Renalytix AI plc Annual Report 2020

← All annual reports

FY2020 Annual Report · Renalytix AI plc

Loading PDF…

Renalytix AI plc
Annual Report and
Financial Statements

For the Year Ended 30 June 2020

Index

Strategic Report

Chairman & CEO’s Joint Statement

Company Overview

Operational and Financial Highlights

Product Overview and Strategy

Financial Review

Risk Management Approach

Section 172 Statement

Corporate Social Responsibility Review

Corporate Governance

Board of Directors

Directors’ Report

Corporate Governance Statement

Directors’ Remuneration Report

Independent Auditors’ Report

Financial Statements

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated and Company’s Statements of Financial Position

Consolidated and Company’s Statements of Cashflows

Consolidated and Company’s Statements of Changes in Equity

Notes to the Financial Statements

Additional Financial Information

4-21

22-39

41-86

Strategic Report

Chairman & CEO’s Joint Statement

To the Members of Renalytix AI plc
We are delighted to present the annual report for the twelve months ended 30 June 2020 for Renalytix AI plc
(“RenalytixAI” or the “Company”).

About RenalytixAI
RenalytixAI was created to accelerate the introduction of advanced diagnostic products to the market
place that could have a major impact on the cost and quality of life for patients with kidney and other
chronic diseases. Chronic Kidney Disease (“CKD”), in particular, is one of the largest unmet medical
challenges today. RenalytixAI was founded in 2018 based on research by leading nephrologists at the Icahn
School of Medicine at Mount Sinai (“Mount Sinai”) and initially funded through an admission to AIM, a
market of the London Stock Exchange, on 6 November 2018. Post-period, in July, we expanded our capital
base by raising an additional $85 million through an offering and listing on the Nasdaq Global Market.

We have made significant progress towards our operational, regulatory and reimbursement goals and
are now engaged in commercial roll-out of our lead product, KidneyIntelXTM, in the United States. In
addition, we are seeing an increase in strategic partnering activities which will continue to build on the
validation and commercial use cases for KidneyIntelX.

KidneyIntelX™
KidneyIntelX is a clinical grade, artificial intelligence in vitro diagnostic (“AI-IVD”) solution that we believe
will change the ability to identify rapid kidney function decline and/or kidney failure earlier and more
accurately in diabetic patients with CKD. KidneyIntelX uses a unique combination of blood-based
markers and electronic health record information to provide a unique patient risk-score. We believe
KidneyIntelX is setting a medical and regulatory standard for use of artificial intelligence enabled
algorithms to predict disease outcomes and drive actionable clinical response.

KidneyIntelX has achieved national medical reimbursement pricing and also regulatory approval to offer
testing services nationally. We believe our core strategy of using in vitro diagnostic development protocols
and quality standards will continue to yield commercial benefits such as growing reimbursement
coverage and expanded use cases with regulatory review.

As our validation and utility study accumulate, KidneyIntelX has growing potential to be viewed as the
compelling solution to promote early intervention in kidney disease where impact on care and cost is
most effective. The board of directors of the Company (the “Directors” or the “Board”) is pleased with the
broad-based support that KidneyIntelX is attracting from leading clinicians and healthcare providers.

Operational Progress
In the year ended 30 June 2020 (“FY20”) and the immediate post-period, the Company has achieved a
number of key objectives culminating in the activation of KidneyIntelX within the Mount Sinai Health
System, our launch hospital system partnership, shortly after period end. 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 programme will be an important resource to help inform and
improve care for early stage diabetic kidney disease (“DKD”) patients and support future hospital system
deployments of KidneyIntelX in the United States and abroad.

The Company also continues to execute on a number of key operational items including (1) growing
our world-class employee base and leadership team to manage US national commercial expansion,
(2) product development which will add to the KidneyIntelX clinical use cases and addressable market,
(3) expanding laboratory services capacity with our new facility in Salt Lake City, Utah, (4) gaining further
regulatory approvals which currently allow us to operate in 49 states and (5) generating additional utility
and validation data to build-out our peer-reviewed performance data dossier.

Reimbursement
As we have previously reported, KidneyIntelX has achieved both a distinct Common Procedural
Terminology (“CPT”) reimbursement code 0105U and inclusion in the Final 2020 Clinical Laboratory Fee
Schedule (“CLFS”) by the Centers for Medicare and Medicaid Services (“CMS”) which set a national price
for KidneyIntelX at $950 per reportable test result. Post-period, CMS has submitted for public comment a
rule which would provide an automatic National Medicare Coverage Determination for diagnostic devices
under FDA Breakthrough Device designation upon approval. As we already have designated coding and
pricing in effect and were awarded Breakthrough Device designation in May of 2019, this new proposed
CMS rule making, if it becomes effective, could help shorten the time to addressable market population
with insurance coverage for KidneyIntelX. We estimate that the number of DKD patients covered under
Medicare exceeds 12 million and, in specific metro markets such as our New York City launch market,
represents a majority of insured DKD patients.

Regulatory
Post-period in July 2020, we received a clinical laboratory permit from the New York State Department
of Health (NYS DOH) to provide commercial testing of KidneyIntelX. The permit was granted following
a review by a panel of NYS DOH scientists and external reviewers of the analytical and clinical validation
results for KidneyIntelX. Officials from the NYS DOH successfully completed an inspection of the
RenalytixAI New York laboratory as part of this process, with no findings reported.

In addition, post-period, we submitted our final package to FDA seeking clearance of KidneyIntelX. Our
FDA process has been highly constructive and, we believe, fundamental to producing a robust first-in-
class, artificial intelligence-enabled in vitro diagnostic product. Further we believe FDA clearance will be
important to building on our national reimbursement strategy and clinical adoption.

Financing
RenalytixAI has continued to benefit from the participation of a growing investor base. In July 2019, we
raised gross proceeds of $17.3m in a following-on financing on the AIM market, and post-period end,
we raised an additional $85.1m in gross proceeds through an offering and concurrent dual-listing on the
Nasdaq Global Market in the U.S. The Directors believe our company is now in a position with considerable
financial resources to build our business and maintain a competitive advantage for years to come.

Strategic Partnerships
We believe that KidneyIntelX’s unique value proposition and the early, but rapidly developing market for
precision medicine applications in CKD will allow us to form long-term partnerships with key industry
stakeholders including pharmaceutical, services and health care providers. These partnerships can have a
material impact on expanding performance data and market opportunity around KidneyIntelX.

In FY20 and the post-period, we announced partnerships with two leading pharmaceutical companies,
most recently with AstraZeneca (LSE/STO/NYSE: AZN). Our partnership with AstraZeneca is examining
uptake of, and patient adherence to, chronic kidney disease treatments using the ability of KidneyIntelX
to identify patients earlier with progressive decline in kidney function.

In May 2020, we entered into a joint venture with Mount Sinai to form Kantaro Biosciences LLC (“Kantaro”)
for the purpose of developing and commercialising test kits for the detection of blood antibodies to SARS-
CoV-2 based on technology originally developed by Mount Sinai. We believe Kantaro and its exclusive
manufacturing and distribution partner Bio-Techne (NASDAQ TECH) are making progress towards key
regulatory and other commercial milestones that will enable these testing kits to be sold worldwide.

Patient Studies
We have now completed expanded clinical validation studies for patients with DKD with positive results
consistent with the KidneyIntelX interim analyses announced on 9 July 2019. These study results were
presented at the 80th Annual American Diabetes Conference and are under peer-review for journal
publication. These data results were part of our KidneyIntelX FDA filing requesting clearance.

During the period, a collaboration study was completed with University Medical Center Groningen
(“UMCG”), Netherlands, to determine the ability of KidneyIntelX to identify patients that will experience
a progressive decline in kidney function or kidney failure in over 9,000 blood samples analysed across
multiple time points in 3,500 patients followed longitudinally. In addition, we are evaluating the
response to drug therapy based on baseline risk and change in risk over time as defined by KidneyIntelX.
The analyses are ongoing, and multiple findings from the dataset will be presented at international
conferences including the American Society of Nephrology Kidney Week, October 2020 in Denver.

Intellectual Property
In the period, 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.

Human Resources
Fundamental to execution of our business plans is the hiring and retention of top-tier professionals
through the entire company operations. Leading in to our NASDAQ listing, we implemented an
international search to fill key management and operating positions critical to commercialisation,
product development, quality control, marketing, governance and other core functions. To date we
have filled several positions including VP of Health Systems Partnerships, Chief Human Resources
Officer, VP of Project Management, Director of Scientific Project Management, Billing Manager, Client
Services Director, Senior Site Reliability Engineer, Clinical Laboratory Scientist, Senior Manager Technical
Accounting, Client Services Specialist, among others. Professionals coming on board RenalytixAI have
cited an excitement to be part of a high-growth opportunity intersecting with a game-changing
technology that can affect many patient lives.

Finally, we would like to thank Julian Baines and Richard Evans for their valued service as directors of the
Company (Mr. Baines as chairman) since inception until our dual-listing on Nasdaq.

Christopher Mills
Chairman

James R. McCullough
Chief Executive Officer

Company Overview

Pioneering Next-Generation Health Technology Solutions for Kidney Disease
RenalytixAI is an artificial intelligence-enabled in vitro diagnostics company, focused on optimising the
clinical management of kidney disease to drive improved patient outcomes and advance value-based
care. Our goal is to lower healthcare costs and improve a patient’s quality of life by transforming the
paradigm for kidney disease risk assessment and clinical management through our KidneyIntelX platform.
KidneyIntelX is a first-in-class artificial intelligence-enabled in vitro diagnostic enabling risk prediction of
progressive decline in kidney function and/or risk of kidney failure in diabetic patients with CKD.

We believe KidneyIntelX is a powerful prognostic tool to help clinicians and patients slow the progression
of kidney disease and support strategies to prevent kidney failure and the need for long-term dialysis
or a kidney transplant. We are continuing to build a body of evidence through clinical validation and
utility studies demonstrating that accurate and early identification of high-risk patients, coupled with
guidelines-driven clinical recommendations designed to maximise patient treatment and compliance,
can have a measurable positive impact on a patient’s quality of life.

On a Mission to Combat a Devastating and Costly Disease
Kidney disease is a public health epidemic affecting over 850 million people globally, approximately
twice that of diabetes and 20 times more than cancer. Commonly referred to as a “silent disease,” kidney
disease is often asymptomatic until a majority of kidney function has been lost. As a result, CKD is
associated with significant morbidity, mortality, and healthcare costs.

In the United States, 15 percent of adults, or 37 million people, currently have CKD, significantly impacting
their quality of life and resulting in Medicare spending of over $120 billion per year. Further, the CDC
reports that 9 out of 10 adults with CKD do not know they have it, and one out of two people with very low
kidney function who are not on dialysis do not know they have CKD.

It is estimated that one-third of adults in the U.S. are at risk for kidney disease. This risk is greatest for those
suffering from diabetes, high blood pressure, heart disease, and obesity. Studies have also shown that
ethnicity is a determining factor, with African Americans and Hispanic populations deemed most at risk.

In response to this substantial kidney disease burden, a U.S. Presidential Executive Order on Advancing
American Kidney Health was issued in July 2019 to support changes in kidney disease care and to prevent
kidney failure whenever possible through better diagnosis, treatment, and incentives for preventative care.

We believe that RenalytixAI is well-positioned to help meet this urgent medical need with KidneyIntelX,
initially indicated for adult patients with type 2 diabetes and existing CKD, accounting for 20 to 30 percent
of the estimated 37 million U.S. CKD patients.

Operational and Financial Highlights

Operational Highlights

CPT reimbursement code 0105U for KidneyIntelX became
effective across the U.S. on 1 October 2019

ظ Medicare national pricing for KidneyIntelX set at $950 per
reportable test result, effective through December 2022

First positive coverage determinations from both private
insurance payors and preferred provider organisations
in the U.S.

ظ Medicare coverage determination process initiated with

results expected in 2021

ظ New York State Department of Health approved

KidneyIntelX for patient testing

FDA Regulatory review process for KidneyIntelX
continues on track

CLIA Certificate of Registration received to initiate
commercial testing for newly established commercial
laboratory in Utah

ظ Mount Sinai electronic medical record (EMR) system

integration initiated for KidneyIntelX

Completed 3,500 patient diabetic kidney disease study
evaluating the effectiveness of KidneyIntelX

Submitted manuscripts for publication highlighting
predictive performance and health economics savings
potential

Research collaboration with University of Michigan provides
access to novel biomarker technology and to the C-PROBE
cohort for potential expanded indications for KidneyIntelX

Initiation of KidneyIntelX
Testing at Mount Sinai

FDA Submission

AstraZeneca Collaboration

Nasdaq IPO (RNLX)

0
2
0
2

Univ. of Michigan Partnership

Expanded Payor Coverage

New York State Commercial
Testing Approval

Opened Utah CLIA
Testing Facility

Medicare Pricing

ظ Health economic model developed by Boston Healthcare
Associates demonstrates compelling savings for payers
and providers, achieving breakeven in less than two years

9
1
0
2

Key leadership appointments including Dr. Chirag Parikh
(Non-Executive Director) and Thomas McLain (President
& Chief Commercial Officer)

Additional key operating hires to support commercial
operations

Expansion of intellectual property portfolio

Advancing commercial discussions with additional
insurance payors and healthcare providers

ظ U.S. Presidential Executive Order, Advancing American
Kidney Health, prioritises the need for transformation in
the prevention and treatment of kidney disease

Approved to offer KidneyIntelX testing in 50 states

8
1
0
2

KidneyIntelX CPT Code

First Payor Coverage

FDA Breakthrough Device
Designation

London Stock Exchange IPO
(LON:RENX)

Financial Highlights

Placing of new ordinary shares in July 2019 secondary offering raising gross proceeds of $17.3m

$2.9 million invested in assay development, laboratory equipment and clinical validation during
the period ($4.5m invested since inception)

ظ Net loss after tax for the period of $9.3m, in line with expectations and reflecting continuing

investment in key development, regulatory and commercialisation activities (FY 2019: $6.2m)

Cash and equivalents of $13.3m on 30 June 2020 (prior to July 2020 Nasdaq dual-listing and
associated financing)

Post period end: completed successful offering and Nasdaq dual-listing in July 2020 raising net
capital of $76.1m after commissions, fees and associated offering expenses ($85.1m gross)

Post-Period End Developments

Activation of KidneyIntelX within the Mount Sinai Health System in September 2020

Submission of final package to FDA seeking clearance of KidneyIntelX

Collaboration with AstraZeneca (LSE/STO/NYSE: AZN) to develop and launch precision medicine
strategies for cardiovascular, renal and metabolic diseases

Initiation of a multi-centre study to conduct in-depth investigations into kidney-related
complications and long-term outcomes linked to COVID-19

Spin-out of Verici Dx (previously FractalDx) completed and admission to AIM of Verici Dx
under consideration

ظ Dual-listing achieved on Nasdaq Global Market in the U.S., expanding institutional investor base

Achieved regulatory approval offer KidneyIntelX testing in all 50 states

ظ Building human resources base to implement scale up of operations including VP of Health
Systems Partnerships, VP of Chief Human Resources Officer, VP of Project Management
among others

Indemnification Agreements
The Company entered into new deeds of indemnity with 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 during the year in connection with the Nasdaq dual-listing.

Product Overview and Strategy

RenalytixAI is a commercial-stage artificial intelligence-enabled in vitro diagnostics company, focused
on optimising clinical management in chronic kidney disease to help drive improved patient outcomes
and significantly lower healthcare costs. The Company’s products are being designed to make
significant improvements in kidney disease prognosis, transplant management, clinical care, and patient
stratification for drug clinical trials.

KidneyIntelX: Bringing Precision Medicine to Kidney Care
KidneyIntelX employs a proprietary, artificial intelligence-enabled algorithm that combines diverse data
inputs, including validated blood-based biomarkers, inherited genetics, and data from electronic health
record systems to generate a unique patient risk score, which is reported to the treating clinician on a
scale from 0 to 100 and categorises patients into low-, intermediate-, and high-risk strata. This patient risk
score enables prediction of progressive decline in kidney function in patients with diabetic kidney disease
(DKD), allowing physicians and healthcare systems to optimise the allocation of treatments and clinical
resources to those patients at highest risk.

KidneyIntelX is one of the first in vitro diagnostics with the novel capability of using a machine learning-
enabled algorithm to generate a continuous risk score. KidneyIntelX enables timely and accurate
prediction of risk of disease progression in the earlier stages of DKD, where active intervention has the most
potential to delay or prevent progression to kidney failure and the need for dialysis or a kidney transplant.

Our business model is focused, in part, on partnerships with healthcare systems and insurance payors
to drive rapid adoption across regionally concentrated populations of DKD patients and maximise data
analysis and clinical management strategies across all key disease stakeholders.

Commercialisation
KidneyIntelX is designed as a scalable platform that can be optimised and deployed into clinical use on
a validated-version by validated-version basis. The initial commercial launch version of KidneyIntelX is
indicated for patients 21 years of age or older with earlier stage DKD (Stages 1 through 3) and assesses the
risk of progressive decline in kidney function over a five-year timeframe.

In June 2020, RenalytixAI received approval to commence commercial testing from the New York
State Department of Health’s Clinical Laboratory Evaluation Program. With licensed CLIA commercial
laboratories in Salt Lake City, Utah and New York, New York, RenalytixAI can currently provide
KidneyIntelX testing services in 50 states.

Reimbursement and Regulatory Progress
RenalytixAI is actively engaged in efforts to achieve commercial coverage and reimbursement for
KidneyIntelX. In February 2020, we received certification to ISO 13485 for the Salt Lake City Laboratory.
In FY20, KidneyIntelX was granted a common procedural terminology (CPT) code and received its first
positive coverage determination from a private insurance payor group. In addition, the Centers for
Medicare and Medicaid Services (“CMS”) set the national price for KidneyIntelX at $950, effective on
1 January 2020. This price will remain in effect for a three-year term from January 2020 until December 2022.

In May 2019, KidneyIntelX was granted Breakthrough Device Designation from the U.S. Food and Drug
Administration (FDA). In June 2020, we received approval from the New York State Department of Health
(NYS DOH) to provide commercial testing of KidneyIntelX. The approval was granted following a review
by a panel of NYS DOH scientists and external reviewers of the analytical and clinical validation results for
KidneyIntelX. Additionally, officials from the NYS DOH successfully completed an inspection of our New
York laboratory with no deficiencies reported.

Partnership Model
Partnerships with healthcare systems are core to our adoption and growth strategy. Integrated
partnerships are designed to allow KidneyIntelX to be deployed directly to patient populations and their
treating clinicians in a cost-efficient and timely manner.

Our Company was founded through a collaborative effort with the Mount Sinai Health System (Mount
Sinai). Mount Sinai is one of our significant shareholders and the launch partner for KidneyIntelX. Mount
Sinai encompasses the Icahn School of Medicine at Mount Sinai and eight hospital campuses in the New
York metropolitan area. Mount Sinai is a pioneer in kidney health and devoted to discovering causes,
prevention, and treatment of kidney disorders. Our collaborative research and validation studies with
Mount Sinai utilise the Mount Sinai BioMe biobank. BioMe is designed to enable researchers to conduct
genetic, epidemiologic, molecular, and genomic studies using research specimens from consented
participants, which are linked with each participant’s de-identified health information. For KidneyIntelX,
this has allowed us to conduct rapid, prospective clinical validation using samples banked at “time zero,”
prior to the occurrence of progressive kidney function decline.

In June 2020, we announced a partnership with the University of Michigan to extend the application
of the KidneyIntelX platform to an expanded population of patients with established CKD or at risk
of developing CKD. RenalytixAI also announced a data sharing agreement with a top ten global
pharmaceutical company during this same time period.

RenalytixAI COVID-19 Initiatives
In FY2020, RenalytixAI also emerged as an innovator in the fight against COVID-19, employing its scientific
resources and technology to help mitigate the impact of the COVID-19 pandemic.

Prediction of Major Adverse Kidney Events and Recovery Study
In April 2020, RenalytixAI announced a study launched in conjunction with the Icahn School of Medicine
at Mount Sinai to assess the risk of adverse kidney events in patients diagnosed with COVID-19 in the
acute hospitalisation setting. The study is using the KidneyIntelX platform to analyse clinical features and
several biomarkers as predictors of major adverse kidney events in patients hospitalised with COVID-19.
Data from this study will be used to foster research projects to improve the knowledge of COVID-19 and
augment clinical operations with augmented intelligence.

Kantaro Biosciences
Additionally, in May 2020, Renalytix announced the launch of Kantaro Biosciences, a joint venture with
the Icahn School of Medicine at Mount Sinai, to develop and scale production and distribution of a high-
performance test kit for SARS-CoV-2 antibodies. The underlying technology was created by Mount Sinai’s
internationally-recognised team of virologists and pathologists, and is designed for use in any lab without
the need for proprietary equipment. The test will deliver valuable information regarding the level of
potentially neutralising antibodies in previously infected individuals. Additionally, the test will diagnose
patients’ post-acute infection, that previously were asymptomatic or did not receive a diagnostic test
during the acute infection period. This diagnostic information is vital to patients presenting with signs
and symptoms of known comorbidities such as multisystem inflammatory syndrome in children, cardiac
anomalies, and acute kidney injury. This information is also expected to be critical to the development of
vaccines and therapeutics, as well as the assessment of workplace personal protection programmes and
population vaccination programmes.

Financial Review

The results presented cover FY20. The Group’s presentational currency is the United States Dollar.

Key Performance Indicators
Renalytix AI and its subsidiaries (together, the “Group”) focuses on assay development and operating/
administrative costs relative to plan as key performance indicators, as well as its cash position. Once test
sales commence, revenue, gross margin and adjusted EBITDA will be added as performance indicators,
as well as certain non-financial measures.

Income Statement

Revenue
The Group is in its initial commercial launch phase and therefore has not yet commenced revenue
generation as of the end of FY20. The Group expects commercial testing sales to begin in the first half of
the financial year ended 30 June 2021 (“FY21”).

Administrative Costs
During FY20, administrative expenses totalled $11.1m (financial year ended 30 June 2019 (“FY19”): $7.6m).
The major items of expenditure were general and administrative costs of $8.9m (FY19: $6.4m) which
included $4.6m in employee-related costs (FY19: $2.1m), $3.0m in subcontractors, legal, accounting,
and other professional fees (FY19: $2.6m), and $2.3m in insurance, marketing, materials, rent, and other
administrative costs (FY19: $1.7m). Depreciation and amortization expense totalled $1.2m for the period
(FY19: $1.2m).

Finance Income
Finance income totalled $0.5m during FY20 (FY19: $0.2m) related to interest earned on short-term
investments.

Other Income
$0.1m was generated through the sale of assay materials in support of a third-party study.

Balance Sheet

Inventory
During FY20, the Company purchased $0.4m of consumable assay materials to be used in the processing
of tests to be sold. Inventory on hand at 30 June 2020 totalled $0.3m (no inventory on hand in FY19).

Fixed Assets
Property, plant, and equipment consists of laboratory equipment being used to support the product
development activities. At 30 June 2020, the company held $0.9m in net property, plant, and equipment
(FY19: $0.3m).

Intangible Assets
$17.1m net book value of intangible assets held at 30 June 2020 (FY19: $18.8m) includes payments made
primarily to Mount Sinai for license and patent costs for the intellectual property underlying KidneyIntelX
and VericiDx, as well as amounts capitalised as development costs. Intangible assets also include the
value of the biomarker business purchased (in exchange for ordinary shares in the Company) from EKF.

Deferred Tax
A deferred tax asset totalling $2.3m (FY19: $1.0m) has been calculated based on the accumulated tax
losses in the US.

Cash
The Group had cash on hand of $13.3m (FY19: $7.3m). Cash and equivalents are held in several deposit
accounts in the US ($10.9m) and UK ($2.4m), as well as in US Treasury Bills ($1.0m). Our expenditure plans
remain sufficiently adaptable to align with available resources.

Borrowings
In April 2020, the Company entered into an original loan agreement with Fortis Private Bank as the lender
(“Lender”) for a loan in an aggregate principal amount of $0.3 million (the “Loan”) pursuant to the Paycheck
Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and
implemented by the U.S. Small Business Administration. The Loan matures in two years and bears interest
at a rate of 1% per annum, with all payments deferred through the six-month anniversary of the date of the
Loan. Principal and interest are payable monthly commencing on October 29, 2020 and may be prepaid
by the Company at any time prior to maturity without penalty. The Company may apply for forgiveness of
amounts due under the Loan, with the amount of potential loan forgiveness to be calculated in accordance
with the requirements of the PPP based on payroll costs, any mortgage interest payments, any covered
rent payments and any covered utilities payments during the 8-week period after the origination date of
the Loan. The Company intends to use proceeds of the Loan for payroll and other qualifying expenses, but
there can be no assurances that any portion of the Loan will be forgiven.

Other than the Loan, the Group has no long-term debt outstanding as of 30 June 2020.

Post Balance Sheet Event
The Company completed a Nasdaq dual-listing in July 2020 and associated financing raising net capital of
$76.1m after commissions, fees and offering expenses.

Risk Management Approach

We recognise 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:

It is the employees’ responsibility to ensure they understand and comply with the Risk
Management Policy and their defined risk management roles and responsibilities.

There is a defined risk management governance structure with clear accountabilities at
Group’s location.

A consistent risk management approach is used throughout the Group to identify and manage
risks posed in the AI and life sciences industries.

Risk management is embedded in all key processes and decision-making within the Group
(including strategy setting, budgeting, planning and day-to-day operations and activities).

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 commercialise 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.

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
organisation, 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.

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 commercialisation, marketing authorisation where
necessary, and coverage and reimbursement. Other companies may succeed in commercialising 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 minimise 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 authorisations, 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.

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 recent COVID-19 pandemic has created uncertainty in the market in the short term. Many countries
are either closed or on the verge of being shut down, and government action is having a significant effect
on economies across the world. The eventual severity and length of the economic disruption is impossible
to forecast. We believe we have a robust plan in place to mitigate the effect of the disruption on the
business including taking the following actions (amongst others):

ظ Organising for as many staff as possible to work from home

Improving our computer networking to facilitate remote working

ظ Gaining designation as a company essential to basic medical care which allows our premises

to remain open even in a lockdown

Improved social distancing by limiting physical meetings, expanding flexible working,
and altering production practices

Preparing requests for support for short time working with local authorities in case this
becomes necessary

ظ Banning international travel and limiting domestic travel

Increasing supplier and customer contact so as to be able to anticipate issues and react quickly

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 the COVID-19 pandemic and
current trading suggests that our base case forecasts are still applicable. However, at this stage, it is
difficult to assess reliably whether there will be any material disruption in the future. We have modelled
a number of scenarios covering reductions in revenue of 10% and 50%, without taking into account
the potential benefits of any mitigation strategies such as potential cost savings or insurance claims.
We have also modelled out 100% reductions in revenue with cost savings within our control. 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.

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:

the likely long-term consequences of any decision;

the interests of the Company’s employees;

the need to foster the Company’s business relationships with suppliers, customers and others;

the impact of the Company’s operations on the community and the environment;

the desirability of the Company maintaining a reputation for high standards of business conduct; and

the need to act fairly as between shareholders of the Company.

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 endeavours 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 recognises 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. Please also see details
of our initiatives in relation to the global COVID-19 pandemic under “Renalytix AI Covid-19 Initiatives”.

The Board recognises 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.renalytixai.com.

The Board endeavours 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 FY20 which the Directors
believe were in the best interests of the Company and all its stakeholders as follows:

In May 2020, following negotiations, during which the Board had full oversight, the Company and
Mount Sinai entered into the Kantaro Operating Agreement for the purpose of developing and
commercialising laboratory tests for the detection of antibodies against SARS-CoV-2 originally
developed by Mount Sinai. Kantaro has partnered with Bio-Techne Corporation to develop the
new test with the goal of commercially launching in the third quarter of calendar year 2020. The
decision to invest time and resources into the global effort against SARS-CoV-2 demonstrates
a commitment to community engagement on behalf of the Board. The Board considered this
transaction to be in the best interests of all stakeholders.

The Company made key strategic appointments during the period of review, including Thomas
McLain (President & Chief Commercial Officer) and Dr. Chirag Parikh (Non-Executive Director).
Mr McLain brings extensive experience in progressive diagnostic reimbursement strategy, having
served as Board Chair and Board member of numerous successful pharmaceutical, biotechnology
and diagnostic companies. Dr. Parikh is the Director of the Division of Nephrology and the Ronald
Peterson Professor of Medicine at the Johns Hopkins School of Medicine. Each of these strategic
appointments was made with consideration for all of our key stakeholders. The Board continually
reviews the Company’s composition of Directors and officers in order to ensure that the relevant
level of expertise and experience is maintained at senior management level and above. Our
continual review of Board composition and thorough decision making regarding key strategic
hires is central to our value creation strategy and is beneficial for our shareholders, employees, and
customers as a whole.

Throughout the period, the Board had full oversight of ongoing discussions and negotiations
with third parties in respect of potential business development transactions which could further
strengthen the Company’s financial position. After the period end, the Company entered into
a collaboration with AstraZeneca to develop and launch precision medicine strategies for
cardiovascular, renal and metabolic diseases. The Board considered this transaction in the best
interests of all stakeholders.

ظ During FY20, the Board dedicated significant time and resources to achieving the offering and
dual-listing on Nasdaq, which was completed after the end of the financial year. The Board
concluded that pursuing the offering and dual-listing was in the best interests of all stakeholders
as it enabled the Company to obtain additional capital to support its operations, to create a public
market for American Depositary Shares representing the Company’s ordinary shares in the United
States and to facilitate future access to the U.S. public equity markets.

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 minimising 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 recognises 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.

Corporate Governance

Board of Directors

Christopher Mills
Non-Executive Chairman (Aged 67)

Christopher Mills has served as a member of the RenalytixAI 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. Christopher
was a Director of Invesco MIM, where he was Head of North American
Investments and Venture Capital, and of Samuel Montagu International.

James McCullough
Chief Executive Officer and Director (Aged 52)

James McCullough has served as RenalytixAI’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 personalised 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 specialising 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 New York City.

Fergus Fleming
Chief Technical Officer and Director (Aged 53)

Fergus Fleming has served as RenalytixAI’s Chief Technical Officer since
its inception. Fergus is managing director of FF Consulting Limited
and Head of Business Development for Oncomark Limited. 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 medical device software, in vitro diagnostics instruments
and reagents, and electromechanical devices. He has extensive experience
managing global projects, including clinical research collaborations, product
development, acquisition integration, and manufacturing site transfers.

Erik Lium Ph.D.
Non-Executive Director (Aged 52)

Erik Lium, Ph.D., has served as a member of the RenalytixAI 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.

Barbara Murphy M.D.
Non-Executive Director (Aged 53)

Barbara Murphy, M.D., has served as a member of the RenalytixAI Board
since November 2018. Barbara is the Murray M. Rosenberg Professor of
Medicine, chair of the Department of Medicine for Mount Sinai and Dean
for Clinical Integration and Population Health. Her area of interest is
transplant immunology, focusing on the use of high throughput genomic
technologies as a means to understand the immune mechanisms that
lead to graft injury and loss, with the aim of identifying gene expression
profiles and / or genetic variants that may be used to predict those at
greatest risk. Dr. Murphy earned her M.B. B.A.O. B.Ch. from The Royal
College of Surgeons in Ireland and spent her early career at Beaumont
Hospital in Dublin. Dr. Murphy completed her postdoctoral training with
a fellowship in Nephrology at Brigham and Women’s Hospital, Harvard
Medical School. As part of this, she trained in transplant immunology at
the Laboratory of Immunogenetics and Transplantation, Renal Division,
Brigham and Women’s Hospital, Harvard Medical School. Among her
many honours, Dr. Murphy was awarded the Young Investigator Award in
Basic Science by the American Society of Transplantation in 2003. In 2005,
Dr. Murphy was awarded the Irene and Dr. Arthur M. Fishberg Professor
of Medicine at The Mount Sinai Hospital. Her many awards include being
named Nephrologist of the Year 2011 by the American Kidney Fund; the
distinguished Jacobi Medallion; an honorary degree from University
College, Dublin, Ireland; and being honoured by The Annual Irish America
Healthcare & Life Science 50.

Dr. Murphy belongs to a number of professional societies, including
the American Society of Transplantation and the American Society of
Nephrology. Among her numerous achievements, she has held many

leadership roles at a national level, including being a member of the board
of the American Society of Transplantation, the executive committee of
the American Transplant Congress, and chair of Education Committee
of the American Society of Transplantation. In 2009, Dr. Murphy was the
president of the American Society of Transplantation and, in 2016, was
elected to Council for the American Society of Nephrology.

Chirag R. Parikh, Ph.D., M.D.
Non-Executive Director (Aged 47)

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.

Julian Baines MBE
Non-Executive Chairman - Resigned on 16 July 2020 (Aged 56)

Richard Evans
Non-Executive Director - Resigned on 16 July 2020 (Aged 63)

This report was approved by the Board on 27 October 2020 and signed on behalf of the Board by:

Christopher Mills
Chairman

Directors’ Report

The Directors present their annual report on the affairs of the Group, together with the consolidated
financial statements and auditor’s report for the year ended 30 June 2020. The Corporate Governance
Statement set out on pages 30 to 31 forms part of this report.

Corporate Details
Renalytix AI 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 Avon House, 19 Stanwell Road,
Penarth, CF64 2EZ. The Company was incorporated on 15 March 2018.

Directors
The Directors, who served in office during the year and as date of signing these financial statements
were as follows:

Christopher Mills

James McCullough

Erik Lium

Fergus Fleming

ظ Barbara Murphy

Chirag Parikh (appointed on 14 October 2019)

Julian Baines (resigned on 16 July 2020)

Richard Evans (resigned on 16 July 2020)

Details of the Directors’ membership of committees is shown on pages 31 to 32.

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.

Post Balance Sheet Events
Post balance sheet events are discussed in the Strategic Report on page 9.

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.

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. However, at this stage, it
is difficult to assess reliably whether there will be any material disruption in the future. In addition, the
Directors have considered the potential effects of the COVID-19 pandemic as laid out in the Strategic
Report. We have modelled a number of scenarios covering reductions in revenue of 10% and 50%, without
taking into account the potential benefits of any mitigation strategies such as potential cost savings or
insurance claims. We have also modelled out 100% reductions in revenue with cost savings within our
control. 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.

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 4 to 21.

Results and Dividends
The Group recorded a loss for the year of $9.3 million (FY19: $6.9 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 FY20 (FY19: nil).

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 2020 (FY19: nil).

Directors’ Interests
The interests in the share capital of the Company of those Directors serving at 30 June 2020 and as at the
date of signing of these financial statements, all of which are beneficial, were as follows:

On 30 June 2020

On 30 June 2019

Ordinary Shares of 0.25p each

Christopher Mills

James McCullough

Erik Lium

Fergus Fleming

Barbara Murphy

Chirag Parikh

Julian Baines

Richard Evans

9,197,501

2,870,110

584,481

150,800

1,231,236

706,322

9,197,501

2,870,110

584,481

150,800

1,231,236

706,322

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.

Substantial Shareholdings
As at 31 July 2020 October 2020, 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

Christopher Mills

Gilder Gagnon Howe and Co LLC

James McCullough

EKF Diagnostics Holdings plc

Canaccord Genuity Wealth
Management

Fidelity Investment International

10,750,926

9,197,501

4,800,000

2,870,110

2,677,981

2,517,105

2,354,539

14.93%

12.77%

6.66%

3.98%

3.72%

3.49%

3.27%

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 regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under
that law the Directors have prepared the group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union and parent company financial
statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union. 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 of the Group and parent
company and of the profit or loss of the Group and parent company for that period. In preparing the
financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;

state whether applicable IFRSs as adopted by the European Union have been followed for the
group financial statements and IFRSs as adopted by the European Union have been followed for
the company financial statements, subject to any material departures disclosed and explained in
the financial statements;

ظ make judgements and accounting estimates that are reasonable and prudent; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the group and parent company will continue in business.

The Directors are also responsible for safeguarding the assets of the Group and parent company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group and parent company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Group and parent company and enable them to ensure that the financial
statements comply with the Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the parent company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.

The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group and parent
company’s performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Report of the Directors confirm that, to
the best of their knowledge:

the parent company financial statements, which have been prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair view of the assets, liabilities, financial position
and loss of the Company;

the Group financial statements, which have been prepared in accordance with IFRSs as adopted
by the European Union, give a true and fair view of the assets, liabilities, financial position and
profit of the Group; and

the Strategic Review includes a fair review of the development and performance of the business
and the position of the Group and parent company, together with a description of the principal
risks and uncertainties that it faces.

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 [and entered into new deeds of indemnity with its Directors during the
year in connection with the Nasdaq dual-listing]. 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.

Disclosure of Information to the Auditors
The Directors who hold office at the date of approval of this report confirm that so far as they are
each aware, there is no relevant audit information of which the Company’s auditors are unaware, and
each Director has taken all the steps that they ought to have taken as a Director in order to make
themselves aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.

Corporate Governance
The Company’s statement of corporate governance can be found in the Corporate Governance
Statement on pages 30 to 33 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 [•] 2020 and signed on behalf of the Board by:

Christopher Mills
Chairman

Corporate Governance Statement

Compliance

The Company recognises 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 four Non-Executive Directors. Julian Baines
was Non-Executive Chairman during FY20 until his resignation after the year end, on 16 July 2020.
Christopher Mills has been appointed as Non-Executive Chairman. Richard Evans served as a Non-
Executive Director during FY20 until his resignation after the year end, on 16 July 2020.

It is the Board’s opinion that the four Non-Executive Directors, Julian Baines, Richard Evans, Chirag
Parikh and Barbara Murphy, have been independent in character and judgement and that there are
no relationships or circumstances which could materially affect or interfere with the exercise of their
independent judgement during the course of FY20. Julian and Richard both have resigned since the end
of FY20, on 16 July 2020.

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
Ten Board meetings were held during the year. The Directors’ attendance record during their period of
office is as follows:

Christopher Mills
(Non-Executive Chairman)

James McCullough
(Chief Executive Officer)

Erik Lium
(Non-Executive Director)

Fergus Fleming
(Chief Technology Officer)

Barbara Murphy
(Non-Executive Director)

Chirag Parikh
(Non-Executive Director)

Julian Baines
(Non-Executive Chairman)

Richard Evans
(Non-Executive Director)

14/17

17/17

16/17

17/17

16/17

11/12 (Appointed on 14 October 2019)

17/17 (Resigned on 16 July 2020)

16/17 (Resigned on 16 July 2020)

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. Being a small listed company,
the Board considers it unnecessary to have evaluations facilitated by an external consultant. During the
year, independent Directors, Barbara Murphy and Richard Evans conducted an evaluation of the Non-
Executive Chairman’s performance. The outcome has been discussed between the Directors.

Audit Committee
The Audit Committee comprised Richard Evans, who acted as chair, 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 twice during the year ended 30 June 2020. There have been no
significant matters communicated to the Committee by the auditors and no interaction with the
Financial Reporting Council.

Since the resignation of Richard Evans as a Director on 16 July 2020, the composition of the Audit
Committee has changed to Erik Lium, acting as chair, Barbara Murphy and Christopher Mills.

Remuneration Committee
The Remuneration Committee comprised Julian Baines, who acted as chair, and Christopher Mills. 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 2020.

Since the resignation of Julian Baines as Director on 16 July 2020, the composition of the Remuneration
Committee has changed to Erik Lium, acting as chair, and Chirag Parikh.

Nomination Committee
The Nomination Committee comprised Julian Baines, who acted as chair, and Christopher Mills. The
Nomination Committee reviews and recommends nominees as new Directors to the Board. Since 16 July
2020 the composition of the Nomination Committee comprises Barbara Murphy, who acts as chair, and
Chirag Parikh.

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 authorisation, approval and control levels
within which senior management operates. These controls reflect the Group’s organisational structure
and business objectives. The control system includes clear lines of accountability and covers all areas of
the organisation. The Board operates procedures which include an appropriate control environment
through the definition of the above organisation 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.

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@renalytixai.com

Corporate Social Responsibility
The Board recognises that the Group has a duty to be a good corporate citizen and is conscious that its
business processes minimise 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 Corporate Governance Statement was approved by the Board on ** October 2020 and signed on its
behalf by:

Salim Hamir
Company Secretary

Director’s Remuneration Report
For the Period Ended 30 June 2020

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.

Policy on Executive Directors’ Remuneration
Remuneration packages are designed to motivate and retain Executive Directors to ensure the continued
development of the Group and to reward them for enhancing value to shareholders. The main elements
of the remuneration package for Executive Directors are basic salary or fees, performance-related
bonuses1, benefits and share based incentives.

Directors’ Remuneration – Audited
The remuneration of the Directors for the year ended 30 June 2020 is shown below2:

Salary
and Fees

Pension

Period to 30 June
2020

$’000

Executive Directors

James McCullough

Fergus Fleming

Non-Executive Directors

Julian Baines

Richard Evans

Mt. Sinai

Christopher Mills

Barbara Murphy

Chirag Parikh

Total Fees and Emoluments

470

317

787

158

945

488

328

816

158

974

(1) Erik Lium is not entitled to receive remuneration as he sits on the Board as a representative of the
Icahn School of Medicine at Mount Sinai.3

Directors' Share Option Plan
Share options were issued to a number of directors and other parties under the Company’s share-option
scheme. The options held by Directors as at 30 June 2020 were as follows:

Number of Ordinary
Shares Under Option

Exercise Price

Exercise Period

Fergus Flemming

Icahn School of Medicine
at Mount Sinai

Barbara Murphy

Chirag Parikh

$’000

538,161

204,501

269,081

80,724

50,000

$’000

£1.21

£2.51

$’000

1 November 2021 – 31 October 2028

14 October 2022 – 13 October 2029

Independent Auditors’ Report

Opinion
We have audited the financial statements of Renalytix AI plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 30 June 2020 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 a
summary of significant accounting policies. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union and as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.

In Our Opinion:

the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 30 June 2020 and of the group’s and parent company’s loss for the period
then ended;

the group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;

the parent company financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union and as applied in accordance with the provisions of the
Companies Act 2006; and

the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.

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
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us
to report to you where:

the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or

the directors have not disclosed in the financial statements any identified material uncertainties
that may cast significant doubt about the group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.

Our Application of Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative
thresholds for materiality. These, together with qualitative considerations, helped us to determine the
scope of our audit and the nature, timing and extent of our audit procedures on the individual financial
statements line items and disclosures and in evaluating the effect of misstatements, both individually
and on the financial statements as a whole.

Group materiality was $410,000 (2019 $540,000) based upon gross assets and performance materiality
was $246,000 (2019 $378,000). The benchmark of gross assets was selected as we consider this to be the
most significant determinant of the Group’s performance for shareholders during the period of product
development prior to commercialisation. Parent Company materiality was $260,000 (2019 $378,000)
based upon gross assets and performance materiality was $156,600 (2019 $264,600) . The Parent
Company holds the product trademarks and licenses and product development costs are capitalised in
this company.

For each component in the scope of our group audit, we allocated a materiality that was less than our
overall group materiality. Component materiality for significant and/or material subsidiary undertakings
ranged from $246,000 to $240,000 (2019 $378,000 to $140,000).

We agreed with the Audit Committee that we would report to them all individual audit differences
identified during the course of the audit in excess of $20,500 (2019 $27,000) for the Group and $13,000
(2019 $18,900) for the Parent Company.

An Overview of the Scope of Our Audit
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 the Scope of Our Audit Responded to the
Key Audit Matter

Recoverability of intangible fixed assets and
eligibility of capitalised development costs

Intangible assets comprise the following
categories with a carrying value as at 30 June
2020 of $17,118,000. Refer to note 18.

Trademarks, trade names and licenses

ظ Development costs

Intangible assets not yet subject to amortisation
are tested annually for impairment via value
in use calculations. 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.

Given the judgements and estimates involved
these were a key focus for our audit.

We confirmed the Group held good title to
the trademarks, trade names and licenses. We
assessed 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. We reviewed the terms and
obligations contained in the underlying
contractual agreements.

We performed substantive testing of additions
in both intangible asset categories to supporting
documentation. We reperformed the
amortisation calculations.

Our testing on the forecasts and value in use
calculations included:

Evaluation and challenge of the key
assumptions used by management;

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 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. 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. In connection with our audit of the financial statements, 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 audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. 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:

the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and

the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.

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:

adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or

the parent company financial statements are not in agreement with the accounting records and
returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

ظ we have not received all the information and explanations we require for our audit.

Responsibilities of Directors
As explained more fully in the statement of directors’ responsibilities, 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’s 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 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.

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

For and on behalf of PKF Littlejohn LLP
Statutory Auditor

15 Westferry Circus
Canary Wharf
London E14 4HD

Financial Statements

Consolidated Income Statement
For the Year Ended 30 June 2020

Note

Year ended
30 June
2020

Period from
inception to
30 June
2019

(RESTATED)

$’000

Continuing operations

Administrative expenses

Operating loss

Share of net Profit (Loss)
of associates and joint
ventures accounted for
using the equity method

Finance income - net

Loss before tax

Taxation

Profit/(Loss) attributable to
Owners of the Parent

Earnings per ordinary share
from continuing operations

(11,078)

(63)

531

(10,610)

1,360

(9,250)

(7,556)

(7,537)

959

(6,578)

Basic and diluted

$ (0.16)

$ (0.18)

Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2020

Loss for the period – continuing operations

Other comprehensive income:

Items that may be subsequently reclassified
to profitor loss

Currency translation differences

Other comprehensive loss for the period

Total comprehensive loss for the period

Total comprehensive income for the period
is attributable to:

Owners of the Parent Company

Year ended to
30 June
2020

$’000

(9,250)

(1,265)

(10,515)

Items stated above are disclosed net of tax. The income tax relating to each component of other
comprehensive income is disclosed in note 14.

Period from
inception to
30 June
2019

(RESTATED)

$’000

(6,578)

(599)

(7,177)

Consolidated and Company’s Statement of Financial Position
As at 30 June 2020

Group
As at 30 June
2020

Group
As at 30 June
2019
(RESTATED)

Company
As at 30 June
2020

Company
As at 30 June
2019
(RESTATED)

Notes

$’000

Assets

Non-current assets

Property, plant and equipment

Right of Use Asset

Intangible assets

Investment in subsidiaries

Investments accounted for using the equity
method

Note receivable

Deferred tax assets

Total non-current assets

Current Assets

Inventory

Security deposits

Assets classified as held for sale

Trade and other receivables

Prepaid and other current assets

Short term investments

Cash and cash equivalents

Total current assets

Total assets

Equity attributable
to owners of the parent

Share capital

Share premium

Share-based payment reserve

Foreign currency reserves

Retained earnings/(deficit)

Total equity

Liabilities

Current liabilities

Trade and other payables

Lease liabilities

SBA PPP Funding - Short Term

Payables due to associates

Total Current liabilities

Non-Current liabilities

SBA PPP Funding - long-term

Lease Liabilities

Payables due to associates

Total Liabilities

Total equity and liabilities

580

365

17,118

1,937

2,319

22,402

326

1,705

2,501

982

13,293

18,896

41,298

192

2,833

(1,915)

34,852

35,962

2,899

121

271

3,383

134

275

1,544

5,336

41,298

278

18,287

959

19,524

9,288

9,398

28,922

175

34,032

1,137

(599)

(6,578)

28,167

755

16,841

2,264

2,106

21,211

21,956

2,408

2,441

26,805

48,016

192

2,833

(1,970)

46,710

47,765

251

18,287

783

19,070

10,860

3,045

13,929

32,999

175

34,032

1,137

(610)

(2,176)

32,558

441

755

28,922

251

48,016

441

32,999

The notes on pages 47 to 80 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 ($1,794,000). (Period ended 30 June 2019: loss of $2,176,000).
The financial statements were approved and authorised for issue by the Board on 27 October 2020 and signed on its behalf by:

Christopher Mills
Chairman

James R. McCullough
Chief Executive Officer

Consolidated and Company’s Statements of Cash Flows
For the Year Ended 30 June 2020
Company
Year to 30 June
2020

Group
Year to 30 June
2020

Group
Period to 30 June
2019
(RESTATED)

Company
Period to 30 June
2019
(RESTATED)

Cash flow from operating activities

Loss before income tax

Adjustments for

Depreciation

Amortisation and impairment charges

Share-based payments

Share of net loss of associate

Gain on sale of assets

Changes in working capital

Trade and other receivables

Prepaid assets and other current assets

Assets classified as a available for sale

Inventory

Security Deposits

Trade and other payables

Cash used in operations

Interest paid

Notes

$’000

(10,610)

(7,541)

(1,793)

(2,369)

140

1,108

1,696

(18)

(2,440)

(1,714)

(326)

(22)

2,064

1,094

1,137

218

(61)

(49)

755

(10,059)

(4,416)

1,094

172

(270)

(12,756)

(2,378)

(188)

(16,094)

1,094

532

(10,639)

(24)

440

(10,966)

Net cash used in operating activities

(10,059)

(4,416)

(16,094)

(10,966)

Cash flow from investing activities

Investment in subsidiary

Purchase of property, plant and equipment (PPE)

Lease payments

Purchase of intangibles

Proceeds (purchase) of financial assets

Net cash generated by /
(used in) investing activities

Cash flow from financing activities

Note receivable

Issue of shares (net of issue costs)

Proceeds from loans

Repayment of loans

Net cash generated
from financing activities

Net increase / (decrease)
in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

(359)

(61)

(1,411)

982

(849)

(83)

16,678

255

16,850

5,942

7,297

13,293

(308)

(12,741)

(13,049)

26,753

438

(438)

26,753

9,288

(1,027)

(161)

16,678

(1)

(12,741)

(12,742)

26,753

(67)

16,517

26,753

(604)

3,045

2,441

3,045

Substantial non-cash items in the period ended 30 June 2019 comprise the Biomarker business acquisition included within intangible assets in return for the issue of Ordinary shares (note 24)
The notes on pages 47 to 80 are an integral part of these financial statements.

Consolidated and Company’s Statements of Changes in Equity

Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2020

Share
Capital

Share
Premium

Share-based
Payment
Reserve

Foreign
Currency
Reserve

Retained
Earnings

Total
Equity

$’000

175

35,522

(1,490)

34,032

532

605

(5,977)

(595)

(5,977)

(6,572)

(595)

(4)

(5,977)

(601)

35,697

(1,490)

532

34,739

28,167

175

34,032

1,137

(599)

(6,578)

28,167

At 15 March 2018

Comprehensive income

Loss for the period

Other comprehensive income

Currency translation differences

Total comprehensive income

Transactions with owners

Issue of shares

Less issue costs

Share-based payments

Total transactions with
owners of the parent,
recognised directly in equity

At 30 June and 1 July 2019

Prior period adjustment

At 30 June and 1 July 2019
(as originally stated)

Comprehensive income

Loss for the period

Other comprehensive income

Currency translation differences

Total comprehensive income

175

34,032

1,137

(9,250)

(1,265)

(9,250)

(1,265)

(10,515)

Transactions with owners

Issue of shares

Less issue costs

Share-based payments

Reduction of Capital

Total transactions with
owners of the parent,
recognised directly in equity

17,193

(596)

(50,629)

1,696

(34,032)

1,696

(51)

50,680

17,210

(596)

1,696

50,680

18,310

At 30 June 2020

192

2,833

(1,915)

34,852

35,962

Company Statement of Changes in Equity
For the Year Ended 30 June 2020

Share Capital

Share
Premium

Share-based
Payment
Reserve

Foreign
Currency
Reserve

Retained
Earnings

Total
Equity

$’000

At 30 June 2018

Comprehensive income

Loss for the period

Other comprehensive income

Currency translation differences

Total comprehensive income

Transactions with owners

Issue of shares

Less issue costs

Share-based payments

175

35,522

(1,490)

Total transactions with owners of the
parent, recognised directly in equity

175

34,032

532

(2,369)

(593)

(2,369)

(2,962)

35,697

(1,490)

532

34,739

175

34,032

532

(593)

(2,369)

31,777

At 30 June and 1 July 2019
(as originally stated)

Prior period adjustment

At 30 June and 1 July 2019 (RESTATED)

175

34,032

605

1,137

(17)

(610)

193

781

(2,176)

32,558

Comprehensive income

Loss for the period

Other comprehensive income

Currency translation differences

Total comprehensive income

Transactions with owners

Issue of shares

Less issue costs

Share-based payments

Asset Sale

Reduction of Capital

Total transactions with owners of the
parent, recognised directly in equity

At 30 June 2020

192

17,193

(596)

(50,629)

1,696

(34,032)

1,696

(1,794)

(1,309)

(1,794)

(1,309)

(3,103)

(51)

50,680

17,210

(596)

1,696

50,680

18,310

2,833

(1,970)

46,710

47,765

Notes to the Consolidated Financial Statements
For the Year Ended 30 June 2020

1. General Information and Basis of Presentation
Renalytix AI 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. The address
of the registered office is Avon House, 19 Stanwell Road, Penarth, Cardiff CF64 2EZ. 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 and Company operates.

2. Basis of Presentation
The consolidated financial statements of Renalytix AI plc have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRSs), IFRS IC
interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The
standards that have been adopted by the Group are those that are effective for financial years beginning
on or after 1 January 2019.

The consolidated financial statements have been prepared under the historical cost convention except
for certain financial assets measured at fair value. They cover the year to 30 June 2020. The comparatives
cover the period from the inception of the Company on 15 March 2018 to 30 June 2019.

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. The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated financial statements are disclosed
in note 6.

New Standards, Amendments, and Interpretations Adopted by the Group

The Group applied IFRS 16 “Leases” for the first time, which is effective for annual periods beginning
on or after 1 January 2019. The Group has not early adopted any other standards, amendments or
interpretations that have been issued but not yet effective. The nature and impact of the new standard is
described below:

The Group has adopted IFRS 16 Leases using the fully retrospective approach. The leases in place in the
prior year do not fall under the scope of IFRS 16. The new accounting policy is disclosed within the ‘Leases’
section of Note 2.

In applying IFRS 16 Leases for the first time, the Group has used the following practical expedients
permitted by the standard:

Applying a single discount rate to a portfolio of leases with reasonably similar characteristics;

Relying on previous assessments on whether leases are onerous as an alternative to performing

An impairment review – there were no onerous contracts as at 1 July 2019;

Accounting for operating leases with a remaining lease term of less than 12 months as at 1 July
2019 as short-term leases;

Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial
application; and

ظ Using hindsight in determining the lease term where the contract contains options to extend or

terminate the lease.

ظ Not reassessing whether a contract is, or contains a lease at the date of initial application. Instead,
for contracts entered into before the transition date the group relied on its assessment made
applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.

New standards, amendments, and interpretations issued but not effective for the period ended 30
June 2020, 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 2020, 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.

Amendments to IFRS 3: Business Combinations

Amendments to IAS 1 and IAS 8: Definition of Material

Amendments to IFRA 16: Leases – COVID-19 Concessions

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

Going Concern
The Group and Company 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. However, at this stage, it
is difficult to assess reliably whether there will be any material disruption in the future. In addition, the
Directors have considered the potential effects of the COVID-19 pandemic as laid out in the Strategic
Report. We have modelled a number of scenarios covering reductions in revenue of 10% and 50%, without
taking into account the potential benefits of any mitigation strategies such as potential cost savings or
insurance claims. We have also modelled out 100% reductions in revenue with cost savings within our
control. 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.

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.

On 23 October 2018 as part of a pre-admission re-organisation, the Company acquired the entire share
capital of Renalytix AI, Inc., then a subsidiary of EKF Diagnostics Holdings LLC. Given common ownership
of the Company and the subsidiary from incorporation up to the date of legal ownership, the transaction
has been treated as a group reorganisation with no fair value adjustments to assets or liabilities. The
subsidiary has been consolidated within the results of the Group from the date of incorporation.

Inter-Company transactions, balances and unrealised gains on transactions between Group companies
are eliminated. Unrealised 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 recognised at cost. The Group’s share of its associates’ post-acquisition
profits or losses is recognised in profit or loss, and its share of post-acquisition movements in reserves is
recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment.

Foreign Currency Translation

(a) Functional and Presentational Currency
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.

(b) Transactions and Balances
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 recognised in the income
statement within ‘administrative expenses’.

(c) Group Companies
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:

assets and liabilities for each balance sheet presented are translated at the closing rate at the date
of that balance sheet;

income and expenses for each income statement are translated at average exchange rates; and

all resulting exchange differences are recognised in other comprehensive income.

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 recognised 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.

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 recognised 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 derecognised. 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 recognised in administration expenses in the income statement.

Intangible Assets

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

(b) Development Costs and Trade Secrets
Development costs have a finite useful life and are carried at cost less accumulated amortisation.

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

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

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

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

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

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

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows. Impairment losses recognised 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 recognised for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss
is recognised in the income statement immediately. If goodwill is impaired however, no reversal of the
impairment is recognised in the financial statements.

Financial Assets

Classification
The Company classifies its financial assets in the following categories: loans and receivables at amortised
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.

(a) Loans and Receivables
Financial assets are classified as at amortised 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.

(b) Financial Assets at Fair Value Through Profit or Loss
The Group classifies the following financial assets at fair value through profit or loss (FVPL):

debt investments that do not qualify for measurement at either amortised cost or fair value
through Other Comprehensive Income;

equity investments that are held for trading, and

equity investments for which the entity has not elected to recognise fair value gains and losses
through Other Comprehensive Income.

(c) Financial Assets at Fair Value Through Other Comprehensive Income
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 recognise in this
category. The Group considers this category to be more relevant for assets of this type.

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 recognise 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.

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 recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.

Current and Deferred Income Tax
Income tax comprises current and deferred tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive income where the associated tax is also
recognised 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 recognised, 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 recognised 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 recognised 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 utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised 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
As noted above, the Group has applied IFRS 16 using the fully retrospective approach. The leases in place
in the prior year do not fall under the scope of IFRS 16, therefore the comparative information presented
for 2019 has not been restated. As a result, the comparative information provided continues to be
accounted for in accordance with the Group’s previous accounting policy.

Accounting Policy Applied from 1 July 2019
Leases are recognised 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:

fixed payments (including in-substance fixed payments), less any lease incentives receivable

variable lease payment that are based on an index or a rate, initially measured using the index or
rate as at the commencement date

amounts expected to be payable by the group under residual value guarantees

the exercise price of a purchase option if the group is reasonably certain to exercise that option, and

payments of penalties for terminating the lease, if the lease term reflects the group exercising
that option.

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 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:

the amount of the initial measurement of lease liability

any lease payments made at or before the commencement date less any lease incentives received

any initial direct costs

restoration costs

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.

Accounting Policy Applied Prior to 1 July 2019
Until 30 June 2019, Leases which transfer substantially all the risks and rewards of ownership of an asset
were treated as a finance lease. Assets held under finance leases were capitalised at their fair value at the
inception of the lease and depreciated over the estimated useful economic life of the asset or lease term if
shorter. The finance charges were allocated to the income statement in proportion to the capital amount
outstanding. All other leases were classified as operating leases. Operating lease rentals were charged to
the income statement in equal annual amounts over the lease term.

Employee Benefits

(a) Pension Obligations
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.

(b) Share-Based Compensation
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 recognises 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
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
recognised for any subsequent write-down of the asset to fair value less costs to sell.

4. Financial Risk Management

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.

(a) Market Risk

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 recognised assets and liabilities.

(b) Credit Risk
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.

(c) Liquidity Risk
The Company’s continued future operations depend on its ability to raise sufficient working capital
through the issue of share capital and generate revenue.

5. Capital Risk Management
The Company manages its capital to ensure that it will be able to continue as a going concern while
maximising the return to stakeholders. The Company’s capital structure primarily consists of equity
attributable to the owners, comprising issued capital, reserves and retained losses.

6. Critical Accounting Estimates and Judgments
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:

Capitalisation and recoverability of intangible assets (note 18);

Share based payments (note 25).

7. Segmental Reporting
The Group operates as a single segment. The Group is in its initial commercial launch phase and therefore
has not yet commenced revenue generation as of the end of FY20.

8. Expenses – Analysis by Nature

Year ended 30 June 2020

Period ended 30 June 2019

Employee benefit expense

Contract labour

Depreciation and amortisation

Professional fees

Laboratory supplies

Other expenses

Total administration expenses

$’000

4,639

1,376

1,244

1,654

366

1,799

11,078

$’000

2,083

1,273

1,141

1,312

660

1,087

7,556

9. Auditor’s Remuneration
During the year the Group (including its overseas subsidiary) obtained the following services from the
Company’s auditor and its associates:

Year ended
30 June
2020

$’000

Period ended
30 June
2019

$’000

Fees payable to the Company’s auditor for the
audit of the parent Company and consolidated
financial statements

Fees payable to the Company’s auditor for
other services:

Tax compliance services

Audit related assurance services

Total

10. Directors' Remuneration

Year ended
30 June
2020

$’000

Period ended
30 June
2019

$’000

Aggregate emoluments

Share based payments

Contribution to defined
contribution pension scheme

Total

945

230

1,203

500

185

692

Retirement benefits are accruing to 1 current director under a defined contribution scheme. See further
disclosures within the Remuneration Report on pages 34. The highest paid director received aggregate
emoluments, excluding the effect of the share based payments charge, totalling $488,000 (2019: $396,000).

11. Employee Benefit Expense

Group
Year ended
30 June
2020

Group
Period ended
30 June
2019
(RESTATED)

Company
Year ended
30 June
2020

Company
Period ended
30 June
2019
(RESTATED)

$’000

Wages and salaries

Social security costs

Share based
payment expenses

2,712

231

1,696

866

1,137

Total

4,639

2,078

215

172

387

343

412

12. Monthly Average Number of People Employed
The monthly average number of people (including Executive Directors) employed was

Group
Year ended
30 June
2020

Company
Year ended
30 June
2020

Group
Period ended
30 June
2020

Company
Period ended
30 June
2020

Administration

Research and
development

Total

6.3

12.6

6.3

12.6

3.9

1.5

5.4

1.4

1.0

2.4

The total number of employees (FTEs) in the Group at 30 June 2020 was 8.5, and in the Company was 8.5.

13. Finance Income and Costs

Year ended
30 June
2020

$’000

194

339

531

Finance costs:

Interest expense

Finance income:

Interest income

Other income

Net finance income

Period ended
30 June
2019

$’000

14. Income Tax

Group

Deferred tax

Total deferred tax

Income tax credit

Year ended
30 June
2020

Period ended
30 June
2019

$’000

2,319

$’000

959

The Finance Act 2015 which was substantively enacted in 2015 included legislation to reduce the main rate
of UK corporation tax to 19% from 1 April 2017 and the Finance Act 2016 which was substantively enacted
in 2016 included legislation to reduce the main rate of UK corporation tax to 17% from 1 April 2020. On 18
November 2019, the government pledged to put the planned corporation tax reduction from 19% to 17%
on hold. This was substantively enacted on March 17 2020.

The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the
standard tax rate applicable to the losses of the consolidated entities as follows:

Loss before tax

Tax calculated at domestic tax rates applicable to the UK
standard rate of tax of 19%

Tax effects of:

Expenses not deductible for tax purposes

Losses on which no deferred tax asset is recognized

Other movements

Tax Credit

Prior year Deferred Tax

Deferred tax asset

Year ended
30 June
2020

Period ended
30 June
2020

$’000

10,610

2,016

(159)

(501)

1,360

959

2,319

7,537

1,432

(217)

(257)

959

Deferred tax assets are recognised 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. No deferred asset is
calculated on losses in the UK totalling $1,794,000 where the probability of future utilisation is considered
too remote.

15. Earnings Per Share
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
2020

Period ended
30 June
2019
(RESTATED)

$’000

Loss attributable to owners of the parent

(9,250)

(6,578)

Weighted average number of ordinary shares in issue

59,079,522

37,332,983

Basic and diluted loss per share

(0.16)

(0.18)

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.

The Company has one category of dilutive potential ordinary share, being share options (see note 25).
The potential shares were not dilutive in the period as the Group made a loss per share.

16. Dividends
No dividends to shareholders of the holding company were provided or paid during the period to
30 June 2020. The Board’s policy is to enhance shareholder value mainly through the growth of the
Group, which is currently in the early stages of its development. The Board will however consider the
payment of dividends if and when appropriate.

17. Property, Plant, and Equipment

Group

Fixtures
and fittings

$’000

Cost

At beginning of period

Additions

At 30 June 2019

Depreciation

At beginning of period

Charge for the period

At 30 June 2019

Net book value at 30 June 2019

Cost

At 1 July 2019

Additions

Transfer to - Assets Held for Sale

Foreign translation

At 30 June 2020

Depreciation

At 1 July 2019

Charge for the period

Transfer to - Assets Held
for Sale Depreciation

Foreign translation

At 30 June 2020

Net book value at 30 June 2020

309

278

309

862

(522)

650

(36)

580

The depreciation charge of $74k related to Property, Plant and Equipment has been charged to
administration expenses.

18. Intangible Fixed Assets

Group

Trademarks
trade names
& licences

Trade secrets

Development
costs

Total

$’000

Cost

At beginning of period

Additions

Foreign translation

At 30 June 2019

Amortisation

At beginning of period

Charge for the period

Foreign translation

At 30 June 2019

Net book value

At 30 June 2019

Cost

At 1 July 2019

Additions

Transfer to Assets
Held for Sale

Foreign translation

At 30 June 2020

Amortisation

At July 2019

Charge for the period

Transfer to Assets Held
for Sale

Foreign translation

At 30 June 2020

Net book value

At 30 June 2020

10,997

11,002

1,095

1,096

6,644

(3)

6,641

1,740

19,381

19,383

1,095

1,096

9,906

6,641

1,740

18,287

11,002

(1,261)

(275)

9,466

1,096

1,108

(114)

(117)

1,973

6,641

(239)

6,402

1,740

1,538

(55)

3,223

19,383

1,538

(1,261)

(569)

19,091

1,096

1,108

(114)

(117)

1,973

7,493

6,402

3,223

17,118

Amortisation expense of $1,108,000 has been charged to administration costs.

Licences entail agreements with Icahn School of Medicine at Mount Sinai for rights to intellectual property
and data to support the KidneyIntelX and FractalDx families of diagnostic assays. 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 amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the carrying amount exceeds its recoverable amount.

The Group has tested the carrying value for impairment at the balance sheet date. The recoverable
amount was assessed on the basis of value in use. The assessed value exceeded the carrying value and
no impairment loss was recognised. 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 10%. 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

Development Costs

15 years

The Company holds capitalised development costs with a cost and net value of $3,335,000. These have
not been placed into service as of the financial statements date.

19. Investments in Subsidiaries

At 30 June
2020

At 30 June
2019

Company

At beginning of period

Capital contribution
relating to share based
payment

Shares in Verici Dx Ltd

At end of period

$’000

771

1,493

2,264

$’000

771

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 26 October 2020.

Name of Company

Proportion held

Class of shareholding

Nature of business

Renalytix AI Inc.1

100%

Ordinary

Verici Dx Limited2

100%

Ordinary/Golden

Developer of artificial
intelligence-enabled
clinical diagnostic
soulutions for kidney
disease

Developer of tests
to understand how
patients will and are
responding to an organ
transplant

(1) Renalytix AI Inc. is incorporated in the United States of America and has their principal place of business at 1460 Broadway,
New York, New York 10036. Renalytix AI Inc. is included in the consolidation. The proporations of voting shares held by the parent
company do not differ from the proporation of Ordinary Shares held.

(2) In April 2020, the Group announced its intentions intentions to pursue a spin-off and potential admission to AIM of Verici Dx
in order to secure separate financial and management resources for the FractalDx portfolio with the goal of enabling accelerated
development.

The Group announced on July 8, 2020 that the share capital of Verici Dx had been re-designated into
59,416,134 A Shares of £0.001 each and one golden share of £0.001 (the ""Golden Share"") and that
Renalytix would retain the Golden Share and its associated controlling voting rights. The Golden Share will
be the only voting share in the capital of Verici. The capital contribution relating to share based payments
related to share options granted to employees and advisors of subsidiary undertakings in the Group.

20. Financial Instruments

Group

Group
30 June
2020

Group
30 June
2019

Company
30 June
2020

Company
30 June
2019

(a) Assets at amortised cost

$’000

Assets as per balance sheet

Intragroup receivable

Security deposits

Short term investments

Cash and cash equivalents

Total

982

13,293

14,346

9,288

9,337

21,956

10,860

2,441

24,397

3,045

13,905

Receivables in the analysis above are all categorised as “loans and receivables” for the Group and Company.

Short term investments relate to Treasury Bills with maturity dates in excess of three months.

(b) Liabilities at amortised cost

$'000

Group
30 June
2020

Group
30 June
2019

Company
30 June
2020

Company
30 June
2019

Liabilities as per balance sheet

Accounts payable

Accrued expenses

SBA PPP Funding

Lease liabilities

Total

2,245

654

255

367

3,521

315

412

727

158

251

357

412

Liabilities in the analysis above are all categorised as ‘other financial liabilities at amortised cost’ for the Group
and Company.

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 2020, in relation to each class of recognised 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:

(c)

AA-

AA+

Total

Group
At 30 June
2020

Group
At 30 June
2019

Company
At 30 June
2020

Company
At 30 June
2019

$’000

13,293

982

14,275

7,297

1,991

9,288

2,441

3,045

21. Trade and Other Receivables

Group
As at 30 June
2020

Group
As at 30 June
2019

Company
As at 30 June
2020

Company
As at 30 June
2019

$’000

Due from subsidiary

Due from affiliates

Total

21,956

10,860

Due to their short term nature, the Directors consider that the carrying amount of trade and other
receivables approximates to their fair value. The carrying amount of the trade and other receivables
balances denominated in GBP are £17,735 for the Company (2019 - £8,440).

22. Prepaids and Other Current Assets

Prepaids

Deferred Nasdaq Offering Costs

Prepaids and Other Current Assets

Group
As at 30 June
2020

Group
As at 30 June
2019

Company
As at 30 June
2020

Company
As at 30 June
2019

$’000

137

2,364

2,501

$’000

2,364

2,408

$’000

23. Cash and Cash Equivalents

Group
As at 30 June
2020

Group
As at 30 June
2019

Company
As at 30 June
2020

Company
As at 30 June
2019

$’000

Cash at Bank

Cash and cash
equivalents

13,293

9,288

2,441

3,045

The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.

24. Trade and Other Payables

Group
As at 30 June
2020

Group
As at 30 June
2019

Company
As at 30 June
2020

Company
As at 30 June
2019

$’000

Accounts payable

Payroll taxes payable

Accrued expenses

2,221

654

2,899

315

412

755

134

251

357

441

The carrying amount of the trade and other receivables balances denominated in GBP are £202 for the
Group and Company (2019 - £301).

25. Share Capital

Group and Company

At 15 March 2018

15-Mar-18 Formation

4-May-18 100:1 subdivision

24-Oct-18 4:1 subdivision

Movement

Total Number
of Shares

As at
30 June 2019

50,000

5,000,000

20,000,000

24-Oct-18 Biomarker business acquisition

15,427,704

35,427,704

6-Nov-18 Placing & offer (listing on AIM)

18,388,430

53,816,134

At 30 June 2019

53,816,134

29-Jul-19 Placing & Secondary Offering (AIM)

5,600,000

59,079,522

At 30 June 2020

59,079,522

Ordinary Shares have a par value of £0.0025 each. All issued shares are fully paid.

$’000

175

192

26. Share Premium Account
On May 15, 2020, our shareholders approved at a general meeting the reduction of our share capital by
the cancellation of our share premium account in its entirety in order to create realized profits, which was
confirmed by the High Court in England and Wales on June 9, 2020. This was necessary to increase our
distributable reserves to allow us to implement the distribution in specie for the FractalDx spin-off, whose
distribution was declared by our board of directors on July 7, 2020 and distributed on July 10, 2020.

27. Share Options and Share-Based Payments
On 23 October 2018 shareholders approved a share option scheme for certain senior employees and
consultants. Options are exercisable at a price equal to the price at which the Company’s Initial Public
Offering took place. With the exception of options over 80,724 shares, which vested immediately
on grant, the options vest equally over twelve quarters commencing from the grant date. If options
remain unexercised after the date one day before the tenth anniversary of grant, the options expire.
Employees have a six month service requirement after the date of grant before options are exercisable.
On termination of employment, options are forfeited either immediately or after a delayed expiry period,
depending on the circumstances of termination.

Details of the share options outstanding during the period are as follows:

General Employee
Share Option Plan

Average Exercise Price
Per Share (GBP)

Number of Options

As at 30 June 2019

Granted during the year

Outstanding at 30 June 2020

Exercisable at 30 June 2020

Vested and expected to vest at
30 June 2020

$’000

1.21

2.33

1.63

1.45

1.63

2,195,697

833,161

3,028,858

1,367,598

3,028,858

The fair value of each share option granted has been estimated using a Black-Scholes model and is
£0.70 - £1.85 ($0.97 - $2.38). The inputs into the model are a weighted average share price of £1.63 ($2.08),
exercise price of £2.41 ($3.10), expected volatility of 63.7%, no expected dividend yield, weighted-average
term of 5.74 years and weighted-average risk free interest rate of 1.7%. As of 30 June 2020 none of the
granted stock options have been exercised.

The aggregate fair value of the award is $3,866,121. The Group recognised total expenses of $1,696,338
($644,739 within R&D expense and $1,051,599 within G&A expense) relating to equity-settled share-based
payment transactions during the period to 30 June 2020. The weighted average remaining contractual
term of the options is 8.6 years.

28. Leases

(i) Amounts Recognised in the Statement of Financial Position

The balance sheet shows the following amounts relating to leases:

Group
As at 30 June
2020

Group
As at 30 June
2019

Company
As at 30 June
2020

Company
As at 30 June
2019

$’000

Right-of-use assets

Properties

Total right-of-use assets

Lease liabilities

Current

Non-current

Total lease liabilities

365

275

367

The Group has applied IFRS 16 "Leases" for the first time.

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.

(ii) Amounts Recognised in the Statement of Comprehensive Income

The statement of profit or loss shows the following amounts relating to leases:

Group
As at 30 June
2020

Group
As at 30 June
2019

Company
As at 30 June
2020

Company
As at 30 June
2019

$’000

Depreciation charge -
right-of-use assets

Properties

Total right-of-use

Interest expense
(included in finance cost)

The total cash outflow for leases in the year to 30 June 2020 was $61,826 for the Group and $Nil for the Company.

(iii) The Group’s Leasing Activities and How These Are Accounted For

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
extension options as described below.

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.

29. Notes Receivable

Company
In May 2020, the Group’s FractalDX related business was sold to Verici DX Limited (see Note XX) for
consideration totalling $2m which took the form of secured convertible debt (“the Notes”).

The Notes are for a maximum of $3m to allow for the inclusion of any additional charges.They are secured
by a debenture over Verici’s assets.

The Notes are interest free and will be redeemed, so far as not converted, on completion by Verici of a
fund raising; 12 months from the date of issue; or following a material breach.

Alternatively the Notes may be converted into ordinary shares in Verici at the Company’s option, subject
to certain conditions, at the equivalent price to that paid by investors on a fund raising, or at the price
used for any Distribution in Specie to the Company’s shareholders.

As at 30 June 2020 the total value of Notes outstanding was $2.106m

30. Inventories

Group
As at 30 June
2020

Group
As at 30 June
2019

Company
As at 30 June
2020

Company
As at 30 June
2019

Finished goods

$’000

326

$’000

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 2019: $Nil).

The cost of inventories recognised as expense and included in ‘cost of sales’ amounted to $Nil
(Year to 30 June 2019: $Nil).

The Company held no inventories at 30 June 2020 or 30 June 2019.

31. Borrowings

Paycheck Protection Program
On April 29, 2020, the Company, entered into an original loan agreement with Fortis Private Bank as the
lender (“Lender”) for a loan in an aggregate principal amount of $0.255 million (the “Loan”) pursuant to
the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security
(CARES) Act and implemented by the U.S. Small Business Administration. The Loan matures in two years
and bears interest at a rate of 1% per year, with all payments deferred through the six-month anniversary
of the date of the Loan. Principal and interest are payable monthly commencing on October 29, 2020
and may be prepaid by the Company at any time prior to maturity without penalty. The Company may
apply for forgiveness of amounts due under the Loan, with the amount of potential loan forgiveness to be
calculated in accordance with the requirements of the PPP based on payroll costs, any mortgage interest
payments, any covered rent payments and any covered utilities payments during the 8-24 week period
after the origination date of the Loan. The Company utilised the proceeds of the Loan for payroll and
other qualifying expenses, but there can be no assurances that any portion of the Loan will be forgiven.
The balance on the PPP loan was $0.255 million as of June 30, 2020 and has been classified as a current and
non-current liability in notes payable in the accompanying consolidated balance sheet at June 30, 2020.

32. Related Party Transactions
In October 2018, the Company purchased a worldwide exclusive license agreement with Joslin, that was
previously entered into with EKF in July 2017, in exchange for the issuance of 15,427,704 of the Company’s
ordinary shares.

EKF provided short-term loans to the Company in the form of notes payable. During the period from
March 15, 2018 (inception) through June 30, 2018 and for the year ended June 30, 2019, the Company
borrowed $0.4 million and $0.6 million, respectively. The notes bore interest at an annual rate of 5%
and the Company recognised $5,000 and $16,000 of interest expense during the period from March 15,
2018 (inception) through June 30, 2018 and for the year ended June 30, 2019. All outstanding principal
and accrued interest of $1.0 million and $21,000, respectively, was repaid in November 2018 upon
consummation of the Company’s IPO.

In May 2018, the Company secured its cornerstone license agreement with Mount Sinai ("ISMMS")
for research and clinical study work and intended commercialisation by the Company as discussed
previously. 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. Additionally, in December 2018, the Company executed its
option with ISMMS for the FractalDx license, which grants rights to technology and patents relating to a
series of potential diagnostics and prognostics in the field of kidney transplant and rejection.

Prior to the Company’s IPO on AIM in November 2018, the Company’s Chief Executive Officer and
Chief Financial Officer provided their respective services through a consulting agreement between
the Company and Renwick Capital, LLC. During the year ended June 20, 2019, the Company incurred
consulting services of $0.2 million. Upon consummation of the Company’s IPO, the Chief Executive
Officer and Chief Financial Officer became employee of the Company and the consulting agreement
with Renwick Capital, LLC as terminated.

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 to be provided under the Advisory Agreement was $2.0 million
and the fair value of the Class A units received from Kantaro was $1.9 million. A loss of $0.1 million was
recognized within equity in losses of affiliate in the accompanying consolidated statements of operations
and comprehensive loss. As of June 30, 2020, the total liability associated with the services was $1.9 million
of which $0.3 million is included within accrued expenses and other current liabilities and $1.6 million is
within other liabilities.

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). The Company loaned Kantaro $83,333 and had a note receivable for this
amount at June 30, 2020. In addition, the Company recognized losses of $50,000 on their investment in
Kantaro during the year ended June 30, 2020.

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:

ظ Demand Registration on Form F-3 – Mount Sinai is entitled to demand registrations on Form F-3,
if we are then eligible to register shares on Form F-3, including up to two underwritten offerings in
any 12-month period.

ظ Demand Registration on Form F-1 or Form S-1 – At any time following one year after the

completion of the global offering, if we are not eligible to register shares on Form F-3 or S-3, Mount
Sinai is entitled to a maximum of one demand registration on Form F-1 or Form S-1 during any
12-month period, subject to specified exceptions.

Piggyback Registration – Mount Sinai is entitled to certain piggyback registration rights, subject to
certain marketing and other limitations in the context of an underwritten offering.

Expenses – We will pay all registration expenses incident to the performance of our obligations
under the registration rights agreement.

ظ 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.

33. Contingent Liabilities
The Group has two contracts 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:

$1.5 million once worldwide sales of Licensed Products reach $50 million; and
$7.5 million once worldwide sales of Licensed Products reach $300 million.

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.

Mount Sinai FractalDx Licence Agreement
The Group is subject to the following one-off milestone payment obligations:
$250,000 upon receipt of certain regulatory clearance / approval
$250,000 upon receipt of U.S. CMS reimbursement code or PAMA reimbursement approval
$1 million once worldwide sales of Licensed Products reach $50 million
$4 million once worldwide sales reach $250 million

The Group has a contract with Joslin Diabetes Center under which the Group is liable for the following
costs and payments:

5% royalty on net sales of Joslin Licenced Products and Joslin Licenced Processes;
25% of royalties received by the Group from sublicensing;
A one-off milestone payment of $300,000 once total net sales reach $2 million; and
A one-off milestone payment of $1 million once total net sales reach $10 million.

34. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through to the date at
which the consolidated financial statements were available to be issued, and determined there are no
other items requiring disclosure beyond those disclosed below.

In July 2020, the Company closed an initial public offering (IPO) on Nasdaq Global Market, in which they
issued and sold 12,583,500 ordinary shares which converted into 6,291,740 American depository shares
at a public offering price of $13.50 per share. In addition, the Company completed a concurrent private
placement in Europe and other countries outside of the United States of 30,000 ordinary shares at a price
of £5.37 per ordinary share (at an exchange rate of GBP:USD 1:1.2563). The Company received net proceeds
of $76.1 million as a result of the offering.

In July 2020 the Company’s Board of Directors convened and declared a distribution in specie of shares
in Verici to trustees on trust for the Company’s shareholders. As a result, Verici’s share capital has been re-
designated into 59,416,134 A Shares of £0.001 each and 1 golden share of £0.001 (the “Golden Share”). The
Golden Share will be the only voting share in the capital of Verici and will be retained by the Company.
The Company’s shareholders on the register as at close of business on July 9, 2020 will receive one A Share
in Verici for every 1 ordinary share held in the Company. The value of each Verici A share at the time of
distribution was $0.015 per share.

We have entered into deeds of indemnity with our directors and we expect to enter into a new deed of
indemnity with each of our directors and executive officers in connection with the listing of our ADSs on
Nasdaq. The deeds of indemnity and our articles of association require us to indemnify our directors and
executive officers to the fullest extent permitted by law.

35. Ultimate Controlling Party
The Directors believe there to be no ultimate controlling party.

36. Assets and Liabilities of Disposal Group Classified as Held for Sale
In April 2020, the Group announced its intentions to pursue a spin-off and potential admission to AIM
of Verici Dx Limited in order to secure separate financial and management resources for the FractalDx
portfolio with the goal of enabling accelerated development.

On 7th July 2020 the Board declared a distribution in specie of shares in Verici to trustees on trust for the
Company’s shareholders. As such, the assets of Verici DX Limited have been classified as held for sale in
accordance with IFRS 5.The following Assets and liabilities were reclassified as held for sale as of 30 June
2020 as a result of the pending spin off.

As at
30 June
2020

Assets classified as held for sale

Prepaid Expenses

Property Plant and Equipment

Intangible Assets

Total assets of disposal group held for sale

490

1,204

1,705

37. Restatement of Previously Issued Financial Statements

Change in Volatility Assumption
The company has restated its previously issued Consolidated Financial Statements for the period ended
30 June 2019 to adjust for a change in accounting estimates relating to its share-based compensation.
Most significantly, the Company has revised the volatility rate used in the estimate of the fair value of
each share option award which has resulted in an increase in the fair value estimate and therefore a
higher share-based compensation expense in the period. The fair value of the awards is estimated using
a Black-Scholes model. Previously the volatility assumption was estimated using the average volatility
rate of Renalytix AI PLC’s (RENX) share price. Following discussions with its professional advisers, the
Company has now determined that due to the limited trading history of RENX stock it would be more
accurate to estimate volatility using the average historical volatility rate of eight peer companies. As a
result, the volatility rate used has been increased to 63.7% from the previously used rate of 23.0%. The
period to 30 June 2019 has been restated to show the impact of the increased volatility rate. The Company
believes that the updated volatility rate is more appropriate as it takes into consideration a wider range of
historical data. The revision resulted in an increase in Administrative Expenses in the Consolidated Income
Statement and of the Share-based payment reserve in the Consolidated Statement of Financial Position
of $605,000.

Reallocation of Stock Based Compensation
The company has restated its previously issued Consolidated Financial Statements for the period ended
30 June 2019 to reallocate a portion of the stock based compensation expense from RenalytixAI PLC
to RenalytixAI Inc. In 2019 the entire stock based compensation expense was booked on RenalytixAI
PLC's books. Stock based compensation should be booked on the entity that the individual employee
works for therefore an adjustment was made in the current year to properly allocate the portion of stock
based compensation attributable to Renalytix AI Inc. employees. The revision resulted in a decrease in
Stock Based Compensation in the Renalytix AI PLC Income Statement and an increase in Investment in
Renalytix AI Inc. in the Renalytix AI PLC Statement of Financial Position of $343,390. The revision resulted
in an increase in Stock Based Compensation in the Renalytix AI Inc. Income Statement and an Increase in
other reserves of $793,691. The restatement has no impact on the consolidated financial statements.

Income Statement

Administrative expenses

Operating loss

Finance costs

Loss before tax

Taxation

Loss for the period

Earnings per ordinary share
from continuing operations

Period to
30 June 2019
(As Presented)

Restatement
Impacts

Period to
30 June 2019
(Restated)

$’000

(6,955)

(6,936)

959

(5,977)

$’000

(601)

(a)

(601)

$’000

(7,556)

(7,537)

959

(6,578)

Basic and diluted

$(0.16)

$(0.02)

$(0.18)

(a) Entry was made to increase - Stock Based Compensation' by $604,803, off set by a $4,000 entry to Foreign
Translation Reserve

Statement of Financial Position

30 June
2019
(As Presented)

Restatement
Impacts

30 June
2019
(Restated)

$’000

Assets

Non-current assets

Property, plant and equipment

Intangible assets

Deferred tax assets

Total non-current assets

Current assets

Security Deposits

Inventories

Trade and other receivables

Prepaid and other current
assets

Cash and cash equivalents

Total current assets

Total assets

Equity attributable to
owners of the parent

Share capital

Share premium

Share-based payment reserve

Foreign currency reserves

Retained earnings

Total equity

Liabilities

Current liabilities

Trade and other payables

Total liabilities

Total equity and liabilities

278

18,287

959

19,524

9,288

9,398

28,922

175

34,032

532

(595)

(5,977)

28,167

755

28,922

605

(a)

(4)

(b)

(601)

(c)

278

18,287

959

19,524

9,288

9,398

28,922

175

34,032

1,137

(599)

(6,578)

28,167

755

28,922

Consolidated Statement of Changes in Equity

For the Period Ended 30 June 2020

Share
Capital

Share
Premium

Share-based
Payment
Reserve

Foreign
Currency
Reserve

Retained
Earnings

Total
Equity

Restatement
Impact

Total
Equity
(Restated)

$’000

At 15 June 2018

Comprehensive income

Loss for the period

Other comprehensive
income

Currency translation
differences

Total comprehensive
income

Transactions with
owners

Issue of shares

Less issue costs

Share-based payments

Total transactions with
owners of the parent,
recognised directly in
equity

At 30 June
and 1 July 2019

175

35,522

(1,490)

532

109

34,032

532

(595)

(5,977)

(601) (a)

(6,578)

(595)

(4) (b)

(599)

(5,977)

(6,572)

(605)

(7,177)

35,697

(1,490)

532

35,697

(1,490)

(605) (c)

1,137

34,739

605

35,344

175

34,032

532

(595)

(5,977)

28,167

Company Statement of Changes in Equity

For the Period Ended 30 June 2020

Share Capital

Share
Premium

Share-based
Payment
Reserve

Foreign
Currency
Reserve

Retained
Earnings

Total
Equity

Restatement
Impact

Total
Equity
(Restated)

$’000

175

35,522

(1,490)

532

175

34,032

532

(593)

(2,369)

193 (a)

(2,176)

(593)

(17) (b)

(610)

(2,369)

(2,962)

176

(2,786)

35,697

(1,490)

532

35,697

(1,490)

(605) (c)

1,137

34,739

605

35,344

175

34,032

532

(593)

(2,369)

31,777

781

32,558

At 15 March 2018

Comprehensive income

Loss for the period

Other comprehensive
income

Currency translation
differences

Total comprehensive
income

Transactions with
owners

Issue of shares

Less issue costs

Share-based payments

Total transactions with
owners of the parent,
recognised directly in
equity

At 30 June
and 1 July 2019

(a) As mentioned above an entry was made to correctly allocate the Share Based compensation expense between RenalytixAI PLC and RenalytixAI Inc.
Since all expenses were booked on PLC in prior year the entry removed Share Based compensation expense from PLC's books thus decreasing the loss
for the period.
(b) Entry was made to increase Stock Based Compensation by $604,803, increased share based payments for the period. Note all share based
payments are made out of the Company on behalf of the group. Actual expenses are booked on the respective entity's books.

The restatement had no impact on the Group or Company statement of Cash Flows.

38. Equity Method Investments
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.

(A) Interest in associates and joint ventures
Set out below are the associates and joint ventures of the Group as of 30 June 2020 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

2020

2019

2020

2019

2020

2019

Kantaro Biosciences LLC

USA

25%

Joint Venture

Equity Method

(*)

1,937,000

Total equity
accounted investments

(*) - Private Entity -
No quoted price available

1,937,000

(B) Interest in associates and joint ventures

Commitments - Joint Ventures

Commitment to provide additional loan to Kantaro

Total

As at
30 June
2020

166,667

(B) Kantaro Financial Statements

Kantaro Balance Sheet

Assets

Cash and cash equivalents

Prepaid Services

Total assets

Equity attributable to owners
of the parent

Member's Equity

Net Income

Total equity

Liabilities

Current liabilities

Trade and other payables

Note Payable - RenalytixAI

Total Liabilities

As at
30 June
2020

26,905

1,811,373

1,838,278

(2,000,000)

252,555

(1,747,445)

(7,500)

(83,333)

(90,833)

Total equity and liabilities

(1,838,278)

Kantaro Income Statement

Period to
30 June
2020

Continuing operations

Administrative Expenses

(252,555)

Operating loss

(252,555)

Profit/(Loss) attributable to Kantaro

(252,555)

RenalytixAI Equity Interest in Kantaro

RenalytixAI Portion of Net Profit (Loss)

25%

(63,139)

Additional Financial Information

The information on pages 81 to 82 is presented in order to assist investors with their review of these
accounts. The comparative period within the annual report covers the period from the inception of the
Company on 15 March 2018 to 30 June 2019 while the information below presents figures for the fiscal
year to 30 June 2020 and for the fiscal year to 30 June 2019. It is unaudited and does not form part of the
statutory accounts.

Consolidated Income Statement
For the Year Ended 30 June 2020

Continuing operations

Administrative expenses

Year to 30 June
2020

Year to 30 June
2019
(RESTATED)

$'000

(11,078)

$'000

(7,138)

Operating loss

(11,078)

(7,138)

Share of net Profit (Loss) of associates and joint
ventures accounted for using the equity method

Finance income - net

Loss before tax

Taxation

(63)

531

(10,610)

1,360

(7,119)

959

Loss for the period

(9,250)

(6,160)

Earnings per Ordinary share
from continuing operations

Basic and diluted

$ (0.16)

$ (0.17)

Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2020

Loss for the period – continuing operations

Other comprehensive income:

Items that may be subsequently
reclassified to profit or loss

Currency translation differences

Other comprehensive loss for the period

Total comprehensive loss for the period

Year to 30 June
2020

Year to 30 June
2019
(RESTATED)

$'000

(9,250)

$'000

(6,160)

(1,265)

(603)

(10,515)

(6,763)

Reconciliation of IFRS to US GAAP (Unaudited)
Since Renalytix 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.

Renalytix Form 20-F, which is based on US GAAP, contains differences from its Annual Repor,t which
is based on IFRS. The Form 20-F and Annual Report are available on the Company's website (www.
renalytixai.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:

Reconciliation of Net Loss
($ thousands)

Net loss in accordance with IFRS

(a) Development expenditures

(b) Deferred tax assets

(d) Other adjustments

Total adjustments

Net loss in accordance with US GAAP

30 June,
2020

30 June,
2019

(9,250)

293

(1,360)

537

(64)

(594)

(9,844)

(6,578)

(18,287)

(959)

612

(17,089)

(35,723)

(42,301)

(a) Development Expenditures
Under IFRS, the acquisition of licenses and subsequent development efforts are capitalized and
presented as intangible assets. Under U.S. GAAP, such costs are expensed as incurred until technological
feasibility has been achieved or the assets are deemed to have future alternative use.

(b) Deferred Tax Assets
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized based on available evidence. Under U.S. GAAP, a full valuation allowance has
been applied. Under IFRS, a partial valuation allowance has been applied.

(c) Stock Compensation Expense
In addition, stock based compensation is recognized on a straight line basis under U.S. GAAP and a
graded vesting basis under IFRS.

(d) Other Adjustments
During the year ended June 30, 2019, the value of the ordinary shares issued in connection with the
acquisition of the Joslin license was determined based on the estimated value of the license under
IFRS. Under U.S. GAAP, the value of the ordinary shares was determined based upon the initial public
offering price of the Company's ordinary shares. This resulted in a difference of roughly $17.6 million. The
remaining difference of $0.1 million represents other immaterial audit adjustments. During the year
ended June 30, 2020 the differences were related to immaterial audit adjustments.

Reconciliation of Statement of Financial Position

GAAP
30 June
2020

IFRS
30 June
2020

GAAP vs IFRS
Difference

Assets

Current assets:

Cash and cash equivalents

13,293 $

Short-term investments

Assets held for sale

Prepaid expenses and other current assets

Related-party receivable

Total current assets

Property and equipment, net

Intangibles, net

Deferred tax assets

Note receivable

Investment in affiliate

Right of use asset

Deferred Offering Costs

Total assets

Liabilities and stockholders’ equity

Current liabilities:

Note payable - current

Accounts payable

Accrued expenses and other
current liabilities

Payable to affiliate - current

Current lease liability

Total current liabilities

Note payable - noncurrent

Non-current lease liabilities

Payable to affiliate - noncurrent

Total liabilities

Stockholders’ (deficit) equity:

982

551

14,844

1,655

1,937

2,364

982

1,705

2,898

18,896

580

17,118

2,319

1,937

365

(1,705) (a)

(2,347) (b)

(4,052)

1,075 (c)

(17,118) (d)

(2,319) (e)

(365)

(f)

2,364 (g)

20,883 $

41,298 $

(20,415)

120

2,218

683

271

3,292

135

1,544

4,971

121

2,221

678

271

3,383

134

275

1,544

5,336

(1) (h)

(3) (h)

5 (h)

(92)

(f)

(91)

1 (h)

(275)

(f)

(365)

Ordinary shares, £0.0025 par value per share: 62,444,992
and 56,011,831 shares authorized at June 30, 2020 and
June 30, 2019, respectively; 59,416,134, 53,816,134 and
20,000,000 shares issued and outstanding at June 30,
2020, 2019 and 2018, respectively

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated deficit

Total stockholders' (deficit) equity

179

192

(13)

(h)

69,650

(1,200)

(52,717)

15,912

2,833

(1,915)

34,852

35,962

66,817

(i)

715

(j)

(87,569)

(k)

(20,050)

Total liabilities and stockholders' (deficit) equity

20,883 $

41,298 $

(20,415)

(a) Under IFRS, the acquisition of licenses and subsequent development efforts associated with FractalDx are capitalized and
presented as intangible assets. Under U.S. GAAP, such costs are expensed as incurred until technological feasibility has been
achieved or the assets are deemed to have future alternative use. In addition, under IFRS the property and equipment ($0.5 million)
associated with FractalDx that are being contributed to Verici have been reclassified as assets held for sale.

(b) Under IFRS, the deferred offering costs below ($2,364) are classified as an other current asset on the Balance Sheet.

(c) Differences are primarily attributable to $0.6 million of capitalized software costs which are recorded as property and equipment
under U.S. GAAP and Intangibles under IFRS. In addition, under IFRS the property and equipment ($0.5 million) associated with
FractalDx that are being contributed to Verici have been reclassified as assets held for sale.

(d) Under IFRS, the acquisition of licenses and subsequent development efforts are capitalized and presented as intangible assets.
Under U.S. GAAP, such costs are expensed as incurred until technological feasibility has been achieved or the assets are deemed
to have future alternative use. In addition, $0.6 million of capitalized software costs which are recorded as property and equipment
under US GAAP and Intangibles under IFRS.

(e) Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be
realized based on available evidence. Under U.S. GAAP, a full valuation allowance has been applied. Under IFRS, a partial valuation
allowance has been applied.

(f) Represents the adoption of IFRS 16 in connection with the Company's commercial laboratory in Utah. The Company has deferred
the adoption of ASC 842 under U.S. GAAP until July 1, 2022.

(g) Under IFRS, the deferred offering costs ($2,364) are classified as an other current asset on the Balance Sheet

(h) Represents other immaterial audit adjustments.

(i) Represents a dividend declaration under IFRS in anticipation of a distribution of FractalDx net assets to the shareholders of Verici.
In addition, stock based compensation is recognized on a straight line basis under U.S. GAAP and a graded vesting basis under IFRS.

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

(k) Represents a dividend declaration under IFRS in anticipation of a distribution of FractalDx net assets to the shareholders of Verici
and differences noted within the Company's consolidated statement of operations and comprehensive loss.

Assets

Current assets:

Cash

Short-term investments

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Intangibles, net

Deferred tax assets

Total assets

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

Accrued expenses and other
current liabilities

Total current liabilities

Total liabilities

Stockholders’ (deficit) equity:

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated deficit

Total stockholders' (deficit) equity

GAAP
30 June
2019

IFRS
30 June
2019

GAAP vs IFRS
Difference

8,201 $

9,288 $

(1,087) (a)

994

227

9,422

278

110

9,398

278

18,287

959

994 (b)

117 (c)

(18,287) (d)

(959) (e)

9,700 $

28,922 $

(19,222)

317

832

1,149

316

439

755

1 (c)

393 (c)

394

162

175

(13) (c)

52,084

(822)

(42,873)

8,551

35,169

(599)

(6,578)

28,167

16,915 (i)

(223)

(j)

(36,295) (k)

(19,616)

(19,222)

Total liabilities and stockholders' (deficit) equity

9,700 $

28,922 $

(a) Reclassification of investments with maturity dates of 91 days or greater under U.S. GAAP and other immaterial adjustments.

(b) Reclassification of investments with maturity dates of 91 days or greater under U.S. GAAP.

(i) Under IFRS, the value of the ordinary shares issued in connection with the acquisition of the Joslin license was determined based
on the estimated value of the license. Under U.S. GAAP, the value of the ordinary shares was determined based upon the initial
public offering price of the Company's ordinary shares. Stock based compensation is recognized on a straight line basis under U.S.
GAAP and a graded vesting basis under IFRS.

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

(k) Represents differences noted within the Company's consolidated statement of operations and comprehensive loss.