DEF: Lunai Bioworks Seeks Shareholder Approval Amid Losses

Lunai Bioworks, Inc. will hold its 2025 Annual Meeting to vote on key governance matters, including an expanded equity incentive plan, as the company navigates significant net losses and recent dilutive debt restructuring.

Summary

• The 2025 Annual Meeting of Stockholders will be held virtually on Friday, October 31, 2025, at 10:00 a.m., Eastern Time.
• Stockholders of record as of October 3, 2025, are entitled to vote.
• Key proposals include the election of four directors, a non-binding advisory vote on executive compensation (Say-on-Pay), ratification of Sadler, Gibb & Associates LLC as the independent auditor for fiscal year ending June 30, 2026, and approval of proposed amendments to the Renovaro Biosciences, Inc. 2023 Equity Incentive Plan.
• The Board of Directors recommends a vote FOR all four director nominees and FOR all other proposals.
• As of October 3, 2025, 23,178,153 shares of Common Stock were issued and outstanding and entitled to vote.
• A 1-for-10 reverse stock split was effected on September 30, 2025, with all shares and per-share data retroactively adjusted.
• The company reported net losses of $178 million for fiscal year 2025, $88 million for fiscal year 2024, and $40 million for fiscal year 2023.
• A debt restructuring on July 7, 2025, involved exchanging $9.7 million in secured promissory notes for $16.1 million in new convertible promissory notes (a 65% premium), which were immediately converted into 5.36 million shares of common stock at $3.00 per share.

Sentiment

Score: 3

Explanation: The company exhibits significant financial distress, marked by increasing net losses and a highly dilutive debt restructuring that involved a substantial premium and shareholder dilution. This indicates a precarious financial position and a substantial erosion of shareholder value. High executive turnover further signals instability. While the proposed governance changes and incentive plan aim to retain talent, the current financial performance and recent capital structure changes are deeply concerning for investors.

Positives

• The Board of Directors unanimously recommends approval for all proposals, indicating internal alignment on strategic and governance matters.
• The proposed amendments to the 2023 Equity Incentive Plan incorporate several corporate governance best practices, including an evergreen provision for share reserve, prohibition of repricing without stockholder approval, no discounted stock options, minimum one-year vesting requirements (with exceptions), and a clawback policy.
• A Clawback Policy has been adopted, allowing for the recovery of incentive compensation in the event of an accounting restatement due to material noncompliance with financial reporting requirements.
• The company has adopted an Insider Trading Policy and Anti-Hedging and Anti-Pledging Policies to promote compliance with securities laws.
• A Corporate Code of Ethics and Conduct is in place, applicable to employees, officers, directors, agents, and contractors.

Negatives

• The company reported increasing net losses over the past three fiscal years: $40 million in FY2023, $88 million in FY2024, and $178 million in FY2025.
• A significant debt restructuring on July 7, 2025, involved exchanging $9.7 million in secured notes for $16.1 million in new convertible notes (a 65% premium), which were immediately converted into 5.36 million shares, indicating financial distress and substantial dilution for existing shareholders.
• There has been notable executive turnover, including the resignation of the CEO (Mark Dybul) and COO (Francois Binette), and the resignation and subsequent removal of CFOs (Luisa Puche and Simon Tarsh) within the fiscal year 2025.
• The company repriced 384,993 eligible employee and consultant options on February 13, 2024, to an exercise price of $19.2 per share, which could be viewed negatively by shareholders if the original options were underwater.
• 5,850 stock options issued to a former interim Chief Financial Officer were clawed back and canceled during the period ended March 31, 2025.

Risks

• Deferred compensation arrangements that do not satisfy Section 409A of the Code could lead to additional taxes and penalties for participants.
• If an individual's rights under the Amended Incentive Plan are accelerated due to a change in control and they are a disqualified individual under Section 280G of the Code, it could result in a 20% federal excise tax and the loss of a compensation deduction for the company.
• The company may not deduct compensation exceeding $1,000,000 paid to covered employees under Section 162(m) of the Code.

Future Outlook

The company's future success is highly dependent on its ability to attract, retain, and motivate key personnel in the competitive biotechnology market, which the Amended Incentive Plan is designed to support. The Board believes the increased share reserve under the Amended Incentive Plan, including an evergreen provision, will be sufficient for future equity awards. The next advisory vote on executive compensation is scheduled for the 2026 annual meeting.

Management Comments

• "On behalf of our entire Board of Directors, we thank you for your continued support." David Weinstein, Chief Executive Officer and Director.
• The Board has determined that each proposal listed is in the best interests of the Company and its stockholders and has approved each proposal.
• The Board believes that all of the Company Nominees possess personal and professional integrity, good judgment, a high level of ability and business acumen.
• The company believes that an affordable, market-competitive blend of base salary, short-term incentives and long-term incentives is key to its success.
• The executive compensation program is designed to attract, motivate, reward and retain the senior management talent capable of delivering on the company's strategy and goals.

Industry Context

Operating in the competitive biotechnology space, Lunai Bioworks emphasizes the critical need for competitive equity compensation packages to attract and retain talent. The company's strategic direction, as indicated by Dr. Mark Collins' background in AI-driven drug discovery, aligns with a growing trend of leveraging advanced technologies in the life sciences sector.

Comparison to Industry Standards

• The director compensation program is structured to reflect competitive practices for a NASDAQ listed company.
• The Compensation Committee periodically assesses executive officer compensation in relation to companies of comparable size, industry, and complexity.
• The company's compensation programs are designed to align with pay-for-performance principles and long-term stockholder interests, a common goal across industries, particularly in competitive sectors like biotechnology.

Management Changes

Corporate Governance

Related Party Transactions

• On August 23, 2024, Avram Miller, a former director, forfeited 83,333 shares and was granted an option to purchase 97,826 shares for advisory services.
• On July 7, 2025, Lunai Bioworks Inc. entered into an Exchange Agreement with certain accredited investors, all of whom are existing shareholders, to exchange $9.7 million in secured promissory notes for $16.1 million in new convertible promissory notes, which were immediately converted into 5.36 million shares of common stock.
• From June 4, 2025, to June 14, 2025, the company entered into agreements with Paseco ApS (a Danish entity controlled by a shareholder) and Laksya Ventures Inc. (a shareholder) to issue Promissory Notes for $3,450,000.
• From October 21, 2024, to January 24, 2025, the company entered into agreements with Paseco ApS to issue Promissory Notes for $2,650,000.
• From November 12, 2024, to December 3, 2024, Renovaro Cube entered into an agreement with Paseco ApS to issue Promissory Notes for $450,000.
• On January 2, 2024, the company entered into an agreement with RS Bio ApS (a Danish entity controlled by a shareholder) to issue a $526,315 Secured Promissory Note. On February 24, 2025, RS Bio assigned its ownership rights to Rene Sindlev (a shareholder).
• On November 3, 2023, the company entered into an agreement with RS Bio to issue a $1,000,000 Promissory Note. On February 24, 2025, RS Bio assigned its ownership rights to Rene Sindlev.
• On March 30, 2020, the company issued a $5,000,000 Promissory Note to Paseco ApS, which was assigned to Rene Sindlev on February 24, 2025.
• On August 1, 2023, RS Bio purchased 7,012 Units for $500,000 in a Private Placement. Paseco ApS converted $2,000,000 of its Promissory Note into 28,051 Units and purchased 6,312 Units for $450,000 in the same Private Placement.
• The company had a consulting agreement with Paseco ApS for business advisory services, issuing 100,000 restricted common shares in FY2024 as payment. This agreement was not extended past February 24, 2024.
• On October 14, 2024, the company entered into a consulting agreement with Laksya Ventures Inc. and issued 50,000 shares of Common Stock for consulting services valued at $275,000.

Stakeholder Impact

• Shareholders face significant dilution from the recent debt-to-equity conversion (5.36 million shares) and potential future dilution from the expanded equity incentive plan. They have the opportunity to vote on key corporate governance and compensation matters.
• Employees and management are impacted by the executive compensation structure and the proposed equity incentive plan, which is designed to attract, motivate, reward, and retain talent.
• Creditors involved in the debt restructuring received a 65% premium on their secured notes, indicating the company's efforts to manage its debt obligations, albeit at a high cost.
• The independent auditor, Sadler, Gibb & Associates LLC, is proposed for ratification, ensuring continued external oversight of financial statements.

Next Steps

• Stockholders will vote on the proposed matters at the Annual Meeting on October 31, 2025.
• Preliminary or final voting results will be published in a Current Report on Form 8-K within four business days of the Annual Meeting.
• The next advisory vote to approve executive compensation will occur at the 2026 annual meeting.
• The Amended Incentive Plan's evergreen provision will automatically increase the number of Authorized Shares on each July 1, starting July 1, 2026.

Key Dates

Recommendation

The company's financial health is severely deteriorating, evidenced by rapidly increasing net losses ($178 million in FY2025, a substantial increase from previous years). The recent debt restructuring, which involved exchanging $9.7 million in secured notes for $16.1 million in convertible notes (a 65% premium) and subsequent conversion into 5.36 million shares, signals acute financial distress and has resulted in significant shareholder dilution. High executive turnover further exacerbates concerns about stability and strategic execution. While governance improvements are proposed, the fundamental financial performance and capital structure changes present an extremely high risk profile, making the stock highly unattractive for investment.

Keywords

Lunai Bioworks, LNAI, Proxy Statement, Annual Meeting, Corporate Governance, Executive Compensation, Equity Incentive Plan, Stock Options, Debt Restructuring, Biotechnology, Financial Reporting, Director Election, Auditor Ratification, Reverse Stock Split