneration policy in force at the time of appointment but focusing on the objective of appointing the most appropriate person in the right geography.
In setting base salaries for new Executive Directors, the Committee will consider the existing salary package of the new Director, the individual’s skills, level of experience and the market rate for the role.
In setting the annual performance bonus, the Committee may wish to set different performance metrics (to those of other Executive Directors) in the first year of appointment. Where it is appropriate to offer a below-median salary on initial appointment, the Committee will have the discretion to allow phased salary increases over a period of time for a newly appointed Director as the Executive gains experience in their new role, even though this may involve increases in excess of inflation and the increases awarded to the wider workforce.
Benefits and pensions will be in line with those offered to other executive directors, taking account of local market practice with relocation expenses provided at the discretion of the Committee if necessary. Tax equalization may also be considered if an executive is adversely affected by taxation due to their employment with the Group. Legal fees and other costs incurred by the individual may also be met by the Company.
The ongoing incentive opportunity offered to new recruits will be in line with that offered to existing Directors. Different measures and targets under the bonus plan or the Company’s equity incentive arrangements may be set initially taking
| Renalytix plc Annual Report and Financial Statements 37
account of the responsibilities of the individual and the point in the financial year at which they join. A new employee may be granted normal annual equity awards in the first year of employment in addition to any awards made with respect to prior employment being forfeited, which shall be excluded from any annual maximum on the size of awards.
To enable the recruitment of exceptional talent, the Committee may determine that the buy-out of remuneration forfeit from a prior employer is necessary. Where possible, any replacement remuneration will be offered on a like-for-like basis with the forfeited awards and may be in the form of cash or shares and depending whether the award forgone has similar performance conditions, may or may not be subject to performance conditions. The value of any buy-out will be limited to the value of remuneration forfeit. Where appropriate, such awards will be granted under existing share plans, however, the Committee will have discretion to make standalone awards where appropriate.
In respect of internal appointments, any commitments entered into in respect of a prior role, including variable pay elements, may be allowed to pay out according to their prior term, adjusted as relevant to take into account the appointment.
The terms of appointment for a new Non-Executive Director would be in accordance with the remuneration policy for Non- Executive Directors in force at that time.
EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
James McCullough (Chief Executive Officer) is currently employed at-will pursuant to an employment agreement entered into with Renalytix AI, Inc, dated 2 November 2018 but effective on 1 November 2018. His employment may be terminated by either party at any time for any or no reason, with or without notice. Severance payments no more generous than those described in this policy will be payable to him on termination. Upon termination of his employment agreement, our Chief Executive Officer is required to resign from all other positions within the Company’s group. Following termination of his employment, our Chief Executive Officer will be bound by certain post-termination covenants.
As is customary for US executives, our Chief Executive Officer’s remuneration is subject to a “best-after-tax” cutback for excise tax calculations under section 280G of the US Internal Revenue Code of 1986, with no tax gross-up.
Fergus Fleming (Chief Technology Officer) is currently employed on an indefinite term pursuant to an employment agreement entered into with the Company dated 1 November 2018. His employment may be terminated by either party on 12 months written notice.
At its discretion, upon receipt of his written notice, or as an alternative to providing notice, terminate the employment with immediate effect and make a payment in lieu of notice, comprising base salary only, for the notice period (or remainder thereof, should notice have been given). In the event of a breach of service agreement or other summary termination of employment, no such payments will be made.
A copy of these contracts may be viewed at the Company’s head office or may be requested from the Company Secretary at the annual general meeting.
NON-EXECUTIVE DIRECTORS’ TERMS OF ENGAGEMENT
All Non-Executive Directors, including the Chair, have specific terms of engagement which may be terminated on not less than six months’ notice by either party.
The remuneration of Non-Executive Directors is determined by the Board within the limits set by the Company’s articles of association and based on a review of fees and equity-based remuneration paid to Non-Executive Directors of similar companies.
A Board evaluation has been performed and the results of this exercise confirmed that all Non-Executive Directors were independent.
TERMINATION AND LOSS OF OFFICE PAYMENTS
Depending on market practice in the jurisdiction in which an Executive Director is employed, exit payments shall depend on the circumstances of termination and may be made by reference to a notice period (including a payment in lieu of notice) or employment “at-will” together with a severance payment. Where a notice period applies, this will not exceed 12 months but may be accompanied by additional severance entitlements where applicable.
The Company’s policy on remuneration for Executive Directors who leave the Company is set out below. The Committee will exercise its discretion when determining amounts that should be paid to leavers, taking into account the facts and circumstances of each case.
| Renalytix plc Annual Report and Financial Statements 38
US-BASED EXECUTIVES
|
Termination without cause or with Good Reason1 |
Termination for cause |
Termination without cause or with Good Reason1 in connection with change in control |
Salary and benefits |
Subject to the executive executing a release: a payment of up to 12 months’ salary and benefits including COBRA or other applicable healthcare coverage payable in equal monthly instalments or as a lump sum, at the discretion of the Committee. |
No payment. |
Subject to the executive executing a release: a payment of up to 18 months’ salary and benefits and benefits payable in equal monthly instalments or as a lump sum, at the discretion of the Committee. |
Annual bonus |
Any earned but unpaid bonus, a pro-rata portion of the bonus that would have been due for any part year worked, plus up to one year’s target bonus, or a higher bonus at the discretion of the Committee, payable as a lump sum or on a monthly basis. |
No payment. |
Any earned but unpaid bonus, a pro-rata portion of the bonus that would have been due for any part year worked, plus up to 1.5 year’s target bonus, or a higher bonus at the discretion of the Committee, payable as a lump sum or on a monthly basis. |
Equity incentive awards |
The Company may accelerate the vesting of the portion of equity held on the termination date that would have vested over the following one year period. |
Unvested awards lapse in full. |
Full vesting on termination. |
1: Includes, among others, a material diminution in role, a material reduction in base salary or mandated relocation, as defined by contract.
NON-US BASED EXECUTIVES
When calculating termination payments for Non-US based Executives, the Committee will consider a variety of factors, including individual and Company performance, the length of service of the Executive Directors in question and, where appropriate, the obligation for the Executive Directors to mitigate loss. In the event of a change of control and ownership, the Committee may exercise its discretion to provide for additional remuneration and/or benefits for Executive Directors who leave the Company in connection with such change of control, and will take into account all relevant circumstances when making any such determination.
In the case of a ‘good leaver’ (to be determined at the discretion of the Committee) the following policy will normally apply, although the Committee retains the discretion to make payments which are no more generous than those applicable to a US based Executive Director (as described above), when viewed in the round with notice / payment in lieu of notice entitlements:
| Renalytix plc Annual Report and Financial Statements 39
ADDITIONAL PAYMENTS
The Committee will make payment of any statutory entitlements as necessary. In addition, the Committee will retain the discretion to make additional payments in settlement of, or to compromise, an actual or potential claim in connection with a termination of any Executive Director as necessary.
The Committee reserves the right to make reasonable legal, relocation and outplacement costs, if deemed necessary.
REMUNERATION COMMITTEE (THE “COMMITTEE”)
Governance
In its decision-making process, the Committee takes account of information from both internal and independent sources and Compensia surveys. Compensia were appointed as remuneration consultants by the Committee based on their expertise in the field via a competitive tender process. Compensia advises the Committee on all aspects of senior executive remuneration. Compensia has kept the Committee up to date on remuneration trends and corporate governance best practice. Compensia does not have any other connection with the Company and is considered to be independent and objective by the Committee. During the year ended 30 June 2022, fees charged by Compensia amounted to approximately USD 16,000 and this was charged on a time spent basis.
The current members of the Committee are Daniel J. Levangie (Chair), and Dr. Erik Lium.
Remuneration Committee report (continued)
The Company’s Chief Human Resources Officer provides updates to the Committee, as required, to ensure that the Committee is fully informed about pay and performance issues throughout the Company. The Committee takes these factors into account when determining the remuneration of the Executive Directors and senior executives.
No Executive Director or employee can participate in any discussion directly relating to their own personal conditions of service or remuneration.
No conflicts of interest have arisen during the year and none of the members of the Committee has any personal financial interest in the matters discussed, other than as option holders. The fees of the Non-Executive Directors are approved by the Board on the joint recommendation of the Committee and the Chief Executive Officer.
Director |
Meetings attended |
Daniel J. Levangie |
2 |
Dr. Erik Lium |
2 |
The Committee met twice in the year to 30 June 2022.
Discretions retained by the Committee
The Committee operates under the powers it has been delegated by the Board. In addition, it complies with rules that require certain matters to be put to either shareholder or Board approval. These rules provide the Committee with certain discretions which serve to ensure that the implementation of the Remuneration Policy is fair, both to the individual director and to the shareholders. The Committee operates the Company’s remuneration plans in accordance with their rules from time to time. To maintain an efficient administrative process, the Committee retains the following discretions to apply its judgement in setting remuneration:
| Renalytix plc Annual Report and Financial Statements 40
In certain circumstances, such as a material acquisition/divestment of a Group business, which mean the original performance conditions are no longer appropriate, the Committee may adjust the targets, alter weightings or set different measures as necessary, to ensure the conditions achieve their original purpose and are not materially less difficult to satisfy.
The Committee may make minor amendments to the Remuneration Policy (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval for that amendment.
ILLUSTRATION OF APPLICATION OF THE POLICY
Pay-for-performance scenario analysis
The charts below have been updated to reflect the intended application of the policy for the 2023 financial year. A copy of the shareholder approved policy (including the scenario charts for the 2021 financial year) is in the Annual Report for the year ended 30 June 2021, which is available on the Company’s website. The charts below provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split between different elements of remuneration under different performance scenarios:
Fixed pay comprises:
Amounts are shown in thousands (USD).
Values do not include the impact of any share price appreciation over the vesting period. The reporting regulations require the disclosure of maximum total pay including the impact of a 50% increase in share price over the vesting period for equity awards subject to multi-year performance measures which is not applicable to any of our current equity awards. The equity award amounts shown above relate to share options vesting during the year using the Company’s AIM closing price at the end of the quarter in which the award vested less associated exercise price.
| Renalytix plc Annual Report and Financial Statements 41
Statement of consideration of employees’ pay and remuneration conditions elsewhere in the Group
The Company does not formally consult with employees on the matters of Executive Director remuneration. However, the Committee is made aware of employment conditions in the wider Group. The same broad principles apply to the remuneration policy for both Executive Directors and the wider employee population. However, the remuneration for Executive Directors has a stronger emphasis on performance-related pay than for other employees. Salaries, benefits and pensions are compared to appropriate market rates in the jurisdiction in which the Executive Director is employed and is set at an appropriate level with allowance for role, responsibilities and experience.
Statement of consideration of Shareholders’ views
The Committee will consider any Shareholder feedback received at the Annual General Meeting and at meetings throughout the year, when reviewing the overall remuneration policy each year. The guidance from relevant shareholder representative bodies is also considered on an ongoing basis.
More specifically the Committee will consult with major Shareholders when proposing any significant changes to the policy in the future.
ANNUAL REPORT ON REMUNERATION
This section of the remuneration report provides details of how our remuneration policy was implemented during the financial year ended 30 June 2022, and how it will be implemented during the year ending 30 June 2023.
This report splits certain information into that for Executive Directors and that for Non-Executive Directors.
Directors’ Remuneration – financial year ended 30 June 2022
The total remuneration of the individual Directors who served during the period is shown below. Total remuneration is the sum of emoluments for the period in service as a director plus Company pension contributions, and the value of long-term incentive awards vesting by reference to performance in the twelve months to 30 June 2022.
Directors’ Remuneration – financial year ended 30 June 2022
|
Year |
Base Salary ($000s)a |
Benefits ($000s)b |
Bonus ($000s)c |
EIPd |
Pension ($000s)e |
Total Remuneration ($000s) |
Total Fixed Remuneration ($000s) |
Total Variable Remuneration ($000s) |
Executive Directors |
|||||||||
James McCullough |
2022 |
601 |
20 |
- |
- |
27 |
648 |
648 |
- |
|
2021 |
586 |
62 |
742 |
- |
15 |
1,405 |
663 |
742 |
Fergus Fleming |
2022 |
378 |
16 |
- |
- |
75 |
469 |
469 |
- |
2021 |
366 |
17 |
211 |
2,379 |
24 |
2,997 |
407 |
2,590 |
|
Non-Executive Directors |
|
|
|
|
|
|
|
|
|
Erik Lium (Mount Sinai representative)1 |
2022 |
27 |
- |
- |
- |
- |
27 |
27 |
- |
2021 |
27 |
- |
- |
904 |
- |
931 |
27 |
904 |
|
Christopher Mills |
2022 |
27 |
- |
- |
- |
- |
27 |
27 |
- |
|
2021 |
27 |
- |
- |
- |
- |
27 |
27 |
- |
Chirag Parikh2 |
2022 |
88 |
- |
- |
- |
- |
88 |
88 |
- |
|
2021 |
87 |
- |
- |
548 |
- |
635 |
87 |
548 |
Ann Berman3 |
2022 |
20 |
- |
- |
- |
- |
20 |
20 |
- |
|
2021 |
- |
- |
- |
- |
- |
- |
- |
- |
Daniel Levangie4 |
2022 |
27 |
- |
- |
- |
- |
27 |
27 |
- |
|
2021 |
- |
- |
- |
- |
- |
- |
- |
- |
Timothy Scannell5 |
2022 |
7 |
- |
- |
- |
- |
7 |
7 |
- |
2021 |
- |
- |
- |
- |
- |
- |
- |
- |
|
| Renalytix plc Annual Report and Financial Statements 42
Notes to the remuneration table
ANNUAL PERFORMANCE BONUS – 2021/2022 FINANCIAL YEAR
In the 2022 financial year, all employees were eligible for an annual discretionary cash bonus, whereby performance objectives were established at the beginning of the financial year by reference to suitably challenging corporate goals.
For the 2022 financial year, the company refined the annual bonus calculation as annual bonuses for all staff (including Executive Directors and Non-Executive Directors) were calculated and achieved by reference to both corporate and individual performance.
The achievement against the scorecard of corporate goals was as follows:
Corporate goals |
Weighting % |
2022 Achievement % |
Achieve first implementation and associated building blocks for future implementations |
20% |
0% |
FDA Submission for KidneyIntelX |
20% |
50% |
Announced Events with Healthcare Systems / Payer Groups |
20% |
50% |
Payor coverage agreements |
20% |
25% |
Pass Regulatory Audits and Certifications |
10% |
100% |
Attract and Retain Top Talent |
10% |
50% |
Total |
100% |
40% |
| Renalytix plc Annual Report and Financial Statements 43
Specific targets associated with each corporate goal are commercially sensitive and have been omitted to protect competitive information. However, full details of the targets will be disclosed when they are no longer considered commercially sensitive.
Achievement against objectives is given careful consideration by the Committee prior to finalisation of bonus outcomes. The Committee reviewed the formulaic outcome of the scorecard and concluded that 40% of corporate goals were met and the scorecard outcome, as shown above, reflected the performance of the Executive Directors in the year. As a result of corporate performance, the following bonuses were calculated for the Company’s executive directors and will be presented to the Board for approval.
|
Bonus scorecard Outcome ($000s) |
% of salary |
Maximum opportunity Cash amount ($000s) |
% of salary |
James McCullough |
- |
0% |
1,080 |
180% |
Fergus Fleming |
- |
0% |
504 |
133% |
During the year ended 30 June 2022, no Executive Directors or non-executive directors were awarded bonus or options under the EIP scheme. There was no change in the exercise price or date of existing options.
EXECUTIVE DIRECTORS’ SHARE AWARDS
Directors’ interests in shares at 30 June 2022
Director |
Total shares owned outright plus vested options |
Shares owned outright |
Percentage of issued share capital |
Vested but not exercised |
Unvested but subject to performance |
Unvested and not subjected to performance |
Current Directors |
|
|
|
|
|
|
James McCullough1 |
2,746,386 |
2,746,386 |
3.7% |
- |
- |
- |
Fergus Fleming |
1,107,642 |
569,481 |
1.5% |
538,161 |
- |
89,694 |
Mount Sinai (Board Seat) |
170,418 |
- |
0.3% |
204,501 |
- |
- |
Christopher Mills2 |
9,726,125 |
9,726,125 |
13.0% |
- |
- |
- |
Chirag Parikh |
107,394 |
- |
0.1% |
107,394 |
- |
8,330 |
Daniel Levangie |
- |
- |
0.0% |
- |
- |
40,000 |
Timothy Scannell |
68,967 |
68,967 |
0.1% |
- |
- |
40,000 |
| Renalytix plc Annual Report and Financial Statements 44
REMUNERATION COMMITTEE REPORT (CONTINUED)
Performance graph and table
The following graph shows Renalytix’s cumulative Total Shareholder Return (“TSR”) from the Company’s November 2018 IPO on AIM relative to the FTSE AIM All Share Index and the Nasdaq Biotech Index. These two indices were chosen due to Renalytix’s listing on both exchanges and the sector in which it operates. For the period from 6 November 2018 to 30 June 2022 Renalytix Plc data relates to AIM TSR, and from 17 July 2020 the data relates to Nasdaq TSR (as show by the separate line).
TSR is defined as the return on investment obtained from holding a company’s shares over a period. It includes dividends paid, the change in capital value of the shares and any other payment made to or by shareholders within the period.
ALIGNING PAY WITH PERFORMANCE
CEO remuneration compared with annual growth in TSR:
The total 2021/22 remuneration figure for the CEO (James McCullough) is shown in the table below, along with the value of bonuses paid in respect of the year, and EIP vesting, as a percentage of the maximum opportunity. As this is the first year reported since listing on Nasdaq and therefore the first year for which this disclosure is required, it is not possible to provide meaningful comparative data. However, full disclosure of the year on year movement will be provided in future remuneration reports.
James McCullough |
2022 ($000s) |
2021 ($000s) |
Total remuneration |
648 |
1,193 |
Actual bonus as a % of the maximum |
0% |
50% |
Actual share award vesting as % of the maximum |
- |
- |
| Renalytix plc Annual Report and Financial Statements 45
Percentage change in remuneration of the Directors and employees
Set out below is the change over the prior period in base salary, benefits, pension and annual performance bonus for all the directors and the Company’s employees.
|
Salary % change 2020/21 vs 2021/22 |
Benefits % change 2020/21 vs 2021/22 |
Bonus % change 2020/21 vs 2021/22 |
James McCullough |
3% |
(68%) |
(100%) |
Fergus Fleming |
3% |
(8%) |
(100%) |
Mount Sinai |
- |
- |
- |
Christopher Mills |
- |
- |
- |
Chirag Parikh |
- |
- |
- |
Dan Levangie |
- |
- |
- |
Timothy Scannell |
- |
- |
- |
Ann Berman1 |
- |
- |
- |
Relative importance of spend on pay
Total revenue and administrative expenditures have been selected as comparators for the employee costs as these two financial measures are strong indicators of the activity within the Company and of its performance.
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
Change ($000’s) |
Change (%) |
Total employee remuneration ($000s) |
26,527 |
12,416 |
14,111 |
114% |
Average number of employees |
93 |
47 |
46 |
98% |
Revenue ($000s) |
2,970 |
1,491 |
1,479 |
99% |
Administrative expenditures ($000s) |
58,290 |
33,298 |
24,992 |
75% |
No dividends distributions or share buyback transactions occurred in either 2021 or 2020 |
- |
- |
- |
|
Statement of Implementation of Policy in 2022/23
Base salary: There was no change in James McCullough’s or Fergus Fleming’s base salary for the 2022/2023 financial year. The 2022/2023 target base salary increases for other employees are expected to be in line with market rates for all of eligible employees, being those that had joined the business prior to 1 July 2022.
Pension and benefits: In 2022/2023, Executive Directors are eligible for the same benefits as provided to all senior employees. The Executive Directors are each entitled to the maximum employer pension contribution of 5% of their respective base salary which is paid into a defined contribution pension scheme / paid in cash in lieu of pension contributions.
Annual performance bonus: For 2022/2023, the Executive Directors’ annual cash bonus target payouts are still being determined by the Committee as the benchmarking process is ongoing and will be disclosed in next year’s report. The Committee considers overall corporate performance and individual performance when determining the final bonus amount to be awarded to an Executive Director. Performance will be tested against targets set by the Committee at the start of the year and will comprise a combination of corporate goals and individual goals for James McCullough and Fergus Fleming.
Specific targets are commercially sensitive and therefore are not disclosed in advance. However, full details of the targets and performance against them will be disclosed when they are no longer considered commercially sensitive.
The Chairman and non-executive directors will continue to be paid their current level of fees.
| Renalytix plc Annual Report and Financial Statements
46
Payments for loss of office (audited information)
There were no loss of office payments in 2021/2022.
Payments to past Directors (audited information)
The Company made payments of $20,000 to Ann Berman for her service as a director for the fiscal year ended 30 June 2022. Ann Berman resigned from the board in September 2022.
Daniel J. Levangie
Chair of the Remuneration Committee
9 November 2022
| Renalytix plc Annual Report and Financial Statements
47
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RENALYTIX PLC
Opinion
We have audited the financial statements of Renalytix Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 June 2022 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statements of Cash Flows, the Consolidated and Parent Company Statements of Changes in Equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included:
| Renalytix plc Annual Report and Financial Statements
48
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's or parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. At the planning stage, materiality is used to determine the financial statement areas that are included within the scope of our audit.
Materiality for the group financial statements as a whole was $743,000 (2021: $1,005,000) with performance materiality set at $445,800 (2021: $603,000), being 60% of group materiality. Materiality for the financial statements as a whole was based upon 1% of the group’s gross assets.
In determining materiality, we considered gross assets a key benchmark for the group as the group holds product trademarks and licences and product development costs are capitalised in the group. We consider gross assets to be a key metric used by shareholders owing to the historic investment in the product technology held by the group, and the early stages of commercialisation. We have also set a separate, lower materiality, for revenue to reflect the early stages of revenue generation which would not be captured sufficiently using group materiality. We have determined materiality for revenue as $59,000 (2021: $32,000) and performance materiality as $35,400 (2021: $19,200), calculated at 2% of total revenue.
The percentages applied to these benchmarks have been selected to bring into scope all significant classes of transactions, account balances and disclosures relevant for the shareholders, and also to ensure that matters that would have a significant impact on the reported result were appropriately considered.
In determining performance materiality, significant judgements made were in respect our experience with auditing the financial statements of the group in previous years, based on the number and quantum of identified misstatements in prior period audits.
We agreed with the audit committee that we would report all individual audit differences identified for the group during the course of our audit in excess of $37,150 (2021: $50,250) together with any other audit misstatements below that threshold that we believe warrant reporting on qualitative grounds.
Materiality applied to the company’s financial statements was $328,000 (2021: $470,000) with performance materiality set at $197,000 (2021: $282,000), being 60% of the company materiality.
The benchmark for materiality of the parent company was 1% of the company’s gross assets. The significant judgements used by us in determining this were that total assets are the primary measure used by the shareholders in assessing the performance of the company. The percentage applied to this benchmark has been selected to bring into scope all significant classes of transactions, account balances and disclosures relevant for the shareholders, and also to ensure that matters that would have a significant impact on the reported profit were appropriately considered.
In determining performance materiality, significant judgements made were in respect of our experience with auditing the financial statements of the company in previous years.
We agreed with the audit committee that we would report all individual audit differences identified for the company during the course of our audit in excess of $16,000 (2021: $23,500) together with any other audit misstatements below that threshold that we believe warrant reporting on qualitative grounds.
Our approach to the audit
| Renalytix plc Annual Report and Financial Statements
49
In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the Directors such as the recoverability of intangible fixed assets and eligibility of capitalised development costs, as outlined in the Key Audit Matter section below, and considered events that are inherently uncertain.
We also addressed the risk of management override of controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. All significant and/or material subsidiary undertakings were audited directly by PKF Littlejohn LLP.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter |
How our scope addressed this matter |
Recoverability of intangible fixed assets and eligibility of capitalised development costs |
|
Intangible assets comprise the following categories:
• Trademarks, trade names and licenses • Trade secrets • Product development costs Intangible assets that are subject to amortisation are assessed for indicators of impairment.
Estimated recoverable amounts using value in use calculations are subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows. Judgement is also required when estimating useful economic lives.
The eligibility for capitalisation of expenditure is assessed in accordance with the criteria in IAS 38 Intangible Assets. There is a risk that these assets have been capitalised incorrectly and are not recoverable. Given the judgements and estimates involved these were a key focus for our audit. |
Our work on this matter included:
• Confirming the group held legal title to the trademarks, trade names and licenses. • Assessing whether any indicators of impairment (including regulatory issues, progress on obtaining milestones towards commercialisation, development of competing technology and products entering the market) existed which required an impairment charge to be recognised in profit or loss. • Performing substantive testing of additions in all intangible asset categories including agreeing to supporting documentation. We also reperformed the amortisation calculations. • Our testing on the forecasts and value in use calculations included: o Evaluation and challenge of the key assumptions used by management; o The performance of a sensitivity analysis on the headroom to reasonably possible changes in key assumptions. • We tested and verified the eligibility for capitalisation of development costs in accordance with the criteria under IAS 38, in particular technical feasibility, the ability to commercialise the asset and the availability of |
| Renalytix plc Annual Report and Financial Statements
50
|
technical and financial resources to complete development. |
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
| Renalytix plc Annual Report and Financial Statements
51
to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
| Renalytix plc Annual Report and Financial Statements
52
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
David Thompson (Senior Statutory Auditor) 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Statutory Auditor London E14 4HD
Date: 9 November 2022
| Renalytix plc Annual Report and Financial Statements
53
FINANCIAL STATEMENTS
Consolidated Income Statement
FOR THE YEAR ENDED 30 JUNE 2022
|
Note |
Year to 30 June 2022 |
Year to 30 June 2021 |
|
$’000 |
$’000 |
||
Continuing operations |
|
|
|
|
Revenue |
8 |
2,970 |
1,491 |
|
Cost of Sales |
|
(2,052) |
(804) |
|
Gross Profit |
|
918 |
687 |
|
Administrative expenses |
9 |
(58,290) |
(33,298) |
|
Operating loss |
|
(57,372) |
(32,611) |
|
Share of Net loss in Associate accounted for using the equity method |
|
9 |
(199) |
|
Impairment of Investment of associate |
34 |
- |
(1,913) |
|
Gain (loss) on financial assets at fair value through profit or loss |
23 |
(5,900) |
6,483 |
|
Gain on distribution of assets classified as held for sale |
|
- |
402 |
|
Fair value adjustment of convertible debt |
30 |
3,998 |
- |
|
Finance (costs) income - net |
14 |
9,637 |
(7,950) |
|
Loss before tax |
|
(49,628) |
(35,788) |
|
Taxation |
15 |
(7,104) |
4,778 |
|
Loss for the period |
|
(56,732) |
(31,010) |
|
Earnings per Ordinary share from continuing operations |
|
|
|
|
Basic |
16 |
$ (0.78) |
$ (0.43) |
|
Diluted |
16 |
$ (0.82) |
$ (0.43) |
|
| Renalytix plc Annual Report and Financial Statements
54
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2022
|
Year to 30 June 2022 |
Year to 30 June 2021 |
|
$’000 |
$’000 |
Loss for the period – continuing operations |
(56,732) |
(31,010) |
Other comprehensive income: |
||
Items that may be subsequently reclassified to profit or loss |
||
Changes in the fair value of the convertible notes |
536 |
- |
Currency translation differences |
(11,742) |
11,616 |
Other comprehensive (loss)/income for the period |
(11,206) |
11,616 |
Total comprehensive loss for the period |
(67,938) |
(19,394) |
Items stated above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 15.
| Renalytix plc Annual Report and Financial Statements
55
Consolidated and Company’s Statements of Financial Position
AS AT 30 JUNE 2022
|
Notes |
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$’000 |
$’000 |
$’000 |
$’000 |
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Property, plant and equipment |
17 |
1,368 |
1,081 |
- |
- |
Right of use asset |
18 |
355 |
297 |
- |
- |
Intangible assets |
19 |
14,020 |
18,021 |
13,605 |
17,524 |
Investment in subsidiaries |
20 |
- |
- |
89,112 |
4,588 |
Investments accounted for using the equity method |
34 |
9 |
- |
- |
- |
Note receivable |
24 |
75 |
75 |
- |
- |
Deferred tax assets |
15 |
- |
7,097 |
- |
- |
Total non-current assets |
|
15,827 |
26,571 |
102,717 |
22,112 |
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
Inventory |
22 |
1,160 |
353 |
- |
- |
Security deposits |
23 |
141 |
86 |
- |
- |
Financial asset at fair value through profit or loss |
23 |
2,744 |
9,295 |
2,744 |
9,295 |
Trade and other receivables |
24 |
901 |
594 |
234 |
84,686 |
Prepaid and other current assets |
25 |
1,152 |
520 |
299 |
271 |
Cash and cash equivalents |
26 |
41,333 |
65,159 |
28,313 |
15,063 |
Total current assets |
|
47,431 |
76,007 |
31,590 |
109,315 |
Total assets |
|
63,258 |
102,578 |
134,307 |
131,427 |
|
|
|
|
|
|
Equity attributable to owners |
|
|
|
|
|
of the parent |
|
|
|
|
|
Share capital |
27 |
241 |
233 |
241 |
233 |
Share premium |
27 |
85,444 |
76,457 |
85,444 |
76,457 |
Share-based payment reserve |
28 |
11,954 |
4,940 |
11,840 |
4,940 |
Accumulated other comprehensive income |
|
(1,509) |
9,701 |
(5,119) |
9,687 |
Retained earnings/(deficit) |
|
(52,961) |
3,771 |
23,763 |
38,917 |
Total equity |
|
43,169 |
95,102 |
116,169 |
130,234 |
| Renalytix plc Annual Report and Financial Statements
56
|
Notes |
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
|
$’000 |
$’000 |
$’000 |
$’000 |
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
29 |
7,281 |
6,652 |
5,796 |
1,193 |
Deferred Revenue |
8 |
46 |
122 |
- |
- |
Current lease liabilities |
18 |
163 |
86 |
- |
- |
Borrowings |
|
- |
53 |
- |
- |
Note payable current |
30 |
4,660 |
- |
4,660 |
- |
Current due to affiliated company |
31 |
55 |
350 |
- |
- |
Total current liabilities |
|
12,205 |
7,263 |
10,456 |
1,193 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Note payable non-current |
30 |
7,682 |
- |
7,682 |
- |
Non-current lease liabilities |
18 |
202 |
213 |
- |
- |
Total non-current liabilities |
|
7,884 |
213 |
7,682 |
- |
Total liabilities |
|
20,089 |
7,476 |
18,138 |
1,193 |
Total equity and liabilities |
|
63,258 |
102,578 |
134,307 |
131,427 |
The notes on pages 63 to 84 are an integral part of these financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company income statement. The loss for the Parent Company for the year was ($15,154,820). (Year ended 30 June 2021: loss of $7,718,000).
The financial statements were approved and authorized for issue by the Board on 9 November 2022 and signed on its behalf by:
Christopher Mills James R. McCullough
Chairman Chief Executive Officer
Company number: 11257655
| Renalytix plc Annual Report and Financial Statements
57
Consolidated and Company’s Statements of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2022
|
Note |
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
|
$’000 |
$’000 |
$’000 |
$’000 |
Cash flow from operating activities |
|
|
|
|
|
Loss before income tax |
|
(49,628) |
(35,788) |
(15,154) |
(7,718) |
Adjustments for |
|
|
|
|
|
Depreciation |
|
304 |
138 |
- |
- |
Amortization and impairment charges |
|
2,309 |
1,958 |
2,100 |
1,806 |
Share-based payments |
|
7,010 |
2,180 |
63 |
75 |
Share of net (profit)/loss of associate |
|
(9) |
2,112 |
- |
- |
Reversal of Kantaro Liability |
|
(295) |
(495) |
- |
- |
Gain on Sale of assets |
|
- |
(449) |
- |
- |
Forgiveness of PPP Loan |
|
- |
(255) |
- |
- |
Unrealized loss (Gain) on financial asset at fair value through profit or loss |
|
5,900 |
(6,483) |
5,900 |
(6,483) |
Fair value adjustment of convertible debt |
|
(3,998) |
- |
(3,998) |
- |
Foreign Exchange Loss (Gain) |
|
(7,354) |
8,832 |
- |
2,939 |
Impairment of Investment in Subsidiary |
|
- |
- |
- |
517 |
Changes in working capital |
|
|
|
|
|
Trade and other receivables |
|
(307) |
(576) |
- |
(60,624) |
Prepaid assets and other current assets |
|
(698) |
1,981 |
253 |
2,137 |
Inventory |
|
(807) |
(27) |
- |
- |
Security Deposits |
|
- |
(15) |
- |
- |
Trade and other payables |
|
1,904 |
3,753 |
1,417 |
943 |
Deferred Revenue |
|
(76) |
122 |
- |
- |
Payable to affiliated company |
|
- |
(1,623) |
- |
- |
Cash used in operations |
|
(45,745) |
(24,635) |
(9,419) |
(66,408) |
Interest received |
|
- |
3 |
- |
2 |
Net cash used in operating activities |
|
(45,745) |
(24,632) |
(9,419) |
(66,406) |
Cash flow from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment (PPE) |
|
(591) |
(783) |
- |
- |
Lease Payments |
|
- |
(93) |
- |
- |
Purchase of intangibles |
|
(103) |
(847) |
(103) |
(358) |
Proceeds (purchase) of financial assets |
|
- |
982 |
- |
- |
| Renalytix plc Annual Report and Financial Statements
58
|
Note |
Group Year to 30 June 2022 |
Group Year to 30 June 2021 |
Company Year to 30 June 2022 |
Company Year to 30 June 2021 |
|
|
$’000 |
$’000 |
$’000 |
$’000 |
Net cash generated by/(used in) investing activities |
|
(694) |
(741) |
(103) |
(358) |
Cash flow from financing activities |
|
|
|
|
|
Proceeds from convertible notes |
|
18,020 |
- |
18,020 |
- |
Payment of debt issuance costs |
|
(1,382) |
- |
(1,382) |
- |
Payments of issuance costs for the Securities Purchase Agreement |
|
(218) |
- |
(218) |
- |
Issue of shares (net of issue costs) |
|
8,804 |
76,876 |
8,804 |
79,023 |
Proceeds from the issuance of ordinary shares under employee share purchase plan |
|
211 |
111 |
211 |
111 |
Proceeds from exercise of stock options |
|
198 |
252 |
198 |
252 |
Lease payments |
|
(118) |
- |
- |
- |
Net cash generated from financing activities |
|
25,515 |
77,239 |
25,633 |
79,386 |
Net increase/(decrease) in cash and cash equivalents |
|
(20,924) |
51,866 |
16,111 |
12,622 |
Cash and cash equivalents at beginning of period |
|
65,159 |
13,293 |
15,063 |
2,441 |
Effect of exchange rate changes on cash |
|
(2,902) |
- |
(2,861) |
- |
Cash and cash equivalents at end of period |
22 |
41,333 |
65,159 |
28,313 |
15,063 |
| Renalytix plc Annual Report and Financial Statements
59
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2022
|
Share Capital |
Share Premium |
Share-based payment reserve |
Accumulated other comprehensive income |
Retained earnings |
Total equity |
|
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
At 30 June and 1 July 2020 |
192 |
- |
2,833 |
(1,915) |
34,856 |
35,966 |
Comprehensive income |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
(31,010) |
(31,010) |
Other comprehensive income |
|
|
|
|
|
|
Currency translation differences |
- |
- |
- |
11,616 |
- |
11,616 |
Total comprehensive income |
- |
- |
- |
11,616 |
(31,010) |
(19,394) |
|
|
|
|
|
|
|
Transactions with owners |
|
|
|
|
|
|
Issuance of Ordinary Shares in US |
40 |
85,101 |
- |
- |
- |
85,141 |
Less issue costs |
- |
(9,007) |
- |
- |
- |
(9,007) |
Share-based payments |
- |
- |
2,107 |
- |
- |
2,107 |
Shares issued under the ESPP |
- |
111 |
- |
- |
- |
111 |
Exercise of Stock Options |
1 |
252 |
- |
- |
- |
253 |
Verici Ordinary Share Repurchase |
- |
- |
- |
- |
(75) |
(75) |
Total transactions with owners of the parent, recognized directly in equity |
41 |
76,457 |
2,107 |
- |
(75) |
78,530 |
At 30 June and 1 July 2021 |
233 |
76,457 |
4,940 |
9,701 |
3,771 |
95,102 |
Comprehensive income |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
(56,732) |
(56,732) |
Other comprehensive income |
|
|
|
|
|
|
Changes in fair value of convertible notes |
- |
- |
- |
536 |
- |
536 |
Currency translation differences |
- |
- |
4 |
(11,746) |
- |
(11,742) |
Total comprehensive income |
- |
- |
4 |
(11,210) |
(56,732) |
(67,938) |
|
|
|
|
|
|
|
| Renalytix plc Annual Report and Financial Statements
60
|
Share Capital |
Share Premium |
Share-based payment reserve |
Accumulated other comprehensive income |
Retained earnings |
Total equity |
|
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
Transactions with owners |
|
|
|
|
|
|
Issuance of Ordinary Shares in US |
8 |
8,796 |
- |
- |
- |
8,804 |
Less issue costs |
- |
(218) |
- |
- |
- |
(218) |
Share-based payments |
- |
- |
7,010 |
- |
- |
7,010 |
Shares issued under the ESPP |
- |
211 |
- |
- |
- |
211 |
Exercise of Stock Options |
- |
198 |
- |
- |
- |
198 |
Total transactions with owners of the parent, recognized directly in equity |
8 |
8,987 |
7,010 |
- |
- |
16,005 |
At 30 June 2022 |
241 |
85,444 |
11,954 |
(1,509) |
(52,961) |
43,169 |
| Renalytix plc Annual Report and Financial Statements
61
Company’s Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2022
|
Share Capital |
Share Premium |
Share-based payment reserve |
Accumulated other comprehensive income |
Retained earnings |
Total equity |
|
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
At 30 June and 1 July 2020 |
192 |
- |
2,833 |
(1,970) |
46,710 |
47,765 |
Comprehensive income |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
(7,718) |
(7,718) |
Other comprehensive income |
|
|
|
|
|
|
Currency translation differences |
- |
- |
- |
11,657 |
- |
11,657 |
Total comprehensive income |
- |
- |
- |
11,657 |
(7,718) |
3,939 |
|
|
|
|
|
|
|
Transactions with owners |
|
|
|
|
|
|
Issuance of Ordinary Shares in US IPO |
40 |
85,101 |
- |
- |
- |
85,141 |
Less issue costs |
- |
(9,007) |
- |
- |
- |
(9,007) |
Share-based payments |
- |
- |
2,107 |
- |
- |
2,107 |
Shares issued under the ESPP |
- |
111 |
- |
- |
- |
111 |
Exercise of Stock Options |
1 |
252 |
- |
- |
- |
253 |
Verici Ordinary Share Repurchase |
- |
- |
- |
- |
(75) |
(75) |
Total transactions with owners of the parent, recognized directly in equity |
41 |
76,457 |
2,107 |
- |
(75) |
78,530 |
At 30 June 2021 |
233 |
76,457 |
4,940 |
9,687 |
38,917 |
130,234 |
Comprehensive income |
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
(15,154) |
(15,154) |
Other comprehensive income |
|
|
|
|
|
|
Changes in the fair value of the convertible notes |
- |
- |
- |
536 |
- |
536 |
Currency translation differences |
- |
- |
- |
(15,342) |
- |
(14,806) |
Total comprehensive income |
- |
- |
- |
(14,806) |
(15,154) |
(29,960) |
|
|
|
|
|
|
|
| Renalytix plc Annual Report and Financial Statements
62
|
Share Capital |
Share Premium |
Share-based payment reserve |
Accumulated other comprehensive income |
Retained earnings |
Total equity |
|
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
Transactions with owners |
|
|
|
|
|
|
Issuance of Ordinary Shares in US |
8 |
8,796 |
- |
- |
- |
8,804 |
Less issue costs |
- |
(218) |
- |
- |
- |
(218) |
Share-based payments |
- |
- |
6,900 |
- |
- |
6,900 |
Shares issued under the ESPP |
- |
211 |
- |
- |
- |
211 |
Exercise of Stock Options |
- |
198 |
- |
- |
- |
198 |
Total transactions with owners of the parent, recognized directly in equity |
8 |
8,987 |
6,900 |
- |
- |
15,895 |
At 30 June 2022 |
241 |
85,444 |
11,840 |
(5,119) |
23,763 |
116,169 |
| Renalytix plc Annual Report and Financial Statements
63
Notes to the Financial Statements
Renalytix Plc (the “Company”) is a company incorporated in the United Kingdom. The Company is a public limited company, which is listed on the AIM market of the London Stock Exchange and Nasdaq global market. The address of the registered office is Finsgate, 5-7 Cranwood Street, London, United Kingdom, EC1V 9EE. The Company was incorporated on 15 March 2018 and its registered number is 11257655.
The principal activity of the Company and its subsidiaries (together “the Group”) is as a developer of artificial intelligence- enabled diagnostics for kidney disease.
The financial statements are presented in United States Dollars (“USD”) because that is the currency of the primary economic environment in which the Group operates.
The Group and Company’s financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.
New Standards, amendments, and interpretations not adopted by the group
The group did not adopt any new standards, amendments or interpretations in year as they did not have a material impact on the financial statements.
New standards, amendments, and interpretations issued but not effective for the period ended 30 June 2022, and not early adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2022 and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Group or Parent Company.
The principal accounting policies applied in the preparation of these financial statements are set out below.
Going concern
The Group and Company meet their day-to-day working capital requirements through the use of cash reserves.
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial performance, that the Group and Company should be able to operate within the level of its current funding arrangements.
We have not yet seen any material disruption to our business as a result of the COVID-19 pandemic and current trading suggests that our base case forecasts are still applicable.
The Directors believe that the Group and the Company have adequate resources to continue in operation for the foreseeable future. For this reason, they have adopted the going concern basis in the preparation of the financial statements.
| Renalytix plc Annual Report and Financial Statements
64
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Associates are entities over which the Group has significant influence but not control over the financial and operating policies. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in reserves is recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.
Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in United States Dollars, which is the Group’s presentational currency. The functional currency of the Parent Company is GB Pounds.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement within ‘administrative expenses’.
The results and financial position of all the Group entities that have a functional currency different from the presentational currency are translated into the presentational currency as follows:
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sale.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors who make strategic decisions. At present the Directors consider the business to operate in a single segment.
| Renalytix plc Annual Report and Financial Statements
65
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition for its intended use.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only where it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be
measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation on assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:
Fixtures and fittings 20%
The assets’ residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognized in administration expenses in the income statement.
Intangible assets
Separately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over the contractual license period of 10 to 15 years and is charged to administrative expenses in the income statement.
Development costs have a finite useful life and are carried at cost less accumulated amortization.
Expenditure incurred on the development of new or substantially improved products or processes is capitalized, provided that the related project satisfies the criteria for capitalisation, including the project’s technical feasibility and likely commercial benefit. All other research and development costs are expensed to profit or loss as incurred.
Development costs are amortized over the estimated useful life of the products with which they are associated. Amortization commences when a new product is in commercial production. The amortization is charged to administrative expenses in the income statement. The estimated remaining useful lives of development costs are reviewed at least on an annual basis.
The carrying value of capitalized development costs is reviewed for potential impairment at least annually and if a product becomes unviable and an impairment is identified the deferred development costs are immediately charged to the income statement. Amortization has not yet commenced.
Trade secrets, including technical know-how, operating procedures, methods and processes, are recognized at fair value at the acquisition date. Trade secrets have a finite useful life and are carried at cost less accumulated amortization. Amortization has not yet commenced.
Impairment of non-financial assets
Assets that have an indefinite life or where amortization has not yet commenced are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
| Renalytix plc Annual Report and Financial Statements
66
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognized for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognized in the income statement immediately. If goodwill is impaired however, no reversal of the impairment is recognized in the financial statements.
Financial assets
Classification
The Company classifies its financial assets in the following categories: loans and receivables at amortized cost and financial assets at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired and management determines the classification of its financial assets at initial recognition.
Financial assets are classified as at amortized cost only if both of the following criteria are met: the asset is held within a business model whose objective is to collect contractual cash flows, and the contractual terms give rise to cash flows that are solely payments of principal and interest. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Company’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the balance sheet.
The Group classifies the following financial assets at fair value through profit or loss (“FVPL”):
Financial assets at fair value through other comprehensive income comprise equity securities that are not held for trading and which the Group has irrevocably elected at initial recognition to recognize in this category. The Group considers this category to be more relevant for assets of this type.
The Group classifies the following financial assets at fair value through profit or loss (“FVPL”):
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short- term deposits with an original maturity of three months or less.
For the purposes of the cash flow statements, cash and cash equivalents consist of cash and short-term deposits as defined above.
Share capital and premium
Ordinary Shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary Shares or options are deducted from the share premium account.
Other reserves - equity
The share-based payment reserve is used to recognize the fair value of equity settled share-based payment transactions.
Foreign currency reserve is used to record the exchange differences on translation of entities in the Group which have a functional currency different to the presentation currency.
Retained earnings includes all current and prior period results as disclosed in the income statement.
| Renalytix plc Annual Report and Financial Statements
67
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
Current and deferred income tax
Income tax comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income where the associated tax is also recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiary operate and generate taxable income. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is recognized, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized in respect of all temporary differences except where the deferred tax liability arises from the initial recognition of goodwill in business combinations.
Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and tax losses, to the extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will be sufficient taxable profits against which the future reversal of the underlying temporary differences can be deducted.
The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance sheet date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Leases
Leases are recognized as a right-of-use asset and a corresponding lease liability at the date on which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit within the lease. If that rate cannot be readily determined, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security, and conditions.
Where the Group is exposed to potential future increases in variable lease payments based on an index or rate, amounts are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the income statement over
| Renalytix plc Annual Report and Financial Statements
68
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on straight line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Revenue Recognition
The Group recognizes revenue when a customer obtains control of contracted goods or services. The Group records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. The Group applies the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Group satisfies each performance obligation.
The Group only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that it transfers to the customer. The Group reviews the contract to determine which performance obligations it must deliver and which of these performance obligations are distinct. Certain contracts have options for the customer to acquire additional services. The Group evaluates these options to determine if a material right exists. If, after that evaluation, it determines a material right does exist, it assigns value to the material right based upon the renewal option approach. The Group recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied. The Group uses present right to payment and customer acceptance as indicators to determine the transfer of control to the customer occurs at a point in time. Sales tax and other similar taxes are excluded from revenues.
Cost of revenue
Cost of revenue consists of costs directly attributable to the services rendered, including labor costs directly related to revenue generating activities.
Employee benefits
The Group makes contributions to defined contribution pension plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity with the pension cost charged to the income statement as incurred. The Group has no further obligations once the contributions have been paid.
The Group operates an equity-settled, share-based compensation plan, under which the Group receives services from employees and others as consideration for equity instruments of the Group. Equity-settled share-based payments are measured at fair value at the date of grant and are expensed over the vesting period based on the number of instruments that are expected to vest. For plans where vesting conditions are based on share price targets, the fair value at the date of grant reflects these conditions. Where applicable the Group recognizes the impact of revisions to original estimates in the income statement, with a corresponding adjustment to equity for equity-settled schemes. Fair values are measured using appropriate valuation models, taking into account the terms and conditions of the awards.
When the share-based payment awards are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
National insurance on share options
To the extent that the share price at the balance sheet date is greater than the exercise price on options granted to UK citizens under unapproved share-based payment compensation schemes, provision for any National Insurance Contributions has been based on the prevailing rate of National Insurance. The provision is accrued over the performance period attaching to the award.
Interest income
| Renalytix plc Annual Report and Financial Statements
69
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
Exceptional items
These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one-off items relating to business combinations, such as acquisition expenses.
Assets Classified as Held for Sale
Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying value and fair value less costs to sell. An impairment loss is recognized for any subsequent write-down of the asset to fair value less costs to sell.
Financial Risk Factors
The Company’s activities expose it to a variety of financial risks. The Company’s Board monitors and manages the financial risks relating to the operations of the Company.
Foreign Exchange Risk
The Company operates internationally and is exposed to foreign exchange risk primarily with respect to the US Dollar and the Pounds Sterling. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities.
Credit risk relates mainly to cash at bank. The Company only deposits cash with major banks with high quality credit standing and limits exposure to any one counterparty.
The Company’s continued future operations depend on its ability to raise sufficient working capital through the issue of share capital and generate revenue.
The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders. The Company’s capital structure primarily consists of equity attributable to the owners, comprising issued capital, reserves and retained losses.
The Company makes estimates and assumptions regarding the future. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual results may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to:
The Group operates as a single segment.
| Renalytix plc Annual Report and Financial Statements
70
Testing services revenue
Testing services revenue is generated from the KidneyIntelX platform, which provides analytical services to customers. Each individual test is a performance obligation that is satisfied at a point in time upon completion of the testing process (when results are reported) which is when control passes to the customer and revenue is recognized. During the year ended June 30, 2022, the Company recognized $2.7 million of testing services revenue. Sales tax and other similar taxes are excluded from revenues. There was $0.4 million of testing services revenue recognized in the 2021 accounting period.
Pharmaceutical services revenue
Pharmaceutical services revenue is generated from the provision of analytical services to customers. Contracts with customers generally include an initial upfront payment and additional payments upon achieving performance milestones. The Company uses present right to payment and customer acceptance as indicators to determine the transfer of control to the customer which may occur at a point in time or over time depending on the individual contract terms. Sales tax and other similar taxes are excluded from revenues. During the year ended June 30, 2022, the Company recognized $0.2 million of pharmaceutical services revenue. There was $1.1 million of pharmaceutical services revenue recognized in the 2021 accounting period
Deferred revenue
Deferred revenue represents the allocated transaction price to the material right which will be recognized as revenue when the renewal options are exercised which is expected to occur over the next 24 months.
The following table summarizes the changes in deferred revenue:
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
|
$'000 |
$'000 |
Balance, beginning of period |
122 |
- |
Deferral of revenue |
150 |
250 |
Revenue recognized |
(227) |
(128) |
Balance, end of period |
45 |
122 |
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
|
$'000 |
$'000 |
Employee benefit expense |
26,527 |
12,416 |
Contract labor |
6,245 |
3,393 |
Depreciation and amortization |
2,254 |
2,053 |
Professional fees |
12,951 |
8,374 |
Laboratory supplies |
851 |
326 |
Other expenses |
9,462 |
6,736 |
Total administrative expenses |
58,290 |
33,298 |
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
|
$'000 |
$'000 |
Fees payable to the Company’s auditor for the audit of the parent Company and consolidated financial statements |
71 |
53 |
| Renalytix plc Annual Report and Financial Statements
71
Total |
71 |
53 |
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
|
$'000 |
$'000 |
Aggregate emoluments |
1,189 |
1,832 |
Share based payments |
292 |
206 |
Contribution to defined contribution pension scheme |
102 |
39 |
Total |
1,583 |
2,077 |
Retirement benefits are accruing to two current executive directors under a defined contribution scheme. See further disclosures within the Remuneration Report on pages 32. The highest paid director received aggregate emoluments, excluding the effect of the share based payments charge, totaling $648,000 (2021: $1,405,000).
|
Group Year ended 30 June 2022 |
Group Year ended 30 June 2021 |
Company Year ended 30 June 2022 |
Company Year ended 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Wages, salaries and Bonus |
15,006 |
8,902 |
345 |
168 |
Social security costs and Benefits |
4,511 |
1,334 |
286 |
9 |
Share based payment expenses |
7,010 |
2,180 |
61 |
74 |
Total |
26,527 |
12,416 |
692 |
251 |
| Renalytix plc Annual Report and Financial Statements
72
The monthly average number of people (including Executive Directors) employed was:
|
Group Year ended 30 June 2022 |
Group Year ended 30 June 2021 |
Company Year ended 30 June 2022 |
Company Year ended 30 June 2021 |
Administration |
68 |
27 |
6 |
6 |
Research and development |
25 |
20 |
- |
6 |
Total |
93 |
47 |
6 |
12 |
The total number of employees (FTEs) in the Group at 30 June 2022 was 110 (2021: 53), and in the Company was 8 (2021: 2).
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
|
$'000 |
$'000 |
Finance costs: |
|
|
Interest expense |
(2) |
(3) |
Royalty Expense |
(169) |
|
Finance income: |
|
|
Interest income |
12 |
236 |
Gain on debt forgiveness |
- |
255 |
Reduction in contractual liability |
- |
495 |
Gain/(Loss) on Foreign Exchange |
9,677 |
(8,933) |
Other Income |
119 |
- |
Net finance income/(loss) |
9,637 |
(7,950) |
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
Group |
$'000 |
$'000 |
Deferred tax |
(7,104) |
4,778 |
Total deferred tax |
(7,104) |
4,778 |
Income tax (charge)/credit |
(7,104) |
4,778 |
No deferred asset is calculated on losses in FY22 as the probability of future utilization is considered too remote.
Factors affecting the future tax charge
The standard rate of corporation tax in the UK is 19%.
Changes to UK Corporation tax rates were enacted as part of The Finance (No.2) Act 2021 which received Royal Assent on 10 June 2021. The main rate will remain at 19% before increasing to 25% from 1 April 2023.
| Renalytix plc Annual Report and Financial Statements
73
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
|
$'000 |
$'000 |
Loss before Tax |
49,628 |
35,788 |
Tax Calculated at domestic tax rates applicable to the UK Standard of tax at 19% |
9,429 |
6,800 |
Tax effects of: |
|
|
Expenses not deductible for tax purposes |
4,490 |
(487) |
Losses on which no deferred tax asset is recognized |
(578) |
(1,535) |
Tax Credit for the Year |
13,341 |
4,778 |
Current year Valuation Allowance |
(13,341) |
4,778 |
Prior year Deferred Tax |
7,097 |
2,319 |
Reversal of tax asset at 30 June |
(7,097) |
7,097 |
Tax Expense |
(7) |
- |
Total Income Tax (Expense)/Credit |
(7,104) |
4,778 |
Deferred tax assets are recognized based on subsidiary net losses based on the US corporate tax rate of 21%. Net losses can be carried forward indefinitely to offset future taxable profits however management has concluded that the realization of deferred tax assets to be less than probable and recorded an impaired the deferred tax asset in current year. No deferred asset is calculated on losses in the UK totaling $15,155,000 where the probability of future utilization is considered too remote.
Basic earnings per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the period.
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
|
$'000 |
$'000 |
Loss attributable to owners of the parent |
(56,648) |
(31,010) |
Weighted average number of ordinary shares in issue |
72,861,251 |
71,484,934 |
Basic and diluted loss per share |
$ (0.78) |
$ (0.43) |
The Company has two categories of dilutive potential ordinary share, being share options and convertible debt. The potential shares were not dilutive the period and prior period as the Group made a loss. For the fiscal year ended June 30, 2022, the diluted net loss per share calculation included the dilutive effect of convertible debt as well as the impact of the $3.9 million fair value gain related to the convertible debt, which further increase net loss used in the diluted loss per share calculation. For the year ended June 30, 2022, the basic and diluted loss per share calculation excluded shares related to stock options, as the exercise price of these options was greater than their market value. For the fiscal years ended June 30, 2021 the basic and diluted loss per share excluded shares related to stock options as the inclusion of the stock options had an antidilutive effect.
The following is a reconciliation of basic net loss per share to diluted net loss per share for the fiscal years ended June 30, 2022 and 2021.
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
Basic earnings per share |
$ (0.78) |
$ (0.43) |
Average shares outstanding – basic |
72,861,251 |
71,484,934 |
Convertible debt shares |
976,048 |
- |
Adjusted average shares outstanding – diluted |
73,837,496 |
71,484,934 |
| Renalytix plc Annual Report and Financial Statements
74
Diluted earnings per share |
$ (0.82) |
$ (0.43) |
The Company was incorporated on 15 March 2018 with 50,000 ordinary shares of £1.00 each, and as a result of subdivisions (100:1 on 4 May 2018 and then 4:1 on 24 October 2018), the resulting founding shares became 20,000,000 at £0.0025 each.
Group |
Fixtures and fittings |
|
$'000 |
Cost |
|
At 1 July 2020 |
650 |
Additions |
782 |
Reclass to computer software |
(146) |
Foreign translation |
|
At 30 June 2021 |
1,286 |
Depreciation |
|
At 1 July 2020 |
70 |
Charge for the period |
138 |
Foreign translation |
(3) |
At 30 June 2021 |
205 |
Net book value at 30 June 2021 |
1,081 |
Cost |
|
At 1 July 2021 |
1,286 |
Additions |
591 |
Foreign translation |
- |
At 30 June 2022 |
1,877 |
Depreciation |
|
At 1 July 2021 |
205 |
Charge for the period |
304 |
At 30 June 2022 |
509 |
Net book value at 30 June 2022 |
1,368 |
The depreciation charge of $304k related to Property, Plant and Equipment has been charged to administration expenses ($272k) and cost of goods sold ($32k).
| Renalytix plc Annual Report and Financial Statements
75
The balance sheet shows the following amounts relating to leases:
|
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Right-of-use assets |
|
|
|
|
Properties |
355 |
297 |
- |
- |
Total right-of-use assets |
355 |
297 |
- |
- |
Lease liabilities |
|
|
|
|
Current |
163 |
86 |
- |
- |
Non-current |
202 |
213 |
- |
- |
Total lease liabilities |
365 |
299 |
- |
- |
Right-of-use assets have been measured at the amount equal to the lease liability.
Lease liabilities were measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate.
The statement of profit or loss shows the following amounts relating to leases:
|
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Depreciation charge - right-of-use assets |
|
|
|
|
Properties |
126 |
155 |
- |
- |
Total right-of-use |
126 |
155 |
- |
- |
Interest expense (included in finance cost) |
2 |
3 |
- |
- |
The total cash outflow for leases in the year to 30 June 2022 was $119k (2021: $155k) for the Group and $Nil (2021: $nil) for the Company.
The group leases various offices. Rental contracts for offices are made for fixed periods of between 1 and 5 years, but may have extension options as described below.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee’s incremental cash rate is used, being the rate that the individual lessee would forego to release the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
| Renalytix plc Annual Report and Financial Statements
76
|
Trademarks, Trade Names & Licenses |
Trade Secrets |
Development Costs |
Total |
|
$'000 |
$'000 |
$'000 |
$'000 |
Cost |
|
|
|
|
At 1 July 2020 |
9,466 |
6,402 |
3,223 |
19,091 |
Additions |
- |
- |
847 |
847 |
Foreign translation |
1,087 |
734 |
359 |
2,180 |
At 30 June 2021 |
10,553 |
7,136 |
4,429 |
22,118 |
Amortization |
|
|
|
|
At July 2020 |
1,973 |
- |
- |
1,973 |
Charge for the period |
1,030 |
529 |
305 |
1,864 |
Foreign translation |
251 |
6 |
3 |
260 |
At 30 June 2021 |
3,254 |
535 |
308 |
4,097 |
Net book value |
|
|
|
|
At 30 June 2021 |
7,299 |
6,601 |
4,121 |
18,021 |
Cost |
|
|
|
|
At 1 July 2021 |
10,553 |
7,136 |
4,429 |
22,118 |
Additions |
- |
- |
103 |
103 |
Foreign translation |
(1,274) |
(861) |
(477) |
(2,612) |
At 30 June 2022 |
9,279 |
6,275 |
4,055 |
19,609 |
Amortization |
|
|
|
|
At 30 June 2021 |
3,254 |
535 |
308 |
4,097 |
Charge for the period |
1,018 |
688 |
459 |
2,165 |
Foreign translation |
(483) |
(125) |
(65) |
(672) |
At 30 June 2022 |
3,789 |
1,098 |
702 |
5,589 |
Net book value |
|
|
|
|
At 30 June 2022 |
5,490 |
5,177 |
3,353 |
14,020 |
Amortization expense of $2,060,485 has been charged to administration costs and $104,294 has been charged to cost of goods sold. Amortization expense of $1,864,016 was charged in the prior year ended 30 June 2021.
Licenses entail agreements with Icahn School of Medicine at Mount Sinai for rights to intellectual property and data to support the KidneyIntelX diagnostic assay. Trade secrets refer to the Company’s acquisition of the biomarker business from EKF, which includes intellectual property licensed from Joslin Diabetes Centre and forms a key component of the KidneyIntelX product. Development costs include proprietary software development and diagnostic assay design for KidneyIntelX.
Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
| Renalytix plc Annual Report and Financial Statements
77
The Group has tested the carrying value for impairment at the balance sheet date. The recoverable amount was assessed in the basis of value in use. The assessed value exceeded the carrying value and no impairment loss was recognized. The key
assumptions in the calculation to assess value in use are future revenues and costs and the ability to generate future cash flows. Recent working capital projections approved by the Board were used as well as forecasts for a further four years, followed by an extrapolation of expected cash flows and the calculation of a terminal value. For prudence the expected growth rate used for longer term growth was zero. The projected results were discounted at a rate which is a prudent evaluation of the pre-tax rate which reflects current market assessments of the value of money and the risks specific to the business, reflecting an assessment of the risk-adjusted weighted average cost of capital of 20%. The headroom in the value in use calculation is not sensitive to changes in key assumptions.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Any impairment loss is charged pro rata to the other assets in the cash generating unit.
The remaining average useful lives of the intangible assets is as follows:
Trademarks trade names & licenses |
10-15 years |
Trade secrets |
15 years |
Development Costs |
15 years |
The Company holds capitalized development costs with a cost of $4,055,060and net value of $3,352,629 these projects were placed into service in FY21.
|
Year ended 30 June 2022 |
Year ended 30 June 2021 |
Company |
$'000 |
$'000 |
At beginning of Period |
4,588 |
2,264 |
Capital Contribution relating to share based payment |
2,824 |
2,325 |
Conversion of intercompany loan to equity investment |
81,700 |
- |
Shares in Verici Dx Ltd |
- |
(1) |
At End of Period |
89,112 |
4,588 |
Investments in Group undertakings are recorded at cost which is the fair value of the consideration paid, less any impairment. The Company had the following subsidiaries as of 30 September 2022.
Name of Company |
Proportion held |
Class of shareholding |
Nature of business |
Renalytix AI Inc.1 |
100% |
Ordinary |
Developer of artificial intelligence-enabled clinical diagnostic solutions for kidney disease |
Renalytix AI Limited2 |
100% |
Ordinary |
Developer of artificial intelligence-enabled clinical diagnostic solutions for kidney disease |
| Renalytix plc Annual Report and Financial Statements
78
|
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Finished goods |
1,160 |
353 |
- |
- |
The Directors are of the opinion that the replacement values of inventories are not materially different to the carrying values stated above. The carrying values above are stated net of impairment provisions of $Nil (30 June 2021: $Nil).
The cost of inventories recognized as expense and included in ‘cost of sales’ amounted to $266k (Year to 30 June 2021: $60k). The Company held no inventories at 30 June 2022 and 30 June 2021.
|
Group 30 June 2022 |
Group 30 June 2021 |
Company 30 June 2022 |
Company 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Assets as per balance sheet |
|
|
|
|
Security deposits |
141 |
86 |
- |
- |
Intragroup receivable |
- |
- |
- |
84,686 |
Cash and cash equivalents |
41,333 |
65,159 |
28,313 |
15,063 |
Total |
41,474 |
65,245 |
28,313 |
99,749 |
Receivables in the analysis above are all categorized as “loans and receivables” for the Group and Company.
|
Group 30 June 2022 |
Group 30 June 2021 |
Company 30 June 2022 |
Company 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Assets as per balance sheet |
|
|
|
|
Investment in Verici Dx |
2,744 |
9,295 |
2,744 |
9,295 |
Total |
2,744 |
9,295 |
2,744 |
9,295 |
|
Group 30 June 2022 |
Group 30 June 2021 |
Company 30 June 2022 |
Company 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Liabilities as per balance sheet |
|
|
|
|
Accounts payable |
2,460 |
1,765 |
400 |
622 |
Accrued expenses |
4,821 |
4,887 |
695 |
571 |
Lease Liabilities |
365 |
299 |
- |
- |
Total |
7,646 |
6,951 |
1,095 |
1,193 |
| Renalytix plc Annual Report and Financial Statements
79
|
Group 30 June 2022 |
Group 30 June 2021 |
Company 30 June 2022 |
Company 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Liabilities as per balance sheet |
|
|
|
|
Note Payable |
12,342 |
- |
12,342 |
- |
Total |
12,342 |
- |
12,342 |
- |
The Group is exposed to credit risk from its operating activities and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
The Group’s maximum exposure to credit risk, due to the failure of counterparties to perform their obligations as at 30 June 2022, in relation to each class of recognized financial assets, is the carrying amount of those assets as indicated in the accompanying balance sheets.
Trade Receivables
The credit quality of trade receivables that are neither past due nor impaired have been assessed based on historical information about the counterparty default rate.
Cash at Bank
The credit quality of cash has been assessed by reference to external credit ratings, based on reputable credit agencies’ long- term issuer ratings:
|
Group At 30 June 2022 |
Group At 30 June 2021 |
Company At 30 June 2022 |
Company At 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
AA+ |
41,333 |
65,159 |
28,313 |
15,063 |
Total |
41,333 |
65,159 |
28,313 |
15,063 |
|
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Trade Receivables |
901 |
594 |
- |
- |
Due from subsidiaries |
- |
- |
- |
84,686 |
Due from affiliates |
75 |
- |
- |
- |
Total |
976 |
594 |
- |
84,686 |
Due to their short term nature, the Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
| Renalytix plc Annual Report and Financial Statements
80
|
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Prepaids |
1,116 |
520 |
284 |
271 |
Deferred Nasdaq Offering Costs |
36 |
- |
16 |
- |
Prepaids and Other Current Assets |
1,152 |
520 |
300 |
271 |
|
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Cash at Bank |
41,333 |
65,159 |
28,313 |
15,063 |
Cash and cash equivalents |
41,333 |
65,159 |
28,313 |
15,063 |
The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.
Group and Company |
Movement |
Total Number of Shares |
Ordinary Shares $’000 |
Share Premium $’000 |
Total $’000 |
15-Mar-18 |
Formation |
50,000 |
50,000 |
66 |
- |
66 |
4-May-18 |
100:1 subdivision |
- |
5,000,000 |
- |
- |
- |
24-Oct-18 |
4:1 subdivision |
- |
20,000,000 |
- |
- |
- |
24-Oct-18 |
Biomarker business acquisition |
15,427,704 |
35,427,704 |
49 |
6,547 |
6,596 |
6-Nov-18 |
Placing & offer (listing on AIM) |
18,388,430 |
53,816,134 |
60 |
27,485 |
27,545 |
At 30 June 2019 |
|
53,816,134 |
175 |
34,032 |
34,207 |
|
29-Jul-19 Placing & Secondary Offering (AIM) |
5,600,000 |
59,416,134 |
17 |
16,597 |
17,210 |
|
15-May-20 Cancellation of Share premium |
- |
59,419,134 |
- |
(50,629) |
- |
|
At 30 June 2020 |
|
59,416,134 |
192 |
- |
192 |
|
17-Jul-20 Placing & Offering (Nasdaq) |
12,613,500 |
72,029,634 |
40 |
76,094 |
76,136 |
|
4-Mar-21 Shares issued under the ESPP |
17,652 |
72,047,286 |
- |
111 |
111 |
|
25-Jun-21 Exercise of Stock Options |
150,000 |
72,197,286 |
1 |
252 |
253 |
|
At 30 June 2021 |
|
72,197,286 |
233 |
76,457 |
76,500 |
|
7-Jul-21 Exercise of Stock Options |
27,500 |
72,224,786 |
- |
46 |
46 |
|
17-Jul-21 Exercise of Stock Options |
5,000 |
72,229,786 |
- |
40 |
40 |
|
31-Aug-21 Shares issued under the ESPP |
10,920 |
72,240,706 |
- |
121 |
121 |
|
1-Nov-21 Exercise of Stock Options |
68,224 |
72,308,930 |
- |
112 |
112 |
|
31-Mar-22 Shares issued under the ESPP |
22,814 |
72,380,014 |
- |
90 |
90 |
|
6-Apr-22 Private Placement |
2,428,688 |
74,760,432 |
8 |
8,578 |
8,586 |
|
At 30 June 2022 |
|
74,760,432 |
241 |
85,444 |
85,685 |
|
|
|
|
|
|
|
|
Ordinary Shares have a par value of £0.0025 each. All issued shares are fully paid.
| Renalytix plc Annual Report and Financial Statements
81
In November 2018, Company established the Renalytix AI plc Share Option Plan (the “Plan”) and a U.S. Sub-Plan and Non-Employee Sub-Plan. The Plan provides for the Company to grant options, restricted share awards and other share-based awards to employees, directors and consultants of the Company. As of June 30, 2021, there were 2,937,005 shares available for future issuance under the Plan.
The Plan is administered by the board of directors. The exercise prices, vesting and other restrictions are determined at their discretion, except that all options granted have exercise prices equal to the fair value of the underlying ordinary shares on the date of the grant and the term of stock option may not be greater than ten years from the grant date.
With respect to the options granted as of June 30, 2022, 2,984,801 vest equally over twelve quarters following the grant date, 1,070,100 options which vest 25% on the one year anniversary and equally over twelve quarters following the one year anniversary and 500,000 which vest 1/12th immediately and the remainder equally over the remaining eleven quarters. If options remain unexercised after the date one day before the tenth anniversary of grant, the options expire. On termination of employment, any options that remain unexercised are either forfeited immediately or after a delayed expiration period, depending on the circumstances of termination. Upon the exercise of awards, new ordinary shares are issued by the Company.
Details of the share options outstanding during the period are as follows:
General employee share option plan |
Average exercise price per share (USD) |
Number of Options |
As at 30 June 2021 |
4.73 |
4,265,958 |
Granted during the year |
10.34 |
555,000 |
Exercised during the year |
1.89 |
(100,724) |
Forfeited during the year |
7.34 |
(165,333) |
Outstanding at 30 June 2022 |
5.34 |
4,554,901 |
Exercisable at 30 June 2022 |
3.72 |
3,368,195 |
Vested and expected to vest at 30 June 2022 |
5.34 |
4,554,901 |
The fair value of each share option granted has been estimated using a Black-Scholes model and is £1.73 - £6.04 ($2.26 - $8.14). The inputs into the model are a weighted average share price of £7.27 ($9.74), exercise price of £7.16 ($9.59), expected volatility of 66.24%, no expected dividend yield, weighted-average term of 6.0 years and weighted-average risk-free interest rate of 1.55%. As of 30 June 2022, none of the granted stock options have been exercised.
The aggregate fair value of the outstanding options is $24,336,546. The Group recognized total expenses of $6,896,721 ($338,625 within R&D expense and $6,558,096 within G&A expense) relating to equity-settled share-based payment transactions during the period to 30 June 2022. The weighted average remaining contractual term of the options is 8.1 years.
|
Group As at 30 June 2022 |
Group As at 30 June 2021 |
Company As at 30 June 2022 |
Company As at 30 June 2021 |
|
$'000 |
$'000 |
$'000 |
$'000 |
Accounts payable |
2,460 |
1,765 |
400 |
623 |
Due to subsidiaries |
- |
- |
4,701 |
- |
Payroll taxes payable |
139 |
638 |
- |
- |
Accrued expenses |
4,682 |
4,249 |
695 |
571 |
|
7,281 |
6,652 |
5,796 |
1,194 |
The carrying amount of the trade and other payables balances denominated in GBP are £37k for the Group and Company (2021 - £4k).
| Renalytix plc Annual Report and Financial Statements
82
In April 2022, the Company issued amortizing senior convertible bonds with a principal amount $21.2 million due in April 2027 (the "Bonds"). The Bonds were issued at 85% par value with total net proceeds of $18.0 million and accrue interest at an annual rate of 5.5%, payable quarterly in arrears, in cash or ADSs valued at the ADS Settlement Price at the option of the Company. The Bonds contain various conversion and redemption features. The initial conversion price for the Convertible Bonds of $8.70 has been set at a 20 per cent. premium to the Reference ADS Price. The Conversion Price may reset down at 12, 24 and 36 months, depending on share price performance and save in limited circumstances, the Bonds have a hard floor in the conversion price of $7.25. Between amortization dates, the Convertible Bond Investor retains the right to advance future amortization payments, provided that (a) there shall be no amortization advancements during the first 12 months, (b) no more than 2 amortization advancements may occur in any 12 month period, and (c) no more than 1 amortization advancement may occur in any 3 month period.
The Convertible Bond Investor is also permitted to defer up to two amortization payments to a subsequent amortization date. The Company retains the option to repay any deferred amortization in cash at 100 per cent. of the nominal amount As of June 20, 2022, the entire principal amount was outstanding. The classification of the liability between non-current and current reflects management’s expected level of amortization payments during the year ended 30 June 2023.
On issuance, the Company elected to account for the Bonds at fair value with qualifying changes in fair value being recognized through the statements of operations until the Bonds are settled. Changes in fair value related to instrument-specific credit risk are recognized through comprehensive loss until the Bonds are settled. The fair value of the bonds is determined using a scenario-based analysis that estimates the fair value based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholders, and therefore falls under level 3 of the fair value hierarchy. Significant assumptions used in the fair value analysis include the volatility rate, risk-free rate, dividend yield and risky yield. The fair value of the Bonds was determined to be $16.9 million on issuance, which is the principal amount of the Bonds. On issuance, total debt issuance costs of $1.2 million were immediately expensed as a component of general and administrative expense in consolidated statement of operations during the year end June 30, 2022. The Company recognized a change in fair value of the Notes related to the instrument-specific credit risk of $0.5 million in the comprehensive loss and a change in fair value related to non-instrument specific credit risk of $4.0 million in the consolidated statement of operations during the year ended June 30, 2022.
In May 2018, the Company secured its cornerstone license agreement with ISMMS for research and clinical study work and intended commercialization by the Company. As part of the collaboration, ISMMS became a shareholder in the Company and has subsequently made equity investments both in the Company’s IPO in November 2018 and the subsequent sale of ordinary shares in July 2019.
In connection with the formation of Kantaro, the Company entered into a five-year Advisory Services Agreement (“Advisory Agreement”) pursuant to which the Company has agreed to provide certain advisory services to Kantaro.
Pursuant to the Kantaro Operating Agreement, Kantaro issued 750 Class A Units to Mount Sinai in exchange for Mount Sinai granting licenses to Kantaro under certain intellectual property rights of Mount Sinai and 250 Class A Units to the Company as the sole consideration for the services to be rendered by the Company under the Advisory Agreement. A portion of the Company’s units are subject to forfeiture if, prior to December 31, 2020, Kantaro terminates the Advisory Agreement as a result of an uncured material breach of the Advisory Agreement or in the event the Company is acquired by a hospital or health system that serves all or any portion of the service areas served by Mount Sinai. The Company determined the fair value of the services at June 30, 2022 to be provided under the Advisory Agreement was $0.1 million. A gain of $0.01 million was recognized within equity in gain (losses) of affiliate the accompanying consolidated statements of operations and comprehensive loss.
In addition to the equity granted at formation, the Company and Mount Sinai each committed to making a loan to Kantaro. Mount Sinai committed to lend an initial amount of $0.3 million and an additional $0.5 million thereafter. The Company committed to lend an initial amount of $83,333 and an additional $0.2 million thereafter. Each loan bears interest at a per annum rate equal to 0.25%, compounded monthly, until repaid, and is repayable from the first amounts that would otherwise constitute cash available for distribution to the members of Kantaro (provided that each loan repayment will be made, 75% to Mount Sinai and 25% to the Company). In the year ended 30 June 2021, the Company loaned Kantaro the full $250,000 however later recorded a reserve of $175,000 based on uncertainty regarding collectability and had a remaining $75,000 note receivable at June 30, 2022.
In June 2020, we and Mount Sinai entered into a registration rights agreement pursuant to which we have granted Mount Sinai the following registration rights:
| Renalytix plc Annual Report and Financial Statements
83
Mount Sinai’s registration rights will terminate at such time as Rule 144, or another similar exception under the Securities Act, is available for the unlimited public sale of all of Mount Sinai’s registrable securities without any volume or manner of sale limitations, subject to specified exceptions.
Additionally, Mount Sinai participated in our April 2022 equity offering and purchased 551,724 ADSs. This purchase was made through the underwriters at the offering price of $7.25 per ADS.
The Group has a contract with Icahn School of Medicine at Mount Sinai which give rise to contingent liabilities:
Mount Sinai Collaboration Agreement
The Group is subject to the following one-off milestone payment obligations:
In addition, royalties of 4-5% are payable to Mount Sinai on net sales of KidneyIntelX™, and 15% or 25% (depending on timing) of income from sublicensing. The Group is also subject to an annual data transfer fee of $50,000.
Joslin Diabetes Center Agreement
The Group has a contract with Joslin Diabetes Center under which the Group is liable for the following costs and payments:
The aforementioned contingencies have not been recognized as of June 30, 2022 as the probability was deemed too remote as of the balance sheet date.
The Directors believe there to be no ultimate controlling party.
In May 2020, the Group and Mount Sinai entered into the Kantaro Operating Agreement in order to form Kantaro Biosciences LLC (“Kantaro”) for the purpose of developing and commercializing laboratory tests for the detection of antibodies against SARS-CoV-2 originally developed by Mount Sinai. In connection with the formation of Kantaro, the Group entered into the Advisory Agreement, pursuant to which the Group has agreed to provide certain advisory services to Kantaro.
Pursuant to the Kantaro Operating Agreement, Kantaro issued 750 Class A Units to Mount Sinai in exchange for Mount Sinai granting licenses to Kantaro under certain intellectual property rights of Mount Sinai and 250 Class A Units to the Group in respect of the services to be rendered by the Group under the Advisory Agreement. A portion of the units are subject to forfeiture if, prior to December 31, 2020, Kantaro terminates the Advisory Agreement as a result of the uncured material breach of the Advisory Agreement or in the event we are acquired by a hospital or health system that serves all or any portion of the service areas served by Mount Sinai. The Group account for the investment in Kantaro using the equity method of accounting as the Group can exert significant influence over, but do not control, Kantaro.
In addition to the equity granted at formation, the Group and Mount Sinai each committed to making a loan to Kantaro.
Mount Sinai committed to lend an initial amount of $250,000 and an additional $500,000 thereafter. The Group committed to lend an initial amount of $83,333 and an additional $166,667 thereafter. Each loan bears interest at a per annum rate equal to 0.25%, compounded monthly, until repaid, and is repayable from the first amounts that would otherwise constitute cash available for distribution to the members of Kantaro (provided that each loan repayment will be made, 75% to Mount Sinai and 25% to us). All services provided by the Group under the Advisory Agreement are subject to the oversight and direction of the board of managers of Kantaro.
Based on sales forecasts, the Company concluded that its equity method investment in Kantaro was impaired due to a shift in focus from COVID antibody testing to promoting vaccination in the United States and European Union. The forecasts indicate there is a prolonged period of time that Kantaro’s fair value is below the carrying value of the investment.
| Renalytix plc Annual Report and Financial Statements
84
Set out below are the associates and joint ventures of the Group as of 30 June 2022 which, in the opinion of the directors, are material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Name of the Entity |
Place of Business/ Country of Incorporation |
% of Ownership Interest |
Nature of Relationship |
Method of Measurement |
Quoted Fair Value |
Carrying Amount |
|||
|
|
2022 |
2021 |
|
|
2022 |
2021 |
2022 |
2021 |
Kantaro Biosciences LLC |
USA |
25% |
25% |
Joint Venture |
Equity Method |
(*) |
(*) |
$9.5 |
- |
Total equity accounted investments (*) - Private Entity - No quoted price available |
- |
- |
|
- |
- |
- |
- |
- |
- |
|
As at 30 June 2022 |
As at 30 June 2021 |
Commitments - Joint Ventures |
- |
- |
Commitment to provide additional loan to Kantaro |
- |
- |
Total |
- |
- |
| Renalytix plc Annual Report and Financial Statements
85
Additional Financial Information
RECONCILIATION OF IFRS TO US GAAP
Since Renalytix’s initial listing on Nasdaq, the Company has followed accounting principles generally accepted in the United States of America (‘US GAAP’), both for internal as well as external purposes. The information below is unaudited and does not form part of the statutory accounts.
Renalytix Form 20-F, which is based on US GAAP, contains differences from its Annual Report, which is based on IFRS.
The Form 20-F and Annual Report are available on the Company’s website (www.renalytix.com). In order to help readers to understand the difference between the Group’s two sets of financial statements, Renalytix has provided, on a voluntary basis, a reconciliation from IFRS to U.S. GAAP as follows:
BALANCE SHEET
(in thousands except share and per share amounts)
|
GAAP As at 30 June 2022 |
IFRS As at 30 June 2022 |
GAAP vs IFRS Difference |
|
Assets |
$'000 |
$'000 |
$'000 |
|
Cash |
41,333 |
41,333 |
- |
|
Accounts receivable |
901 |
901 |
- |
|
Prepaid expenses and other current assets |
2,445 |
2,453 |
(8) |
(a) |
Note receivable – Kantaro |
75 |
75 |
- |
|
Property, plant and equipment, net |
2,558 |
1,368 |
1,190 |
(b) |
Intangibles, net |
- |
14,020 |
(14,020) |
(c) |
Investment in Verici |
2,744 |
2,744 |
- |
|
Investment in Kantaro |
9 |
9 |
- |
|
Right of use asset |
- |
355 |
(355) |
(d) |
Total assets |
50,065 |
63,258 |
(13,193) |
|
Liabilities and stockholders’ equity |
|
|
|
|
Current Liabilities: |
|
|
|
|
Note payable – current |
4,660 |
4,660 |
- |
|
Accounts payable |
2,459 |
7,281 |
4,822 |
(e) |
Accrued expenses and other current liabilities |
3,060 |
- |
(3,060) |
(e) |
Accrued expenses – related party |
1,496 |
- |
(1,496) |
(e) |
Current lease liability |
- |
163 |
163 |
(d) |
Payable to Kantaro - current |
55 |
55 |
- |
|
Deferred Revenue |
46 |
46 |
- |
|
Note payable – noncurrent |
7,682 |
7,682 |
- |
|
Noncurrent lease liabilities |
- |
202 |
202 |
(d) |
Total Liabilities |
19,458 |
20,089 |
631 |
|
|
|
|
|
|
86
| Renalytix plc Annual Report and Financial Statements
|
GAAP As at 30 June 2022 |
IFRS As at 30 June 2022 |
GAAP vs IFRS Difference |
|
Stockholders’ (deficit) equity: |
$'000 |
$'000 |
$'000 |
|
Ordinary shares, |
228 |
241 |
13 |
(f) |
Additional paid in capital |
164,012 |
97,398 |
(66,614) |
(g) |
Accumulated other comprehensive (loss) income |
(915) |
(1,509) |
(594) |
(h) |
Accumulated deficit |
(132,718) |
(52,961) |
79,757 |
(i) |
Total stockholders' (deficit) equity |
30,607 |
43,169 |
12,562 |
|
Total liabilities and stockholders’ (deficit) equity |
50,065 |
63,258 |
13,193 |
|
87
| Renalytix plc Annual Report and Financial Statements
RECONCILIATION OF NET LOSS
($ thousands)
|
Year ended June 2022 |
|
Net loss in accordance with IFRS |
(56,732) |
|
Deferred tax assets |
7,104 |
(j) |
Stock compensation expense |
2,389 |
(k) |
Amortization of intangibles |
1,981 |
(l) |
Other adjustments |
(18) |
(m) |
Net loss in accordance with US GAAP |
(45,276) |
|
88
| Renalytix plc Annual Report and Financial Statements
Exhibit 99.2
10 November 2022
Dear Shareholder,
Renalytix plc – Annual Report 2022 and Notice of 2022 Annual General Meeting
Please accept this letter as notification that Renalytix plc’s (the “Company”) Annual Report for the year ended 30 June 2022 and the Notice of the 2022 Annual General Meeting have now been published on the Company’s website at https://investors.renalytix.com/news-and-events/documents-and-presentations and are enclosed for shareholders who elected for a hard copy of the Report and Notice of Annual General Meeting.
Annual General Meeting attendance
The Annual General Meeting will be held on 19 December 2022 at 11 a.m. (GMT) (the “Annual General Meeting”). The Annual General Meeting will be held in person at 6 Stratton Street Mayfair, London W1J 8LD.
This letter does not contain the full details of the resolutions to be tabled at the Annual General Meeting but these are contained in the Notice of Annual General Meeting and should be read before you complete your vote. The Directors consider that the proposed resolutions contained in the Notice of Annual General Meeting are in the best interests of the Company and shareholders as a whole and unanimously recommend that you vote in favour of them, as they intend to do in respect of their own shareholdings.
Proxy voting
You will not receive a hard copy form of proxy for the Annual General Meeting in the post. Instead, you will be able to vote electronically using the link www.signalshares.com. You will need to log into your Signal Shares account, or register if you have not previously done so. To register you will need your Investor Code, this is detailed on your share certificate or available from our Registrar, Link Group.
You may request a hard copy form of proxy directly from Link Group at shareholderenquiries@linkgroup.co.uk or on +44 (0)371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30 (GMT), Monday to Friday excluding public holidays in England and Wales. A proxy may also be appointed by CREST members, by using the CREST electronic proxy appointment service, further details of which are set out in the Notice.
Proxy votes and electronic votes must be received by no later than 11 a.m. (GMT) on 15 December 2022.
Thank you for your continued support as a shareholder of Renalytix plc.
Yours sincerely,
Salim Hamir
Company Secretary
Mobile: +44 7448960970
Email: shamir@renalytix.com
Finsgate, 5-7 Cranwood Street, London, EC1V 9EE
Exhibit 99.3
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you should immediately consult your stockbroker, bank manager, solicitor, accountant, or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000, if you are resident in the United Kingdom, or if not, another appropriately authorised independent adviser.
If you have sold or otherwise transferred all of your holdings of Ordinary Shares, you should immediately forward this document and the accompanying Annual Report as soon as possible to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold or otherwise transferred some of your Ordinary Shares, you should contact the bank, stockbroker or other agent through whom the sale or transfer was effected. However, such documents should not be forwarded or transmitted in or into any jurisdiction in which such act would constitute a violation of the relevant laws of such jurisdiction.
The Notice of Annual General Meeting to be held at 11 a.m (GMT) on 19 December 2022 is set out at the end of this document. The Annual General Meeting will be held as an in-person meeting at 6 Stratton Street Mayfair, London W1J 8LD.
You will be able to submit a proxy electronically using the website www.signalshares.com. Further details in respect of electronic submission of proxy votes are set out in the Notes to the Notice of Annual General Meeting on page 12. Shareholders of the Company may request a hard copy form of proxy directly from the Company’s registrars, Link Group at shareholderenquiries@linkgroup.co.uk or on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. A proxy may also be appointed by CREST members, by using the CREST electronic proxy appointment service.
RENALYTIX PLC
(incorporated and registered in England and Wales under the Companies Act 2006 with company number 11257655)
Notice of Annual General Meeting
to be held at 6 Stratton Street Mayfair, London W1J 8LD
on 19 December 2022
No person should construe the contents of this document as legal, tax or financial advice and recipients of this document should consult their own advisers as to the matters described in this document.
This document should be read as a whole. Your attention is drawn to the letter from Christopher Mills, the Non-Executive Chairman of the Company, on pages 4 to 8 of this document in which the Directors recommend that you vote in favour of each of the Resolutions to be proposed at the Annual General Meeting referred to below.
Cautionary note regarding forward-looking statements:
This document contains statements about the Company that are or may be “forward-looking statements”. All statements, other than statements of historical facts, included in this document may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words “targets”, “plans”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “should”, “anticipates”, “estimates”, “projects” or words or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and have not been reviewed by the auditors of the Company. These factors are discussed in the “Risk Factors” section of filings that the Company makes with the SEC, including its Annual Report on Form 20-F for the year ended 30 June 2022. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules for Companies, the UK Market Abuse Regulation, and/or the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules), the Company does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to the Company or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this document are based on information available to the Directors of the Company at the date of this document, unless some other time is specified in relation to them, and the posting or receipt of this document shall not give rise to any implication that there has been no change in the facts set forth herein since such date.
Notice to overseas persons
The distribution of this document in certain jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
1
CONTENTS
DEFINITIONS |
3 |
LETTER FROM THE CHAIRMAN |
4 |
NOTICE OF ANNUAL GENERAL MEETING |
9 |
CONTACT DETAILS |
15 |
2
DEFINITIONS
The following words and expressions apply throughout this document and the Notice of Annual General Meeting, unless the context requires otherwise:
“Act” |
the Companies Act 2006 (as amended); |
“AGM” or “Annual General Meeting” |
the Annual General Meeting of the Company to be held at 11 a.m. (GMT) on 19 December 2022, notice of which is set out on pages 9 to 11 of this document; |
“AIM” |
AIM, a market operated by the London Stock Exchange; |
“AIM Rules for Companies” |
the rules and guidance for companies whose shares are admitted to trading on AIM entitled “AIM Rules for Companies” published by the London Stock Exchange, as amended from time to time; |
“Annual Report” |
the reports and financial statements for the Company for the year ended 30 June 2022; |
“Articles” |
the articles of the association of the Company in force at the date of this document; |
“Company” or “Renalytix” |
Renalytix plc, a company registered in England and Wales with company number 11257655 and registered office at Finsgate, 5-7 Cranwood Street, London, EC1V 9EE, United Kingdom; |
“Convertible Bonds” |
the US$21.2 million in principal of amortising senior convertible bonds due April 2027 issued to a fund advised by Heights Capital Ireland LLC in April 2022; |
“GMT” |
Greenwich Mean Time; |
“Directors” or “Board” |
the directors of the Company as at the date of this document, whose names are set out on page 4 of this document, and a “Director” means any one of them; |
“London Stock Exchange” |
London Stock Exchange plc; |
“Nasdaq” |
The Nasdaq Global Market; |
“Notice of Annual General Meeting” |
the notice convening the Annual General Meeting as set out set out on pages 9 to 11 of this document; |
“Ordinary Shares” |
the ordinary shares of £0.0025 each in the capital of the Company; |
“Resolutions” |
the resolutions to be proposed at the Annual General Meeting as set out in the Notice of Annual General Meeting; |
“SEC” |
the U.S. Securities and Exchange Commission; |
“Shareholders” |
the holders of Ordinary Shares; |
“Sterling” or “£” |
pounds sterling, the basic unit of currency in the UK; and |
“UK” or “United Kingdom” |
the United Kingdom of Great Britain and Northern Ireland. |
3
LETTER FROM THE CHAIRMAN
RENALYTIX PLC
(incorporated and registered in England and Wales under the Act with registered number 11257655)
Directors: |
|
Registered Office: |
Christopher Mills |
(Non-Executive Chairman) |
Finsgate 5-7 Cranwood Street London EC1V 9EE United Kingdom |
James McCullough |
(Chief Executive Officer) |
|
Fergus Fleming |
(Chief Technical Officer) |
|
Erik Lium, Ph.D. |
(Non-Executive Director) |
|
Daniel Levangie |
(Non-Executive Director) |
|
Chirag R. Parikh, Ph.D, M.D. |
(Non-Executive Director) |
|
Timothy Scannell |
(Non-Executive Director) |
|
|
|
10 November 2022
Dear Shareholder,
Notice of 2022 Annual General Meeting
1. Introduction
I am pleased to invite you to our 2022 Annual General Meeting which will be held on 19 December 2022 at 11 a.m. (GMT). The Annual General Meeting will be held as an in-person meeting at 6 Stratton Street Mayfair, London W1J 8LD.
In addition to highlighting the usual business to be transacted at the Annual General Meeting, this document explains the background to the Resolutions which will be considered at the Annual General Meeting, why the Directors consider the Resolutions to be in the best interests of Shareholders as a whole and why they recommend that you vote in favour of the Resolutions.
2. Action to be taken in respect of the Annual General Meeting
You will not receive a hard copy form of proxy with this document. Instead, you will be able to submit a proxy electronically using the link www.signalshares.com. You will need to log into your Signal Shares account or register if you have not previously done so. To register you will need your Investor Code which is detailed on your share certificate or available from the Company’s registrar, Link Group. Proxies submitted electronically must be submitted by no later than 11 a.m. (GMT) on 15 December 2022.
You may request a hard copy form of proxy directly from the Company’s registrar, Link Group, shareholderenquiries@linkgroup.co.uk or on +44(0)371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30 (GMT), Monday to Friday excluding public holidays in England and Wales. Hard copy forms of proxy must be received by no later than 11 a.m. (GMT) on 15 December 2022.
A proxy may also be appointed by CREST members, by using the CREST electronic proxy appointment service, further details of which are set out in the notes to the Notice of Annual General Meeting. Proxies submitted via CREST (under ID RA10) must be sent as soon as possible and in any event so as to be received by no later than 11 a.m. (GMT) on 15 December 2022 in order to be valid.
The completion and return of a form of proxy, submitting a proxy instruction electronically or submitting a CREST proxy instruction will not preclude Shareholders from attending and/or voting at the Annual General Meeting should they so wish.
4
3. How to attend and speak at the meeting
The Annual General Meeting will be held at 6 Stratton Street Mayfair, London W1J 8LD. The Annual General Meeting will commence at 11 a.m. (GMT) on 19 December 2022. Please be prepared to provide evidence of your shareholding and/or identity.
Questions on the day will be taken from Shareholders attending the Annual General Meeting who raise their hand. We would politely remind you that the Directors will not answer questions relating to the individual rights of Shareholders at the Annual General Meeting itself, but if you wish to submit such a question by email, we will respond to the extent we are able.
Shareholders who wish to vote are encouraged to submit their votes by proxy as soon as possible and, in any event, no later than the deadlines set out in paragraph 2 above. The Board recommends that Shareholders appoint the Chairman of the meeting as their proxy.
In the event that our Annual General Meeting arrangements change, the Company will issue a further communication via a regulatory information service. As such, we strongly recommend Shareholders monitor such communications, which can also be found on our website at https://investors.renalytix.com/news-and-events/news-releases/general.
4. Resolutions
The business to be conducted at the Annual General Meeting consists of consideration of the following Resolutions. Resolutions 1 to 10 are proposed as ordinary resolutions. This means that for each of those resolutions to be passed, more than half of the votes cast must be in favour of the resolution. Resolutions 11 and 12 are proposed as special resolutions. This means that for each of these resolutions to be passed, at least three-quarters of the votes cast must be in favour of the resolution.
Resolution 1 – Annual Report and Accounts
The Directors are required by the Act to lay before the Company in general meeting copies of the directors’ reports, the independent auditor’s report and the audited financial statements of the Company in respect of each financial year. For the financial year ended 30 June 2022, these are all contained in the Annual Report.
In accordance with best practice, the Company proposes an ordinary resolution to receive and adopt the Annual Report, a copy of which may be found at: https://investors.renalytix.com/financials-and-filings/annual-and-half-year-reports.
Resolution 2 – Approval of the Directors’ Remuneration Report
In accordance with section 439 of the Act, Shareholders are also requested to approve the Directors’ Remuneration Report. The Directors’ Remuneration Report is set out on pages 32 to 47 of the Annual Report. The vote is advisory only and does not affect the actual remuneration paid to an individual Director.
Resolutions 3, 4, 5, 6 and 7 – Re-appointment of a Director
Article 83.1 of the Articles requires that at each annual general meeting any Director who has been appointed by the Board since the last annual general meeting, or who held office at the time of the two preceding annual general meetings and who did not retire at either of them, or who has held office (other than a Director holding an executive position) for a continuous period of nine years or more at the date of such annual general meeting, shall retire from office and may offer himself for re-appointment by the members.
On 30 March 2022, the Company announced that Timothy Scannell had been appointed by the Board as a non-executive Director. In accordance with the Articles, Mr. Scannell may only be appointed by the Board until the annual general meeting next following his appointment, at which he must retire but is eligible to stand for re-appointment. A biography of Mr. Scannell is contained in the announcement of his appointment available from the Company’s Investor Relations website
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(https://investors.renalytix.com/news-releases/news-release-details/timothy-scannell-appointed-board). The Board believes that Mr. Scannell is an accomplished leader in healthcare innovation and with 30 years of experience in medical technology will bring a wealth of experience to the Board and therefore considers it entirely appropriate for him to seek re-appointment at the Annual General Meeting.
In addition to Timothy Scannell, James McCullough, Fergus Fleming, Erik Lium and I will retire from the Board as required under our Articles and offer ourselves for re-appointment.
James McCullough has served as our co-founder and Chief Executive Officer since our inception. Mr. McCullough has leadership experience building emerging technology companies in both the public and private sectors with specific expertise in the life-sciences industry. James was most recently Chief Executive Officer of Exosome Diagnostics, a venture-backed personalized medicine company developing non-invasive liquid biopsy diagnostics in cancer, which was recently acquired by Bio-Techne Corporation. James is also a managing partner of Renwick Capital, LLC, a management consulting firm specializing in assisting emerging healthcare technology companies with strategic planning and business execution, and was a co-founder of PAIGE.AI, a computational pathology spin-out from the Memorial Sloan Kettering Cancer Center. James received his B.A. from Boston University and an M.B.A. from Columbia Business School. James is currently Chairman of BalletNext, a performing arts company in park city Utah. The Board considers it entirely appropriate for him to seek re-appointment at the Annual General Meeting.
Fergus Fleming has served as Renalytix’s Chief Technical Officer since its inception. Fergus has over 25 years’ experience in the life sciences sector, including leadership positions with Baxter Healthcare, Boston Scientific, Trinity Biotech plc, and EKF Diagnostics. Fergus has extensive experience in the design and manufacture of interventional medical devices, digital health solutions, in vitro diagnostics instruments and reagents, and electromechanical devices. He has extensive experience managing global projects, including clinical research collaborations, product development, acquisitions, and manufacturing site transfers. The Board considers it entirely appropriate for him to seek re-appointment at the Annual General Meeting.
Erik Lium, Ph.D. has served as a member of the Board since November 2018. Dr. Lium is the executive vice president of Mount Sinai Innovation Partners and is responsible for advancing Mount Sinai’s research, instruction, and public service missions through strategic research partnerships with industry, the management, transfer and commercialisation of technologies, and fostering the development of start- ups and joint ventures to advance promising early-stage technologies. Dr. Lium also serves as a director of Amathus Therapeutics and as a member of the Investment Review Committee for the Accelerate NY Seed Fund. Prior to joining Mount Sinai, Dr. Lium served as the assistant vice chancellor of Innovation, Technology & Alliances at the University of California, San Francisco (UCSF), and the UCSF Principal Investigator for the Bay area National Science Foundation I-Corps node. He held previous positions at UCSF, including assistant vice chancellor of Research and director of Industry Contracts, and director of Business Development for the Diabetes Center & Immune Tolerance Network. Dr. Lium served as president of LabVelocity Inc., an Information Services Company focused on accelerating research and development in the life sciences prior to its acquisition in 2004. He pursued post-doctoral research at UCSF, and earned a PhD with honours from the Integrated Program in Cellular, Molecular and Biophysical Studies at Columbia University. Dr. Lium holds a BS in Biology from Gonzaga University. The Board considers it entirely appropriate for him to seek re-appointment at the Annual General Meeting.
Christopher Mills has served as a member of the Renalytix Board since its inception. Christopher founded Harwood Capital Management in 2011, a successor to its former parent company, J.O. Hambro Capital Management, which he co-founded in 1993. He is Chief Executive and Investment
Manager of North Atlantic Smaller Companies Investment Trust plc and Chief Investment Officer of Harwood Capital LLP. He is a Non-executive Director of a number of companies, including EKF Diagnostics. The Board considers it entirely appropriate for him to seek re-appointment at the Annual General Meeting.
Resolutions 3, 4, 5, 6 and 7 are proposed as ordinary resolutions to re-appoint myself, James McCullough, Fergus Fleming, Erik Lium and Timothy Scannell as Directors.
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Resolutions 8 and 9 – Appointment and remuneration of the auditor
The Company is required to appoint an auditor at each general meeting at which accounts are laid before the members, to hold office until the conclusion of the next such meeting. Resolution 8 is an ordinary resolution to re-appoint Messrs PKF Littlejohn LLP as the Company’s auditor to hold office until the conclusion of the next annual general meeting at which accounts are laid.
Resolution 9 is an ordinary resolution to authorise the Directors to determine the auditors’ remuneration.
Resolutions 10 and 11 – Authority to allot shares and disapplication of pre-emption rights
The Directors may only allot shares or grant rights to subscribe for or convert any security into shares (other than pursuant to an employees’ share scheme as defined in the Act) if authorised to do so by Shareholders. The Directors also require additional authority from Shareholders to allot equity securities (as defined in the Act) where they propose to do so for cash and otherwise than to existing Shareholders pro rata to their holdings. The authorities granted at the annual general meeting on 17 December 2021 are due to expire at the Annual General Meeting. Resolutions 10 and 11, if passed, will continue to give the Directors flexibility to act in the best interests of the Shareholders, where the opportunity arises, by issuing new shares.
Resolution 10 will be proposed as an ordinary resolution to grant a new authority to allot new shares or grant rights to subscribe for or convert any security into shares up to an aggregate nominal value of £61,785.77 representing approximately 33% of the Company’s issued ordinary share capital, and a further authority to allot an additional approximately 33% of the Company’s issued share capital provided that such allotment is reserved for rights issues in accordance with the Investment Association Guidelines.
Resolution 11 will be proposed as a special resolution to allot equity securities for cash and/or sell Ordinary Shares held by the Company as treasury shares otherwise than to existing Shareholders pro rata to their holdings. Other than in connection with a pre-emptive offer, this authority will be limited to shares of a maximum aggregate nominal value of £46,807.40, being approximately 25% of the issued ordinary share capital.
These authorities, if given, will expire (unless previously renewed, revoked or varied) at the earlier of the conclusion of the next annual general meeting of the Company to be held in 2023 or on 19 March 2024, being 15 months after the relevant resolution is passed.
The Directors consider it important that they have this authority to provide some flexibility in relation to the issue of shares on a non-pre-emptive basis.
The Directors appreciate that this is a larger pre-emption disapplication than has been sought in prior years. However, the Board believes that it is important for the Directors to have flexibility to raise funds through the issue of new equity as required to finance the Company’s growth plans and working capital requirements, including to fund required amortisation and interest payments on the Convertible Bonds should the Company elect to make such payments in cash as permitted under the terms of the Convertible Bonds. In addition, the Company may also need to utilise this pre-emption disapplication to settle amortisation and/or interest payments on the Convertible Bonds in American Depositary Shares representing Ordinary Shares.
Resolution 12 – Authority to purchase shares
Resolution 12, which will be proposed as a special resolution, seeks authority to enable the Company to purchase its Ordinary Shares on AIM during the period until the next annual general meeting of the Company or 31 December 2023, if earlier, for up to 7,489,184 ordinary shares, representing approximately 10% of the issued share capital of the Company. This authority would only allow for purchases of Ordinary Shares on AIM and would not allow for purchases of American Depositary Shares representing Ordinary Shares on Nasdaq.
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The price payable (excluding expenses) shall not be more than the higher of (i) 105% of the average of the middle market quotations as derived from the AIM section of the Daily Official List of the London Stock Exchange plc for the Ordinary Shares for the five business days before the purchase is made and (ii) the higher of the price quoted for the last independent trade of, and the highest current independent bid for, any number of the Ordinary Shares as derived from the London Stock Exchange trading system. The price payable shall not be less than £0.0025 per share, being the nominal value of the Ordinary Shares.
In certain circumstances, it may be advantageous for the Company to purchase its own shares for either cancellation or to be held as treasury shares available for sale and this resolution seeks authority to do this.
This power will only be used if the Directors consider that to do so would promote the success of the Company and be in the best interests of the Company and its Shareholders as a whole. The Company would, within the guidelines set from time to time by the Board, make either a single purchase or a series of purchases, when market conditions are suitable, with the aim of maximising the benefits to Shareholders. The Board considers that it will be most advantageous to Shareholders for the Company to be able to make such purchases as and when it considers market conditions to be favourable and therefore does not propose to set a timetable for making any such purchases.
Under the Act, the Company is allowed to hold any Ordinary Shares purchased in the market in treasury rather than cancelling them. This gives the Company the ability to sell treasury shares quickly and cost-effectively and would provide the Company with additional flexibility in the management of its capital base. The Directors will decide at the time of any purchase which option to pursue. Shares held in treasury have their voting and dividend rights suspended. The Directors will have regard to any guidelines issued by investor groups as at the time of any such purchase with respect to the holding or resale of treasury shares.
As at 7 November 2022 (being the last practicable date prior to the publication of this Notice of Annual General Meeting) options to subscribe for a total of 4,717,701 ordinary shares were outstanding under the Company’s equity incentive schemes, representing approximately 6.3% of the issued share capital of the Company at that date and approximately 6.7% of the issued share capital of the Company if the authority sought by this resolution were to be exercised in full.
5. Directors’ recommendation and voting intentions
The Directors consider the Resolutions to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the Annual General Meeting, as they intend to do in respect of their own beneficial holdings amounting, in aggregate, to 28,198,347 Ordinary Shares, representing approximately 37.65 per cent. of the issued capital of the Company as at 9 November 2022, the latest practicable date prior to the publication of this document.
Yours faithfully,
Christopher Mills
Non-Executive Chairman
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NOTICE OF ANNUAL GENERAL MEETING
RENALYTIX PLC
(incorporated and registered in England and Wales under the Companies Act 2006 with registered number 11257655)
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Renalytix plc (the “Company”) will be held at 11 a.m. (GMT) on 19 December 2022 at 6 Stratton Street Mayfair, London W1J 8LD to consider, and if thought fit, pass the following resolutions of which Resolutions 1 to 10 will be proposed as ordinary resolutions and Resolutions 11 and 12 as special resolutions.
ORDINARY RESOLUTIONS
1. To receive and adopt the accounts for the year ended 30 June 2022 together with the reports of the Directors and the auditors thereon (the “2022 Annual Report and Accounts”).
2. To approve the Directors’ Remuneration Report set out on pages 32 to 47 (inclusive) of the 2022 Annual Report and Accounts.
3. To re-appoint Christopher Mills as a Director of the Company who retires by rotation in accordance with Article 83.1 of the Company’s articles of association and, being eligible, is offering himself for re-appointment.
4. To re-appoint James McCullough as a Director of the Company who retires by rotation in accordance with Article 83.1 of the Company’s articles of association and, being eligible, is offering himself for re-appointment.
5. To re-appoint Fergus Fleming as a Director of the Company who retires by rotation in accordance with Article 83.1 of the Company’s articles of association and, being eligible, is offering himself for re-appointment.
6. To re-appoint Erik Lium as a Director of the Company who retires by rotation in accordance with Article 83.1 of the Company’s articles of association and, being eligible, is offering himself for re-appointment.
7. To re-appoint Timothy Scannell as a Director of the Company who, having been appointed since the last annual general meeting, is retiring in accordance with Article 83.1 of the Company’s articles of association and, being eligible, is offering himself for re-appointment.
8. To re-appoint Messrs PKF Littlejohn LLP as auditors to act as such until the conclusion of the next annual general meeting of the Company at which the requirements of section 437 of the Companies Act 2006 (the “Act”) are complied with.
9. To authorise the Directors of the Company to determine the auditors’ remuneration.
10. That in substitution for any existing such authorities (but without prejudice to any allotment of Relevant Securities (as defined in (i) below) made or agreed to be made pursuant to such authorities), the Directors be and they are hereby generally and unconditionally authorised pursuant to section 551 of the Act to exercise all the powers of the Company:
(i) to allot shares and grant rights to subscribe for, or convert any security into, shares of the Company (all of which transactions are hereafter referred to as an allotment of “Relevant Securities”) up to an aggregate nominal amount of £61,785.77 (representing approximately 33% of the Company’s issued share capital); and
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(ii) to allot further equity securities (within the meaning of Section 560(1) of the Act) up to an aggregate nominal amount of £61,785.77 (representing approximately 33% of the Company’s issued share capital) in connection with a rights issue in favour of shareholders where the equity securities respectively attributable to the interest of the shareholders are proportionate (as nearly as practicable) to the respective numbers of ordinary shares held by them, which satisfies the conditions and may be subject to all or any of the exclusions specified in paragraph (i) of Resolution 11.
The authorities conferred by this resolution shall expire (unless previously revoked or varied by the Company in general meeting) at the conclusion of the next annual general meeting of the Company or the close of business on 19 March 2024, whichever is the earlier, save that the Company may, before such expiry, revocation or variation, make an offer or agreement which would or might require Relevant Securities to be allotted after such expiry and the Directors may allot Relevant Securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired or been revoked or varied.
SPECIAL RESOLUTIONS
11. That, subject to and conditional upon the passing of Resolution 10 above, the Directors be given power in accordance with sections 570 and 573 of the Act to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the authority conferred by Resolution 10 above and/or sell treasury shares as if section 561(1) of the Act did not apply to any such allotment or sale provided that this power shall be limited to:
(i) the allotment of equity securities in connection with an offer or issue of equity securities (but in the case of the authority granted under paragraph (ii) of Resolution 10 by way of a rights issue only) to or in favour of (a) holders of ordinary shares in proportion (as nearly as may be practicable) to their existing holdings and (b) holders of other equity securities if this is required by the rights of those securities or, if the Directors consider it necessary, as permitted by the rights of those securities, and so that the Directors may make such exclusions or other arrangements as they consider expedient or necessary in relation to fractional entitlements, record dates, shares represented by depositary receipts, the use of more than one currency for making payments in respect of such offer, treasury shares, legal or practical problems under the laws in any territory or the requirements of any relevant regulatory body or stock exchange or any other matter; and
(ii) the allotment of equity securities for cash pursuant to the authority granted under paragraph (i) of Resolution 10 (otherwise than under paragraph (i) of this Resolution 11) up to a maximum aggregate nominal amount of £46,807.40, which represents approximately 25% of the Company’s issued share capital.
The power conferred by this resolution shall expire (unless previously revoked or varied by the Company in general meeting) at the conclusion of the next annual general meeting of the Company or the close of business on 19 March 2024, whichever is the earlier, save that the Company may before such expiry, revocation or variation make an offer or agreement which would or might require equity securities to be allotted or treasury shares to be sold after such expiry, revocation or variation and the Directors may allot equity securities and sell treasury shares pursuant to such offer or agreement as if the power hereby conferred had not expired or been revoked or varied. This power is in substitution for any and all powers previously conferred on the Directors under Section 570 of the Act, but without prejudice to any allotment of equity securities made or agreed to be made pursuant to such powers.
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12. That the Company be and is generally and unconditionally authorised for the purposes of section 701(1) of the Act to make one or more market purchases (within the meaning of section 693(4) of the Act) on the London Stock Exchange of ordinary shares of £0.0025 each in the capital of the Company (“Ordinary Shares”) on such terms and in such manner as the Directors may from time to time decide provided that:
(i) the maximum aggregate number of Ordinary Shares authorised to be purchased is 7,489,184 (representing approximately 10% of the Company’s issued ordinary share capital);
(ii) the minimum price (excluding expenses) which may be paid for an Ordinary Share is £0.0025 per share;
(iii) the maximum price (excluding expenses) which may be paid for an Ordinary Share is the higher of (a) 105% of the average of the middle market quotations for an Ordinary Share as derived from the AIM section of the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which the Ordinary Share is purchased and (b) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out;
(iv) unless previously varied or revoked, the authority conferred shall expire at the conclusion of the Company’s next annual general meeting or the close of business on 31 December 2023, if earlier; and
(v) the Company may make a contract or contracts to purchase Ordinary Shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority and may make a purchase of Ordinary Shares in pursuance of any such contract or contracts.
Registered Office |
BY ORDER OF THE BOARD |
Finsgate 5-7 Cranwood Street London EC1V 9EE United Kingdom |
|
|
Salim Hamir |
10 November 2022 |
Company Secretary |
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SHAREHOLDER NOTES
Arrangements for the Annual General Meeting
The Annual General Meeting will be held on 19 December 2022 at 11 a.m. (GMT) at 6 Stratton Street Mayfair, London W1J 8LD.
We would politely remind you that the Directors will not answer questions relating to the individual rights of Shareholders at the Annual General Meeting itself, but if you wish to submit such a question by email, we will respond to the extent we are able.
Shareholders who wish to vote are encouraged to submit their votes by proxy as soon as possible and, in any event, no later than the deadlines set out in paragraphs 3, 4, 5 and 8 below. The Board recommends that Shareholders appoint the Chairman of the meeting as their proxy.
In the event that our Annual General Meeting arrangements change, the Company will make a further communication via a regulatory information service. As such, we strongly recommend Shareholders monitor such communications, which can also be found on our website at https://investors.renalytix.com/news-and-events/news-releases/general.
1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 and article 49.4 of the Articles, the Company specifies that only those members registered on the Company’s register of members at the close of business on 15 December 2022 shall be entitled to attend and vote at the Annual General Meeting or adjourned meeting (as applicable) in respect of the number of Ordinary Shares registered in their name at the time. Changes to the register of members after that time will be disregarded in determining the rights of any person to attend or vote at the Annual General Meeting.
2. If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak, and vote at the Annual General Meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the hard copy proxy form (if requested). A proxy does not need to be a member of the Company, but must attend the Annual General Meeting to represent you. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. To appoint more than one proxy, please contact the Company’s registrars at the address set out in note 5 below. The Board recommends that Shareholders appoint the Chairman of the meeting as their proxy.
3. You will not receive a hard copy form of proxy with this document. Instead, you will be able to submit your proxy electronically using the link www.signalshares.com. You will need to log into your Signal Shares account, or register if you have not previously done so. To register you will need your Investor Code, which is detailed on your share certificate or available from our Registrar, Link Group. Proxies submitted electronically must be submitted by no later than 11 a.m. (GMT) on 15 December 2022.
4. You can also vote electronically:
by downloading the new shareholder app, LinkVote+, on the Apple App Store or Google Play and following the instructions
if you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 11 a.m. on 15 December 2022 in order to be considered valid or, if the meeting is adjourned, by the time which is 48 hours before the time of the adjourned meeting. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy.
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5. You may request a hard copy form of proxy directly from the Registrars, Link Group at shareholderenquiries@linkgroup.co.uk or on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30 (GMT), Monday to Friday excluding public holidays in England and Wales. To be valid, any hard copy form of proxy and power of attorney or other authority, if any, under which it is signed or a notarially certified or office copy of such power or authority or other instrument appointing a proxy must be completed and returned to Link Group, PXS1, Central Square, 29 Wellington Street, Leeds LS1 4DL no later than 11 a.m. (GMT) on 15 December 2022.
6. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service should do so in accordance with the procedures set out below.
7. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual (available from www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
8. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID RA10) by 11 a.m. (GMT) on 15 December 2022. For this purpose, the time of receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST application host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
9. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
10. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior).
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11. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, please contact Link Group at the contact details noted in note 5 above. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
12. In order to revoke a proxy instruction you will need to inform the Company by contacting Link Group on 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. The revocation notice must be received by Link Group no later than 11 a.m.(GMT) on 15 December 2022. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid.
13. Appointment of a proxy does not preclude you from attending the Annual General Meeting and voting in person.
14. Any corporation which is a member of the Company can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same Ordinary Shares.
15. As at 5:00 p.m. (GMT) on the day immediately prior to the date of posting of this Notice of Annual General Meeting, the Company’s issued share capital comprised 74,891,844 Ordinary Shares. Each Ordinary Share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 5:00 p.m. (GMT) on the day immediately prior to the date of posting of this Notice of Annual General Meeting is 74,891,844.
16. You may not use any electronic address provided either in this Notice of Annual General Meeting or any related documents (including any hard copy form of proxy) to communicate with the Company for any purposes other than those expressly stated.
17. Any member attending the Annual General Meeting has the right to ask questions.
18. In accordance with the Articles, voting on all resolutions at the Annual General Meeting will be on a poll rather than a show of hands.
19. A copy of this Notice, and other information required by Section 311A of the Act, can be found on the Company’s website at www.renalytix.com.
20. Under section 527 of the Act, shareholders meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to:
(i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the AGM; or
(ii) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Act.
The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under section 527 of the Act, it must forward
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the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the AGM includes any statement that the Company has been required under section 527 of the Act to publish on a website.
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CONTACT DETAILS
Renalytix plc
Finsgate
5-7 Cranwood Street
London
EC1V 9EE
United Kingdom
www.renalytix.com
The Registrar
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Lawyers
Cooley (UK) LLP
22 Bishopsgate
London
EC2N 4BQ
United Kingdom
If you are an ordinary Shareholder, please contact Link Group at www.signalshares.com if you would like to change your election on how you receive Shareholder documents in the future.
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Exhibit 99.4
Annual General Meeting
The Voting Instructions must be signed, completed and received at the indicated address prior to 10:00 A.M. (New York City time) on December 13, 2022 for action to be taken.
2022 VOTING INSTRUCTIONS AMERICAN DEPOSITARY SHARES
Renalytix plc (the “Company”)
CUSIP No.: 75973T101.
ADS Record Date: November 14, 2022.
Meeting Specifics: Annual General Meeting to be held on Monday, December 19, 2022 at 11:00 A.M. (GMT) as
an in-person meeting at 6 Stratton Street Mayfair, London W1J 8LD.
Meeting Agenda: Please refer to the Company’s Notice of Annual General Meeting and other relevant documents
on the Company’s website:
https://investors.renalytix.com/news-and-events/documents-and-presentations.
Depositary: Citibank, N.A.
Deposit Agreement: Deposit Agreement, dated as of July 21, 2020.
Deposited Securities: Ordinary shares, nominal value £0.0025 per share, of the Company.
Custodian: Citibank, N.A. (London).
The undersigned holder, as of the ADS Record Date, of the American Depositary Share(s) issued under the Deposit Agreement (“ADSs”) and identified above, acknowledges receipt of a copy of the Depositary’s Notice of Annual General Meeting and hereby authorizes and directs the Depositary to cause to be voted at the Meeting (and any adjournment or postponement thereof) the Deposited Securities represented by the ADSs in the manner indicated on the reverse side hereof. All capitalized terms not defined herein shall have the meaning given to such term in the Deposit Agreement. The information with respect to the Meeting and the ADS Voting Instructions contained herein and in any related materials may change after the date hereof as a result of a change in circumstances (e.g., an adjournment or cancellation of the Meeting, and change in manner of holding the Meeting). The Company intends to announce any changes and updates only on its website https://www.renalytix.com. We encourage you to check the referenced Company website for any updates to the information with respect to the Meeting and the ADS Voting Instructions as it is not expected that any additional information will be distributed to you via mail or email.
Voting instructions may be given only in respect of a number of ADSs representing an integral number of Deposited Securities. Upon the timely receipt from a Holder of ADSs as of the ADS Record Date of voting instructions in the manner specified by the Depositary, the Depositary shall endeavor, insofar as practicable and permitted under any applicable law, the provisions of the Deposit Agreement, the Articles of Association of the Company and the provisions of the Deposited Securities, to vote, or cause the Custodian to vote, the Deposited Securities (in person or by proxy) represented by such Holder’s ADSs in accordance with the voting instructions received from the Holder of the ADSs. If the Depositary does not receive voting instructions from a Holder as of the ADS Record Date on or before the date established by the Depositary for such purpose, such Holder shall be deemed, and the Depositary shall deem such Holder, to have instructed the Depositary to give a discretionary proxy to a person designated by the Company to vote the Deposited Securities; provided, however, that no such discretionary proxy shall be given by the Depositary with respect to any matter to be voted upon as to which the Company informs the Depositary that (i) the Company does not wish such proxy to be given, (ii) substantial opposition exists, or (iii) the rights of holders of Deposited Securities may be adversely affected.
Deposited Securities represented by ADSs for which no timely voting instructions are received by the Depositary from the Holder shall not be voted (except as otherwise contemplated in the Deposit Agreement). Neither the Depositary nor the Custodian shall under any circumstances exercise any discretion as to voting and neither the Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in any way make use of, for purposes of establishing a quorum or otherwise, the Deposited Securities represented by ADSs, except pursuant to and in accordance with the voting instructions timely received from Holders or as otherwise contemplated in the Deposit Agreement. If the Depositary timely receives voting instructions from a Holder which fail to specify the manner in which the Depositary is to vote the Deposited Securities represented by such Holder’s ADSs, the Depositary will deem such Holder to have instructed the Depositary to vote in favor of the items set forth in such voting instructions.
Please indicate on the reverse side hereof how the Deposited Securities are to be voted.
The Voting Instructions must be marked, signed and returned on time in order to be counted.
By signing on the reverse side hereof, the undersigned represents to the Depositary and the Company that the undersigned is duly authorized to give the voting instructions contained therein.
RESOLUTIONS ORDINARY RESOLUTIONS
The authorities conferred by this resolution shall expire (unless previously revoked or varied by the Company in general meeting) at the conclusion of the next annual general meeting of the Company or the close of business on 19 March 2024, whichever is the earlier, save that the Company may, before such expiry, revocation or variation, make an offer or agreement which would or might require Relevant Securities to be allotted after such expiry and the Directors may allot Relevant Securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired or been revoked or varied.
SPECIAL RESOLUTIONS
The power conferred by this resolution shall expire (unless previously revoked or varied by the Company in general meeting) at the conclusion of the next annual general meeting of the Company or the close of business on 19 March 2024, whichever is the earlier, save that the Company may before such expiry, revocation or variation make an offer or agreement which would or might require equity securities to be allotted or treasury shares to be sold after such expiry, revocation or variation and the Directors may allot equity securities and sell treasury shares pursuant to such offer or agreement as if the power hereby conferred had not expired or been revoked or varied. This power is in substitution for any and all powers previously conferred on the Directors under Section 570 of the Act, but without prejudice to any allotment of equity securities made or agreed to be made pursuant to such powers.
The Board of Directors recommends a FOR vote for all resolutions.
