CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”) contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this ~~report,~~Report, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements appear in a number of places, including, but not limited to “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “should,” “plan,” “project” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:

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our projected operating or financial results, including anticipated cash flows used in operations;

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our expectations regarding capital expenditures, research and development ~~expense~~expenses and other payments;

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our expectation about the extent and duration of the COVID-19 pandemic (“COVID-19”) on our business;

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our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing;

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our ability to obtain regulatory approvals and the speed of such approvals, for our pharmaceutical drugs and diagnostics; and

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our future dependence on third party manufacturers or strategic partners to manufacture any of our pharmaceutical drugs and diagnostics that receive regulatory approval, and our ability to identify strategic partners and enter into license, co-development, collaboration or similar arrangements.

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known orand unknown risks, uncertainties and other factors including, ~~among others:~~but not limited to, the risks described in Part II, Item 1.A Risk Factors, as well as “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (the “2022 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on September 15, 2022.

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~~the loss of key management personnel or sponsored research partners on whom we depend;~~

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~~the progress and results of clinical trials for our product candidates;~~

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~~our ability to navigate the regulatory approval process in the U.S. and other countries, and our success in obtaining required regulatory approvals for our product candidates;~~

•

~~commercial developments for products that compete with our product candidates;~~

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~~the actual and perceived effectiveness of our product candidates, and how those product candidates compare to competitive products;~~

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~~the strength of our intellectual property protection, and our success in avoiding infringing the intellectual property rights of others;~~

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~~adverse developments in our research and development activities;~~

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~~potential liability if our product candidates cause illness, injury or death, or adverse publicity from any such events;~~

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~~our ability to operate our business efficiently, manage capital expenditures and costs (including general and administrative expenses) and obtain financing when required;~~

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~~our expectations with respect to our acquisition activity.~~

In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included elsewhere in this ~~Quarterly~~ Report, ~~on Form 10-Q,~~ including “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-looking statements contained in this ~~Quarterly~~ Report ~~of Form 10-Q~~ are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this ~~Quarterly~~ Report, ~~on Form 10-Q,~~ except as otherwise required by applicable law.

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PART I –- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Rezolute, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

December 31, 2017 June 30, 2017
(Unaudited)
Assets

Current assets
Cash $ 868,071 $ 4,486,538
Other current assets 295,728 442,015
Total current assets 1,163,799 4,928,553

Non-current assets
Fixed assets, net 4,797,823 5,325,401
Intangible assets, net 40,676 44,322
Deferred lease asset 74,831 86,293
Deposits 244,341 244,341
Total non-current assets 5,157,671 5,700,357

Total Assets $ 6,321,470 $ 10,628,910

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable and accrued expenses $ 2,121,854 $ 1,652,677
Convertible notes payable 10,000 10,000
Deferred lease liability, current portion 116,234 105,295
Interest payable 2,762 2,762
Warrant derivative liability 90 588
Total current liabilities 2,250,940 1,771,322

Non-current liabilities:
Deferred lease liability, less current portion 243,686 304,575
Deposit liability 25,046 25,046
Total non-current liabilities 268,732 329,621

Total Liabilities 2,519,672 2,100,943

Commitments and Contingencies (Note 10)

Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized; none issued and outstanding - -
Common stock, $0.001 par value, 200,000,000 shares authorized; 54,073,309 and 49,228,640 shares issued and outstanding, December 31, 2017 and June 30, 2017 54,075 49,230
Additional paid-in capital 80,472,885 72,800,699
Accumulated deficit (76,725,162 ) (64,321,962 )
Total stockholders’ equity 3,801,798 8,527,967

Total Liabilities and Stockholders’ Equity $ 6,321,470 $ 10,628,910


	March 31,		June 30,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	33,743	$	150,410
Investments in marketable debt securities		69,319		—
Prepaid expenses and other		2,464		1,694
Total current assets		105,526		152,104

Long-term assets:
Investments in marketable debt securities		26,210		—
Right-of-use assets		2,172		152
Property and equipment, net		149		16
Deposits and other		148		148
Total assets	$	134,205	$	152,420

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	2,947	$	1,132
Accrued liabilities:
Accrued clinical and other		1,121		979
Insurance premiums		—		243
Current portion of operating lease liabilities		319		108
Total current liabilities		4,387		2,462

Long term liabilities:
Operating lease liabilities, net of current portion		2,055		80
Embedded derivative liabilities		447		407
Total liabilities		6,889		2,949

Commitments and contingencies (Notes 5, 9 and 10)

Shareholders' equity:
Preferred stock, $0.001 par value; 400 shares authorized; no shares issued and outstanding		—		—
Common stock, $0.001 par value; 100,000 shares authorized; issued and outstanding 36,827 and 33,582 shares as of March 31, 2023 and June 30, 2022, respectively		37		34
Additional paid-in capital		375,668		358,635
Accumulated other comprehensive loss		(132)		—
Accumulated deficit		(248,257)		(209,198)
Total shareholders’ equity		127,316		149,471
Total liabilities and shareholders’ equity	$	134,205	$	152,420

~~See~~The accompanying notes toare an integral part of these unaudited condensed consolidated financial ~~statements~~statements.

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Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts)

Three Months Six Months
Ended December 31, Ended December 31,
2017 2016 2017 2016
(Unaudited) (Unaudited)
Operating expenses
Research and development
Compensation and benefits $ 1,482,946 $ 1,909,518 $ 2,983,810 $ 3,213,358
Consultants and outside costs 233,798 194,783 364,159 466,258
Material manufacturing costs 227,602 567,430 653,691 1,079,137
Clinical trial costs 581,988 - 1,561,754 -
License costs 407,605 - 1,178,505 -
Facilities and other costs 479,149 403,648 981,807 802,555
3,413,088 3,075,379 7,723,726 5,561,308

General and administrative
Compensation and benefits 1,672,494 1,285,052 3,467,921 2,151,953
Professional fees 213,399 139,865 436,993 286,016
Investor relations 133,705 87,428 193,576 155,535
General and administrative 318,272 301,520 645,872 558,115
2,337,870 1,813,865 4,744,362 3,151,619

Total operating expenses 5,750,958 4,889,244 12,468,088 8,712,927

Loss from operations (5,750,958 ) (4,889,244 ) (12,468,088 ) (8,712,927 )

Other income (expense)
Interest income 524 - 861 -
Rent income 31,838 - 63,676 -
Interest expense (147 ) - (147 ) (1,595 )
Derivative gains 156 1,313 498 10,725
Total other income 32,371 1,313 64,888 9,130

Net loss $ (5,718,587 ) $ (4,887,931 ) $ (12,403,200 ) $ (8,703,797 )

Net loss per common share - basic and diluted $ (0.11 ) $ (0.12 ) $ (0.23 ) $ (0.23 )

Weighted average number of common shares outstanding - basic and diluted 53,762,358 40,788,241 53,327,558 38,091,406


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	14,231	$	8,686	$	32,880	$	23,912
General and administrative		2,911		2,068		8,872		6,632
Total operating expenses		17,142		10,754		41,752		30,544
Operating loss		(17,142)		(10,754)		(41,752)		(30,544)
Non-operating income (expense):
Interest and other income, net		1,484		—		2,733		13
Loss from change in fair value of derivative liabilities		(14)		(12)		(40)		(8)
Employee retention credit		—		—		—		231
Interest expense		—		(442)		—		(1,329)
Total non-operating income (expense), net		1,470		(454)		2,693		(1,093)

Net loss	$	(15,672)	$	(11,208)	$	(39,059)	$	(31,637)

Other comprehensive loss:
Net unrealized loss on available-for-sale marketable debt securities		(132)		—		(132)		—

Comprehensive loss	$	(15,804)	$	(11,208)	$	(39,191)	$	(31,637)

Net loss per common share:
Basic and diluted	$	(0.30)	$	(0.65)	$	(0.76)	$	(2.30)

Weighted average number of common shares outstanding:
Basic and diluted		51,409		17,218		51,113		13,748

~~See~~The accompanying notes toare an integral part of these unaudited condensed consolidated financial ~~statements~~statements.

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Rezolute, Inc.

Unaudited Condensed Consolidated Statements of ~~Stockholders’~~Shareholders’ Equity

~~From June 30, 2016 to December~~Nine Months Ended March 31, ~~2017 (Unaudited)~~2023 and 2022

(In thousands)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Loss		Deficit		Equity
Nine Months Ended March 31, 2023:
Balances, June 30, 2022	33,582	$	34	$	358,635	$	—	$	(209,198)	$	149,471
Gross proceeds from issuance of common stock for cash in 2022 Private Placement	3,245		3		12,327		—		—		12,330
Underwriting commissions and other equity offering costs	—		—		(759)		—		—		(759)
Share-based compensation	—		—		5,465		—		—		5,465
Net change in accumulated other comprehensive loss	—		—		—		(132)				(132)
Net loss	—		—		—		—		(39,059)		(39,059)
Balances, March 31, 2023	36,827	$	37	$	375,668	$	(132)	$	(248,257)	$	127,316

Nine Months Ended March 31, 2022:
Balances, June 30, 2021	8,352	$	8	$	194,229	$	—	$	(168,138)	$	26,099
Gross proceeds from issuance of equity securities for cash in Underwritten Public Offering:
Common stock	6,147		6		39,950		—		—		39,956
Pre-Funded warrants	—		—		10,783		—		—		10,783
Gross proceeds from issuance of common stock for cash:
In Registered Direct Offering	769		1		4,999		—		—		5,000
Under Equity Distribution Agreement	138		1		1,518		—		—		1,519
Under LPC Purchase Agreement	116		—		1,172		—		—		1,172
Underwriting discounts and other equity offering costs	—		—		(4,136)		—		—		(4,136)
Share-based compensation	—		—		2,701		—		—		2,701
Issuance of commitment shares	34		—		450		—		—		450
Net loss	—		—		—		—		(31,637)		(31,637)
Balances, March 31, 2022	15,556	$	16	$	251,666	$	—	$	(199,775)	$	51,907

Additional Total
Common Stock, $0.001 Par Value Paid-in Accumulated Stockholders’
Shares Amount Capital Deficit Equity

Balance at June 30, 2017 49,228,640 $ 49,230 $ 72,800,699 $ (64,321,962 ) $ 8,527,967

Stock-based compensation net of forfeitures of $317,674 (Unaudited) - - 2,701,728 - 2,701,728

Fair value of warrants issued for consulting services (Unaudited) - - 535,303 - 535,303

Issuance of common stock, net of issuance costs of $60,000 (Unaudited) 4,500,000 4,500 4,435,500 - 4,440,000

Commitment fee for issuance of common stock (Unaudited) 344,669 345 (345 ) - -

Net loss for the six months ended December 31, 2017 (Unaudited) - - - (12,403,200 ) (12,403,200 )

Balance at December 31, 2017 (Unaudited) 54,073,309 $ 54,075 $ 80,472,885 $ (76,725,162 ) $ 3,801,798

~~See~~The accompanying notes toare an integral part of these unaudited condensed consolidated financial ~~statements~~statements.

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Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

~~(Unaudited)~~(In thousands)

Six Months
Ended December 30,
2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (12,403,200 ) $ (8,703,797 )
Amortization of intangible asset 3,646 3,646
Depreciation expense 533,394 546,429
Stock-based compensation expense 2,701,728 2,125,966
Derivative gains (498 ) (10,725 )
Warrant expense for consulting services 535,303 -
Changes in operating assets and liabilities:
Decrease in other assets 146,287 29,153
Decrease in deferred lease asset 11,462 -
Increase in accounts payable and accrued expenses 469,177 12,097
Decrease in interest payable - (2,800 )
Decrease in deferred lease liability (49,950 ) (58,924 )
Net Cash Used In Operating Activities (8,052,651 ) (6,058,955 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (5,816 ) (272,587 )
Return of security deposit - 187,500
Net Cash Used In Investing Activities (5,816 ) (85,087 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on lease payable - (23,128 )
Proceeds from issuance of equity financing 4,500,000 6,361,499
Payment of placement agent compensation and issuance costs (60,000 ) (683,194 )
Net Cash Provided by Financing Activities 4,440,000 5,655,177

Net decrease in cash (3,618,467 ) (488,865 )

Cash - Beginning of Period 4,486,538 4,062,013

Cash - End of Period $ 868,071 $ 3,573,148

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:
Taxes $ - $ -
Interest $ - $ -

Non-Cash Transactions:
Fixed assets acquired through accounts payable and accrued expenses $ - $ 18,016
Warrant value recorded as issuance costs $ - $ 516,550
Conversion of note payable into common stock $ - $ 50,000
Conversion of interest payable into common stock $ - $ 9,517


	Nine Months Ended
	March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(39,059)	$	(31,637)
Share-based compensation expense		5,465		2,701
Non-cash lease expense		233		221
Accretion of discounts and amortization of premiums on marketable debt securities, net		(708)		—
Loss from change in fair value of derivative liabilities		40		8
Depreciation and amortization expense		21		10
Accretion of debt discount and issuance costs		—		319
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other assets		(770)		17
Increase in accounts payable		1,815		548
Increase (decrease) in accrued liabilities		(168)		307
Net Cash Used in Operating Activities		(33,131)		(27,506)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable debt securities		(94,954)		—
Purchase of property and equipment		(153)		—
Total Cash Used in Investing Activities		(95,107)		—

CASH FLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from issuance of equity securities for cash:
2022 Private Placement		12,330		—
Proceeds from 2021 Underwritten Public Offering		—		50,738
Proceeds from 2021 Registered Direct Offering		—		5,000
Under Equity Distribution Agreement		—		1,519
Under LPC Purchase Agreement		—		1,171
Payment of commissions and other offering costs		(759)		(3,449)
Payment of debt discount and issuance costs		—		(104)
Net Cash Provided by Financing Activities		11,571		54,875

Net increase (decrease) in cash, cash equivalents and restricted cash		(116,667)		27,369
Cash, cash equivalents and restricted cash at beginning of period		150,410		41,047
Cash, cash equivalents and restricted cash at end of period	$	33,743	$	68,416

~~See~~The accompanying notes toare an integral part of these unaudited condensed consolidated financial ~~statements~~statements.

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Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows, Continued

(In thousands)


	Nine Months Ended
	March 31,
	2023		2022
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, end of period	$	33,743	$	63,416
Restricted cash, end of period		—		5,000
Total cash, cash equivalents and restricted cash, end of period	$	33,743	$	68,416

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest	$	—	$	1,011
Cash paid for income taxes		—		—
Cash paid for amounts included in the measurement of operating lease liabilities		87		254
Operating lease liabilities incurred in exchange for right-of-use assets		2,204		—

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of commitment shares for deferred offering costs subsequently charged to additional paid-in capital	$	—	$	450

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements
~~December 31, 2017~~
~~(Unaudited)~~

NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Note 1~~ Nature of Operations

~~These financial statements represent the consolidated financial statements of~~ Rezolute, Inc. ~~(“Rezolute”~~(the “Company”)~~, and its wholly owned operating subsidiary AntriaBio Delaware, Inc. (“Antria Delaware”). Rezolute and Antria Delaware are collectively referred to herein as the “Company”. The Company~~ is a clinical stage biopharmaceutical ~~Company.~~business developing transformative therapies for metabolic diseases related to chronic glucose imbalance. The Company’s primary clinical assets consist of (i) RZ358, which is a potential treatment for congenital hyperinsulinism, an ultra-rare pediatric genetic disorder characterized by excessive production of insulin by the pancreas, and (ii) RZ402, which is an oral plasma kallikrein inhibitor (“PKI”) being developed as a potential therapy for the chronic treatment of diabetic macular edema.

~~Note 2 Summary of Significant Accounting Policies~~

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ~~and~~(“GAAP”), the rules and regulations of the ~~United States Securities and Exchange Commission~~SEC for interim financial information, and ~~with~~ the instructions to Form 10-Q and Article 8 of Regulation S-X.

The condensed consolidated balance sheet as of June 30, 2022, has been derived from the Company’s audited consolidated financial statements. The unaudited interim financial statements should be read in conjunction with the Company’s ~~Annual Report on~~2022 Form 10-K, ~~filed on September 22, 2017,~~ which contains the Company’s audited financial statements and notes thereto, together with the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended June 30, ~~2017.~~

2022.

Certain information orand footnote disclosures normally included in financial statements prepared in accordance with ~~accounting principles generally accepted in the United States of America~~GAAP have been condensed or omitted, pursuant to the rules and regulations of the ~~Securities and Exchange Commission~~SEC for interim financial reporting. Accordingly, they do not include all ~~the~~ information and ~~footnotes~~footnote disclosures necessary for a comprehensive presentation of financial position, results of operations, orand cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) ~~have been made which~~that are necessary for a fair financial statement ~~presentation.~~presentation have been made. The interim results for the ~~period~~three and nine months ended ~~December~~March 31, ~~2017~~2023 are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the ~~full~~ fiscal ~~year.~~year ending June 30, 2023.

Consolidation

The Company has two wholly owned subsidiaries consisting of Rezolute (Bio) Ireland Limited, and Rezolute Bio UK, Ltd. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with ~~U.S. generally accepted accounting principles~~GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and the accompanying notes. ~~Such~~The Company bases its estimates and assumptions ~~impact, among others,~~on current facts, historical experience, and various other factors that it believes are reasonable under the ~~following: estimated useful lives~~circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, determination if other than temporary impairment exists for marketable debt securities, the fair value of ~~depreciable assets, the~~derivative liabilities, fair value of share-based payments, management’s assessment of going concern, and warrants, fair value of derivative instruments, estimates of the probability and potential magnitude of contingent liabilities and the valuation allowance for deferred tax assets due to continuing and expected future operating losses.clinical trial accrued liabilities. Actual results could differ from those estimates.

Risks and Uncertainties

The Company’s operations may be subject to significant ~~risk~~risks and uncertainties including financial, operational, regulatory and other risks associated with a clinical stage ~~company,~~business, including the potential risk of business ~~failure. See~~failure, and the future impact of COVID-19.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies from those described in Note ~~3 regarding going concern matters.~~1 to the financial statements in Item 8 of the 2022 Form 10-K other than the policy described below.

Investments in Marketable Debt Securities

~~Fixed Assets~~

Under the investment policy approved by the Company’s Board of Directors, eligible investments in fixed income debt securities must be denominated and payable in U.S. dollars, including eligible corporate bonds, corporate commercial paper, U.S. government obligations, and money market funds. This investment policy only permits investments in the debt securities of issuers that meet stringent credit quality ratings on the date of the investment. The investment policy also places restrictions on the length of maturities and concentrations by type and issuer. The Company’s cash and investments are held or issued by financial institutions that management believes are of high credit quality. However, they are exposed to credit risk in the event of default by the third parties that hold or issue such assets. The Company classifies investments in marketable debt securities that mature in less than one year as short-term assets. For investments that mature in more than one year, the investments are classified as long-term assets unless management intends to liquidate the investments to fund current operations before the scheduled maturity dates.

~~Fixed assets~~The Company accounts for its investments in marketable debt securities as available-for-sale securities whereby they are ~~carried~~recorded in the unaudited condensed consolidated balance sheet at ~~cost less accumulated depreciation. Depreciation~~fair value. Interest income is ~~computed~~recognized in the unaudited condensed consolidated statement of operations, consisting of accrued interest earned based on the coupon rate of the security, plus the impact of accreting discounts and amortizing premiums to maturity using the straight-line method ~~over~~which approximates the ~~estimated useful lives.~~

~~Research~~interest method. Unrealized gains and ~~Development Costs~~

~~Research~~losses due to subsequent changes in fair value of the investments are reported in shareholders’ equity as a component of accumulated other comprehensive income (loss). The Company reviews the components of its portfolio of available-for-sale debt securities, using both quantitative and ~~development costs~~qualitative factors, to determine if declines in fair value below amortized cost have resulted from a credit-related loss or other factors. If declines in fair value are ~~expensed as incurred and include salaries, benefits and~~due to a deterioration of credit quality of the issuer, the Company recognizes (i) a loss in other staff-related costs; consultants and outside costs; material manufacturing costs, clinical trial costs; and facilities and other costs. These costs relate to research and development costs without an allocation of general and administrative expenses.

~~Fair Value of Financial Instruments~~

~~Fair~~comprehensive income (loss) if the reduction in fair value is ~~defined as the exchange price that would be received for an asset~~considered temporary, or ~~paid to transfer~~(ii) a ~~liability (an exit price)~~loss in the ~~principal or most advantageous market~~consolidated statement of operations if the reduction in fair value is considered other than temporary. For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if the Company has the ability and intent to hold the investment until maturity. The cost basis of any securities sold prior to maturity will be determined using the specific identification method.

Recent Accounting Pronouncements

Recently Adopted Standard. The following standard was adopted during the nine months ended March 31, 2023:

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for ~~the asset or liability~~Convertible Instruments and Contracts in an ~~orderly transaction between market participants on~~Entity’s Own Equity). ASU 2020-06 reduces the ~~measurement date. An entity is required to maximize~~number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the ~~use of observable inputs and minimize~~host contract as compared with current GAAP. Additionally, ASU 2020-06 affects the ~~use of unobservable inputs when measuring fair value. The standard describes three levels of inputs~~diluted earnings per share calculation for instruments that may be ~~used~~settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. ASU 2020-06 allows entities to ~~measure fair value are as follows:~~use a modified or full retrospective transition method. The Company adopted this standard using the full retrospective transition method effective July 1, 2022. The adoption did not have any impact on the Company’s consolidated financial statements.

~~Level 1: Quoted prices for identical assets and liabilities in active markets;~~

Level 2: Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

~~Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.~~

~~The carrying amounts of financial instruments including cash, accounts payable and accrued expenses, and convertible note payable approximated fair value as of December 31, 2017 and June 30, 2017 due~~Standard Required to ~~the relatively short maturity of the respective instruments.~~

The warrant derivative liability recorded as of December 31, 2017 and June 30, 2017 is recorded at an estimated fair value based on a Black-Scholes pricing model. The warrant derivative liability is a level 3 fair value measurement with the entire changebe Adopted in ~~the balance recorded through earnings. See significant assumptions in Note 8.~~Future Periods. The following ~~table sets forth a reconciliation~~accounting standard is not yet effective; management has not completed its evaluation to determine the impact that adoption of ~~changes in~~this standard will have on the ~~fair value~~Company’s consolidated financial statements.

Table of ~~financial instruments classified as level 3 in the fair value hierarchy:~~Contents

Balance as of June 30, 2017 $ (588 )
Total unrealized gains (losses):
Included in earnings 498
Balance as of December 31, 2017 $ (90 )

Rezolute, Inc.

~~Recent Accounting Pronouncements~~Notes to Unaudited Condensed Consolidated Financial Statements

In ~~January~~June 2016, the FASB issued ASU ~~2016-01,~~2016-13, Financial Instruments ~~– Overall~~- Credit Losses (Topic 326):~~Recognition and~~ Measurement of Credit Losses on Financial ~~Assets and Financial Liabilities~~Instruments.~~, which addresses certain aspects of recognition, measurement, presentation, and disclosure~~ ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2019, ASU ~~2016-01 will be effective for us starting on July 1, 2018,~~2016-13 was amended by ASU 2019-10, Financial Instruments- Credit Losses (Topic 326), Derivatives and ~~early adoption is not permitted. We are currently evaluating the impact that the standard will have on our consolidated financial statements.~~

~~In February 2016, the FASB issued ASU 2016-02,~~Hedging (Topic 815), and Leases (Topic 842)~~. This update requires organizations to recognize lease assets and lease liabilities on~~ whereby the ~~balance sheet and also disclose key information about leasing arrangements. This~~effective date for ASU 2016-13 for smaller reporting companies is ~~effective~~now required for ~~annual reporting periods~~fiscal years beginning ~~on or~~ after December 15, ~~2018, and~~2022, including interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. We will be required to adopt ASU 2016-02 starting on July 1, 2019. We are currently evaluating the impact the adoption of this ASU will have on our consolidated financial statements.

~~In March 2016, the FASB issued ASU 2016-09.~~~~Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.~~fiscal years. The update will affect all entities that issue share-based payment awards to their employees and is effective for annual periods beginning after December 15, 2016 for public entities. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted the ASU starting on July 1, 2017 and there is a minimal impact on our consolidated financial statements.

~~In May 2017, the FASB issued ASU 2017-9.~~~~Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.~~The update includes guidance on what changes to share-based payment awards would require modification accounting and is effective for annual periods after December 15, 2017. We expect to adopt the ASU 2017-9 on July 1, 2018. We doCompany does not expect the adoption of ASU 2016-13 will have a material impact on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the ~~new provisions~~FASB or other standards-setting bodies that do not require adoption until a future date are not currently expected to have a material impact on ~~our~~the Company’s financial ~~condition or results of operations.~~statements upon adoption.

~~Note 3 Going Concern~~

NOTE 2 — LIQUIDITY

As ~~reflected in the accompanying financial statements,~~a clinical stage business, the Company has not yet generated any revenues and had an accumulated deficit of $248.3 million as of March 31, 2023. For the nine months ended March 31, 2023, the Company incurred a net loss of ~~$12,403,200~~$39.1 million and net cash used in ~~operations~~operating activities amounted to $33.1 million. For the fiscal year ended June 30, 2022, the Company incurred a net loss of ~~$8,052,651~~$41.1 million and net cash used in operating activities amounted to $39.6 million. As of March 31, 2023, the Company’s capital resources consist of cash and cash equivalents of $33.7 million, short-term investments in marketable debt securities of $69.3 million and long-term investments in marketable debt securities of $26.2 million.

As of March 31, 2023, the Company has total liabilities of $6.9 million, including current liabilities of $4.4 million. As discussed in Note 5, the Company is subject to license agreements that provide for future contractual payments upon achievement of various milestone events. Pursuant to the ~~six~~ActiveSite License Agreement (as defined below), a $3.0 million milestone payment was paid in February 2023 upon dosing of the first patient in a Phase 2 clinical trial for RZ402. Pursuant to the XOMA License Agreement (as defined below), a $5.0 million milestone payment will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358. First patient dosing milestone RZ358 Phase 3 clinical trial is expected to occur within the next 12 months.

Management believes the Company’s existing cash and cash equivalents and investments in marketable debt securities will be adequate to meet the Company’s contractual obligations and carry out ongoing clinical trials and other planned activities at least through May 2024.

On March 10, 2023, Silicon Valley Bank (“SVB”) was shut down, followed on March 11, 2023 by Signature Bank and on May 1, 2023 by First Republic Bank whereby the Federal Deposit Insurance Corporation was appointed as receiver for each of those banks. Starting in January 2023, SVB Asset Management (“SAM”), a nonbank affiliate of SVB and a member of SVB Financial Group, provided investment services relating to the Company’s investment in marketable debt securities held in a segregated custodial account held by a third-party custodian, U.S. Bank. At the time of the closing of SVB, the Company had approximately $20.5 million in cash and certain cash equivalents in an Overnight Money Market Mutual Fund (“MMF”), for which SAM was the investment advisor of until April 13, 2023, when the MMF was liquidated and transferred to a similar investment under the control of a new investment advisor. The Company’s investment portfolio did not and currently does not contain any securities of SVB, and the Company did not have any deposit accounts with SVB. The Company does not believe it was or will be impacted by the closure of SVB and will continue to monitor the banking industry situation as it evolves.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 3 —INVESTMENTS IN MARKETABLE DEBT SECURITIES
Investments in marketable debt securities, including cash and cash equivalents, are as follows (in thousands):

Estimated Fair Value at

March 31,

June 30,

2023

2022
Cash and cash equivalents
$
33,743

$
150,410
Short-term investments in marketable debt securities

69,319

—
Long-term investments in marketable debt securities

26,210

—
Total cash, cash equivalents and investments in marketable debt securities
$
129,272

$
150,410

The Company only invests in liquid, high quality debt securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, the Company generally invests in securities with expected maturities of two years or less and maintains a weighted average maturity of one year or less. As of March 31, 2023 investments in marketable debt securities with a fair value of $69.3 million are scheduled to mature during the 12-month period ending March 31, 2024 and substantially all of the remaining investments, which have a fair value of $26.2 million, are scheduled to mature during the 12 month period ending March 31, 2025.
During the nine months ended ~~December~~March 31, ~~2017, working deficit~~2023 and 2022, we sold no available-for-sale securities.
Accrued interest receivable on all marketable debt securities amounted to $0.3 million which is included in other current assets in the accompanying condensed consolidated balance sheet as of ~~$1,087,141~~March 31, 2023. We did not have any accrued interest receivable as of June 30, 2022.
The following table summarizes the unrealized gains and ~~stockholders’ equity~~losses that result in differences between the amortized cost basis and fair value of ~~$3,801,798~~the Company’s cash, cash equivalents and ~~an accumulated deficit~~marketable debt securities held as of ~~$76,725,162 at December~~March 31, ~~2017.~~2023 and June 30, 2022 (in thousands):

March 31, 2023

June 30,

Gross Unrealized

2022

Amortized Cost

Gains

Losses

Fair Value

Fair Value
Corporate commercial paper

$
38,416

$
2

$
(37)

$
38,381

$
—
Obligations of U.S. government agencies

24,379

23

(1)

24,401

—
U.S. Treasury obligations

5,941

1

—

5,942

—
Corporate notes and bonds

22,150

4

(122)

22,032

—
Asset-backed securities

4,775

—

(2)

4,773

—
Available-for-sale investments

$
95,661

$
30

$
(162)

$
95,529

$
—
Money market funds

20,497

—
Cash

13,246

150,410
Total cash, cash equivalents and investments in marketable debt securities

$
129,272

$
150,410

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 4 — OPERATING LEASES
In April 2022, the Company entered into a lease agreement for a new corporate headquarters in Redwood City, California. The space consists of approximately 9,300 square feet and provides for total base rent payments of approximately $2.9 million through the expected expiration of the lease in November 2027. The landlord was required to make improvements to the facility before the Company could occupy the space. These improvements were completed in October 2022, triggering the commencement of the lease. The lease provided for a six-month rent abatement period beginning upon commencement of the lease term. In addition, the lease provided an allowance of approximately $0.1 million that may be utilized by the Company for the purchase of furniture and equipment. The average base rent payable in cash over the 60-month lease term is approximately $48,000 per month. Upon commencement of the lease, the Company recognized a right-of-use asset for approximately $2.3 million, and a related operating lease liability for approximately $2.2 million.

The carrying values of all of the Company’s right-of-use assets and operating lease liabilities are as follows (in thousands):

March 31,

June 30,


2023

2022

Right-of-use assets

$
2,172

$
152

Operating lease liabilities:




Current

$
319

$
108
Long-term

2,055

80
Total

$
2,374

$
188

For the three and nine months ended March 31, 2023 and 2022, operating lease expense is included under the following captions in the accompanying condensed consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended

Nine Months Ended

March 31,

March 31,


2023

2022

2023

2022

Research and development

$
139

$
66

$
331

$
216

General and administrative

34

32

105

75

Total

$
173

$
98

$
436

$
291

As of March 31, 2023, the weighted average remaining lease term under operating leases was 4.4 years, and the weighted average discount rate for operating lease liabilities was 6.8%. Future cash payments under all operating lease agreements as of March 31, 2023 are as follows (in thousands):

Fiscal year ending June 30,



Remainder of fiscal year 2023

$
80
2024

689
2025

627
2026

646
2027

666
Thereafter

224
Total lease payments

2,932
Less imputed interest

(558)
Present value of operating lease liabilities

$
2,374

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 5 — LICENSE AGREEMENTS

XOMA License Agreement

In December 2017, the Company entered into a license agreement (the “XOMA License Agreement”) with XOMA Corporation (“XOMA”), through its wholly-owned subsidiary, XOMA (US) LLC, pursuant to which XOMA granted an exclusive global license to the Company to develop and commercialize XOMA 358 (formerly X358, now RZ358) for all indications. In January 2019, the XOMA License Agreement was amended with an updated payment schedule, as well as revising the amount the Company was required to expend on development of RZ358 and related licensed products, and revised provisions with respect to the Company’s diligence efforts in conducting clinical studies.

In January 2022, the Company was required to make a milestone payment under the XOMA License Agreement of $2.0 million that became due upon the dosing of the last patient in the Company’s Phase 2b Clinical Trial for RZ358. Upon the achievement of certain clinical and regulatory events under the XOMA License Agreement, the Company will be required to make additional milestone payments to XOMA up to $35.0 million. After the clinical and regulatory milestones, the Company will be required, upon the future commercialization of RZ358, to pay royalties to XOMA based on the net sales of the related products and additional milestone payments to XOMA up to $185.0 million related to annual net sales amounts. The next milestone payment of $5.0 million will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358.

ActiveSite License Agreement

On August 4, 2017, the Company entered into a Development and License Agreement (the “ActiveSite License Agreement”) with ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) pursuant to which the Company acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Portfolio”). The Company is initially using the PKI Portfolio to develop an oral PKI therapeutic for diabetic macular edema (RZ402) and may use the PKI Portfolio to develop other therapeutics for different indications. The ActiveSite License Agreement requires various milestone payments up to $46.5 million, if all milestones are achieved. The first milestone payment for $1.0 million was paid in December 2020 after clearance was received for an Initial Drug Application, or IND, filed with the U.S. Food and Drug Administration (“FDA”). The second milestone payment of $3.0 million was paid in February 2023 after dosing of the first patient in a Phase 2 clinical ~~stage~~trial for RZ402. The next milestone payment of $5.0 million will be due upon the first dosing of a patient in a Phase 3 clinical trial. The Company is also required to pay royalties equal to 2.0% of any sales of products that use the PKI Portfolio. There have been no events that would result in any royalty payments owed under the ActiveSite License Agreement to date.

NOTE 6 — EMBEDDED DERIVATIVE LIABILITY
On April 14, 2021, the Company entered into a $30.0 million Loan and ~~has not yet generated any revenues. These factors raise substantial doubt about~~Security Agreement (the “Loan Agreement”) with SLR Investment Corp. and certain other lenders (the “Lenders”). The Lenders agreed to loan up to $30.0 million in three tranches consisting of (i) a $15.0 million term A loan that was funded on April 14, 2021, (ii) term B and term C loans for an aggregate of $15.0 million, which were subject to the Company’s ability to ~~continue~~obtain prescribed amounts of financing and the achievement of certain clinical milestones. The Company did not achieve the initial clinical milestones by January 2022 and, accordingly, the term B and term C loans were no longer a source of liquidity. The term A loan had a maturity date of April 1, 2026 (the “Maturity Date”) but was repaid in full on June 30, 2022.
Concurrently with the execution of the Loan Agreement, the Company entered into an exit fee agreement (the “Exit Fee Agreement”) that provides for a fee of 4.00% of the funded principal balance of each term loan in the event certain transactions (defined as “Exit Events”) occur prior to April 13, 2031. Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of control transactions, and issuances of common stock that result in new investors owning more than 35% of the Company’s

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

shares. As of April 14, 2021, the Company allocated a portion of the proceeds from the term A loan to recognize a liability for the fair value of embedded derivatives. Fair value was determined primarily based on the Company’s strategic corporate development plans. Management has performed a detailed evaluation of the different types of Exit Events that could occur and has determine fair value using a discounted rate equivalent to the effective rate for the term A loan of 12.6%. Fair value of embedded derivatives is reassessed at the end of each reporting period with changes in fair value recognized as a ~~going concern.~~nonoperating gain or loss.

The Company expects that its current cash resources as well as expected lack of operating cash flows will not be sufficient to sustain operations for a period greater than one year. The ability of the Company to continue its operations is dependent on Management’s plans, which include continuing to raise capital through equity or debt based financings. There can be no assurances that such capital will be available to us on acceptable terms, or at all.

NOTE 7 — SHAREHOLDERS’ EQUITY
Quarterly Changes in Shareholders’ Equity
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
8
~~Note 4 Fixed Assets~~
The following ~~is a summary of fixed assets and accumulated depreciation:~~
Useful
Life December 31, 2017 June 30, 2017
Furniture and fixtures 5 - 7 years $ 118,450 $ 118,450
Lab equipment 3 - 15 years 3,951,855 3,946,040
Leasehold Improvements 5 - 7 years 3,247,038 3,247,038
7,317,343 7,311,528
Less: accumulated depreciation and amortization (2,519,520 ) (1,986,127 )
$ 4,797,823 $ 5,325,401
~~Depreciation expense was $266,781 and $278,074~~table presents changes in shareholders’ equity for the three months ended ~~December~~March 31, ~~2017~~2023 and ~~2016, respectively~~2022:

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Shareholders'


Shares

Amount

Capital

Loss

Deficit

Equity
Three Months Ended March 31, 2023:

Balances, December 31, 2022

36,827

$
37

$
373,813

$
—

$
(232,585)

$
141,265
Share-based compensation

—

—

1,855

—

—

1,855
Net change in accumulated other comprehensive loss

—

—

—

(132)

—

(132)
Net loss

—

—

—

—

(15,672)

(15,672)
Balances, March 31, 2023

36,827

$
37

$
375,668

$
(132)

$
(248,257)

$
127,316

Three Months Ended March 31, 2022:

Balances, December 31, 2021

15,556

$
16

$
250,816

$
—

$
(188,567)

$
62,265
Share-based compensation

—

—

850

—

—

850
Net loss

—

—

—

—

(11,208)

(11,208)
Balances, March 31, 2022

15,556

$
16

$
251,666

$
—

$
(199,775)

$
51,907

July 2022 Financing
In May 2022, the Company entered into securities purchase agreements (“SPAs”) with Handok, Inc. (“Handok”) and ~~was $533,394 and $546,429~~certain of its affiliates. Handok is an affiliate of a member of the Company’s Board of Directors. In July 2022, the Company entered into amended SPAs for a private placement of common stock (the “2022 Private Placement”). The 2022 Private Placement resulted in gross proceeds of $12.3 million in exchange for the ~~six months ended December 31, 2017~~issuance of approximately 3.2 million shares of common stock. The Company incurred approximately $0.8 million for underwriting commissions and ~~2016, respectively~~other offering costs, resulting in net proceeds of $11.5 million.
Underwritten Public Offering
~~Note 5 Related Party Transactions~~
~~During the three and six months ended December 31, 2017,~~On October 12, 2021, the Company ~~incurred investor relations expense of $33,322 and $33,322 and general and administrative expenses of $67,439 and $67,439, see Note 8 for discussion related to warrants issued~~entered into an underwriting agreement (the “Underwriting Agreement”) with Oppenheimer & Co., Inc., as compensation for such services. During the three and six months ended December 31, 2016, the Company incurred investor relations expense of $31,050 and $67,275 and general and administrative expenses of $13,928 and $13,928 for services performed by related partiesrepresentative of the ~~Company~~underwriters listed therein (the “Underwriters”) for the planned issuance and ~~were included~~sale of equity securities in an underwritten public offering (the “Underwritten Offering”). On October 15, 2021, closing occurred for the Underwritten Offering resulting in the ~~statement~~issuance of ~~operations. As of December 31, 2017, and June 30, 2017, there were none and $25,200, respectively, related party expenses recorded in accounts payable and accrued expense – related party.~~
~~Note 6 Convertible Notes Payable~~
As of December 31, 2017, and June 30, 2017, the convertible note outstanding balance was $10,000 and $10,000, respectively. As of December 31, 2017, the outstanding convertible note has matured and payment is due. The convertible note which has not been repaid or converted continues to accrue interest at a rate of 8%.
~~On January 30, 2018, the Company issued a secured convertible promissory note for $500,000 as well as a warrant to purchase 250,000~~(i) 6,030,847 shares of common stock at $6.50 per share for gross proceeds of $39.2 million, and (ii) 1,661,461 pre-funded warrants to a related party. The Note bears interest at 12% per annum and matures at the earlier of January 31, 2019 or when the Company raises $10 million in an equity financing. The note will be secured by a perfected security interest in the tangible assets of the Company.
~~Note 7 Shareholders’ Equity~~
During the year ended June 30, 2017, the Company closed private placement transactions in which the Company issued 5,783,184 units to accredited investors. Each investor was issued either Class A Units or Class B units of the Company. Each Class A Unit received one sharepurchase 1,661,461 shares of common stock at an issuance price of $6.49 per warrant (the “Pre-Funded Warrants”) for gross proceeds of $10.8 million. The aggregate gross proceeds from the Underwritten Offering amounted to $50.0 million, excluding the exercise of the Underwriters’ Option discussed below, and ~~one-half~~before deductions for underwriting discounts

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

and commissions of 6.0% of the gross proceeds and other offering costs of approximately $0.3 million. After deducting total offering costs of $3.3 million, the net proceeds of the Underwritten Offering amounted to approximately $46.7 million.

In connection with the Underwritten Offering, the Company granted the Underwriters a 30-day option to purchase up to an additional 1,153,845 shares of its common ~~share purchase warrant. If the investor had previously invested~~stock in the ~~Company they were eligible~~Underwritten Offering at a public offering price of $6.50 per share, less underwriting discounts and commissions (the “Underwriters’ Option”). In November 2021, the Underwriters’ Option was partially exercised for ~~a Class B Unit~~116,266 shares resulting in additional gross proceeds of approximately $0.8 million.

Pre-Funded Warrants

The Pre-Funded Warrants issued in the Underwritten Offering have an exercise price of $0.01 per share, which ~~received one share~~is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common ~~stock and one common share purchase warrant.~~stock. Each ~~common share purchase warrant~~Pre-Funded Warrant is exercisable at ~~$1.65 per share~~any time and from time to time after issuance with no stated expiration date. In the event of certain corporate transactions, the holders of the Pre-Funded Warrants will ~~expire 60 months following~~be entitled to receive, upon exercise of the ~~issuance. As~~Pre-Funded Warrants, the kind and amount of ~~June 30, 2017,~~securities, cash or other property that the ~~Company~~holders would have received ~~net proceeds~~had they exercised the Pre-Funded Warrants immediately prior to such transaction. The Pre-Funded Warrants do not entitle the holders thereof to any voting rights or any of ~~approximately $5.2 million after~~ the ~~placement agent compensation and issuance costs paid of $683,194 and $516,550 of warrant expense recorded as issuance costs.~~

The Company also entered into a private placement transaction in which the Company issued common stock to accredited investors at an offering price of $1.00 per share. As of June 30, 2017, the Company received net proceeds of approximately $8.1 million after the placement agent compensation of $186,671 of warrant expense recorded as issuance costs, as there was no placement agent compensation.

During the six months ended December 31, 2017, the Company closed an additional private placement transaction in which the Company issued common stock to accredited investors at an offering price of $1.00 per share. The Company received net proceeds of $4.44 million after the placement agent compensation of $60,000.

~~Lincoln Park Transaction~~ ~~– On December 22, 2017, we entered into the Lincoln Park Purchase Agreement pursuant~~other rights or privileges to which ~~Lincoln Park has agreed to purchase from us up to an aggregate of $10.0 million~~holders of the Company’s common stock ~~(subject to certain limitations)~~are entitled.

The gross proceeds of $10.8 million received from ~~time to time over the 36-month term~~issuance of the ~~agreement. We also~~Pre-Funded Warrants was recorded as a component of shareholders’ equity within additional paid-in capital. In accordance with the terms of the warrant agreement, holders of the outstanding warrants are not entitled to exercise any portion of the Pre-Funded Warrant if, upon exercise of such portion of the warrant, the holder’s aggregate ownership of the Company’s common stock or the combined voting power beneficially owned by such holder would exceed a designated percentage elected by the holder ranging from 4.99% to 19.99%, after giving effect to the exercise (the “Maximum Ownership Percentage”). Upon at least 61 days’ prior notice to the Company, any warrant holder may elect to increase or decrease the Maximum Ownership Percentage to any other percentage not to exceed 19.99%. As of March 31, 2023, no shares underlying the Pre-Funded Warrants have been exercised.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Registered Direct Offering

Concurrently with the Underwritten Offering, a major shareholder (the “Purchaser”) that is affiliated with a member of the Company’s Board of Directors entered into a ~~registration rights~~subscription agreement ~~with Lincoln Park~~for a registered direct offering, pursuant to which the Company ~~filed with~~agreed to sell to the ~~Securities and Exchange Commission (the “SEC”) the registration statement to register for resale under the Securities Act~~Purchaser an aggregate of ~~1933, as amended, or the Securities Act, the shares of common stock that have been or may be issued to Lincoln Park under the Purchase Agreement.~~

~~As a result, on December 22, 2017, 344,669 newly issued~~769,231 shares of the Company’s common stock ~~equal~~at a purchase price of $6.50 per share. The closing for the registered direct offering occurred on October 27, 2021, whereby the Company received gross proceeds of $5.0 million.

Equity Distribution Agreement

In December 2020, the Company and Oppenheimer & Co. Inc. (the “Agent”) entered into an Equity Distribution Agreement (the “EDA”) that provides for an “at the market offering” for the sale of up to ~~three percent of the $10~~$50.0 million ~~availability, were issued to Lincoln Park as consideration for Lincoln Park’s commitment to purchase~~in shares of the Company’s common stock (the “Placement Shares”) through the Agent. The Agent was acting as sales agent and was required to use commercially reasonable efforts to sell all of the Placement Shares requested to be sold by the Company, consistent with the Agent’s normal trading and sales practices, on mutually agreed terms between the Agent and the Company. The EDA was scheduled to terminate when all of the Placement Shares had been sold, or earlier upon the election of either the Company or the Agent. In May 2022, the Company provided the Agent with notice of termination of the EDA and no further shares will be issued under ~~the~~this agreement.

Under the terms ~~and subject to the conditions~~ of the ~~Lincoln Park Purchase Agreement,~~EDA, the Company ~~has~~agreed to pay the ~~right, but not the obligation,~~Agent a commission equal to ~~sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $10.0 million worth of shares~~3.0% of the ~~Company’s common stock. Such future~~gross sales ~~of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s option, over the 36-month term of the agreement.~~

~~As contemplated by the Lincoln Park Purchase Agreement, and so long as the closing~~ price of the ~~Company’s common stock exceeds $0.40 per share, then~~Placement Shares plus certain expenses incurred by the Agent in connection with the offering. For the nine months ended March 31, 2022, the Company ~~may direct Lincoln Park, at its sole discretion to purchase up to 65,000~~sold 138,388 shares of its common stock onpursuant to the EDA for net proceeds of approximately $1.5 million.

LPC Purchase Agreement

In August 2021, the Company entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “RRA”) with Lincoln Park Capital Fund, LLC (“LPC”), which provides that the Company may sell to LPC up to an aggregate of $20.0 million shares (the “Purchase Shares”) of its common stock. The Company concurrently filed a prospectus supplement with the SEC to register the shares issuable under the Purchase Agreement. The aggregate number of shares that the Company could sell to LPC under the Purchase Agreement was 1,669,620 shares of common stock, subject to certain exceptions set forth in the Purchase Agreement.

LPC’s initial purchase consisted of 95,708 Purchase Shares at a purchase price of approximately $10.45 per share for a total purchase price of $1.0 million. Concurrently, the Company issued 33,799 shares of common stock to LPC as an initial fee for its commitment to purchase shares of common stock under the Purchase Agreement. Subject to the terms of the Purchase Agreement, the Company had the right, in its sole discretion, to present LPC with a purchase notice (a “Regular Purchase Notice”), directing LPC to purchase up to 25,000 Purchase Shares (a “Regular Purchase”). LPC’s committed obligation under any ~~business day,~~single Regular Purchase generally could not exceed $2.0 million. The Purchase Agreement provided ~~that five business day has passed since the most recent purchase. The~~for a purchase price per share for ~~such purchases will be~~each Regular Purchase (the “Purchase Price”) equal to the ~~lower of:~~lesser of (i) the lowest sale price of the common stock on the ~~applicable~~Nasdaq Capital Market (“NCM”) on the purchase date of such shares; and (ii) the ~~arithmetic~~ average of the three ~~(3)~~ lowest closing sale prices for the ~~Company’s~~ common stock traded on the NCM during the ~~twelve (12)~~ten consecutive business days ending on the business day immediately preceding ~~such~~the purchase date of such shares.

On September 17, 2021, the Company submitted a Regular Purchase Notice, resulting in the sale of 20,000 Purchase Shares to LPC for net proceeds of approximately $0.2 million. In May 2022, the Company provided LPC with notice of termination of the Purchase Agreement whereby no further shares are issuable under this agreement.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 8 — SHARE-BASED COMPENSATION AND WARRANTS
Stock Option Plans
Presented below is a summary of the number of shares authorized, outstanding, and available for future grants under each of the Company’s stock option plans as of March 31, 2023 (in ~~each case,~~thousands):


Plan Termination

Number of Shares
Description

Date

Authorized

Outstanding

Available

2015 Plan

February 2020

17

17

—
2016 Plan

October 2021

140

140

—
2019 Plan

July 2029

200

200

—
2021 Plan

March 2031

10,700

8,422

2,278
Total



11,057

8,779

2,278

2022 Employee Stock Purchase Plan
On June 16, 2022, the Company’s shareholders approved the adoption of the 2022 Employee Stock Purchase Plan (the “2022 ESPP”). The 2022 ESPP provides an opportunity for employees to ~~be appropriately adjusted for any reorganization, recapitalization, non-cash dividend,~~purchase the Company’s common stock ~~split or other similar transaction~~through accumulated payroll deductions.
The 2022 ESPP has consecutive offering periods that ~~occurs~~begin approximately every 6 months commencing on the first trading day on or after July 1 and terminating on the ~~date~~last trading day of the ~~purchase agreement).~~offering period ending on December 31 and commencing on the first trading day on or after January 1 and terminating on the last trading day of the offering period ending on June 30. The ~~maximum amount~~2022 ESPP reserves 0.5 million shares for purchases. The first offering period concluded on December 31, 2022, and no purchases were made under the 2022 ESPP. As of March 31, 2023, no shares ~~subject to any single regular purchase increases as~~have been purchased under the 2022 ESPP.

Stock Options Outstanding
The following table sets forth a summary of the activity under all of the Company’s ~~share price increases, subject~~stock option plans for the nine months ended March 31, 2023 (shares in thousands):


Shares

Price ⁽¹⁾

Term ⁽²⁾

Outstanding, June 30, 2022

8,506

$
5.24

9.7
Grants to employees

668

1.98

Expired

(116)

40.73

Forfeited

(279)

3.78

Outstanding, March 31, 2023

8,779

4.57

9.1
Vested, March 31, 2023

966

11.65

7.73
(1) Represents the weighted average exercise price.
(2) Represents the weighted average remaining contractual term for the number of years until the stock options expire.

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Rezolute, Inc.

Notes to ~~a maximum~~Unaudited Condensed Consolidated Financial Statements

For the nine months ended March 31, 2023, the aggregate fair value of ~~$500,000.~~
~~In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional purchases if the closing sale price of the common~~ stock exceeds certain threshold prices as set forth in the purchase agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock. There are no trading volume requirements or restrictions under the purchase agreement nor any upper limits on the price per share that Lincoln Park must payoptions granted for ~~shares of common stock.~~
The Lincoln Park Purchase Agreement and the registration rights agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification rights and obligations of the parties. The Company has the right to terminate the purchase agreement at any time, at no cost or penalty. During any “event of default” under the purchase agreement, all of which are outside of Lincoln Park’s control, Lincoln Park does not have the right to terminate the purchase agreement; however, the Company may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured. In addition, in the event of bankruptcy proceedings by or against the Company, the purchase agreement will automatically terminate.
~~Actual sales of~~approximately 0.7 million shares of common stock amounted to Lincoln Park under the purchase agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the Company$1.0 million or approximately $1.51 per share as to the appropriate sources of funding for the Company and its operations. Lincoln Park has no right to require any sales by the Company, but is obligated to make purchases from the Company as it directs in accordance with the purchase agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares.
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~~The Company has not declared or paid any dividends or returned any capital to common stockholders as of December 31, 2017.~~
~~Note 8 Stock-Based Compensation~~
~~Options –~~On March 26, 2014, the Company adopted the AntriaBio, Inc. 2014 Stock and Incentive Plan which allows the Company to issue up to 3,750,000 of common stock in the form of stock options, incentive options or common stock. The Company had granted 3,295,000 of these shares to current employees and directors of the Company as of June 30, 2017 and no additional grants as of December 31, 2017. The options have an exercise price from $1.29 to $3.44 per share. The options vest monthly over four years, with some options subject to a one year cliff before options begin to vest monthly.
On February 23, 2015, the Company adopted the AntriaBio, Inc. 2015 Non Qualified Stock Option Plan which allows the Company to issue up to 6,850,000 of common stock in the form of stock options. The Company had granted 4,487,000 of these shares to current employees and directors of the Company as of June 30, 2017 and no additional grants as of December 31, 2017. The options have an exercise price of from $1.00 to $2.06 per share. The options vest monthly over 4 years with some options subject to a one year cliff before options begin to vest monthly.
On October 31, 2016, the Board adopted the AntriaBio, Inc. 2016 Non Qualified Stock Option Plan which allows the Company to issue up to 35,000,000 shares of common stock in the form of stock options. The 2016 Non Qualified Stock Option Plan was amended on August 21, 2017 to reduce the number of shares to be issued to 15,000,000 shares of common stock in the form of stock options. The Board had issued options to purchase 28,995,000 of these shares to current employees and directors as of June 30, 2017, of which 4,360,000 were cancelled before their terms were established and 11,090,000 were additionally cancelled by the Board during the year ended June 30, 2017. The Company had 1,550,000 of the cancelled stock options that had begun vesting prior to the cancellation and with the cancellation the Company recorded $1,199,847 of unrecognized stock compensation expense. The Company had granted 255,000 of these shares to current employees and directors of the Company as of December 31, 2017. The options have an exercise price from $1.00 to $1.20 per share. The options expire no later than ten years from the date of the grant. The options vest on a monthly basis over 48 months, except for 75,000 of the options which do not begin to vest until specific events have occurred and then begin to vest over 48 months and 60,000 of the options that all vest at the end of the consulting contract. Some options are subject to a one year cliff and all options have an exercise price based on the fair value of the common stock on the date of grant.
The Company has computed the fair value of all options granted that have begun vesting using the Black-Scholes option pricing model. The options that require specific events before they begin to vest are not valued until the specific event has occurred. In order to calculate the fair value of the options, certain assumptions are made regarding components of the model, including the estimated fair value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to valuation. The Company estimated a volatility factor utilizing comparable published volatility of several peer companies. Due to the small number of option holders, the Company does not calculate a forfeiture rate but simply accounts for forfeitures as they occur. The Company estimates the expected term based on the average of the vesting term and the contractual term of the options. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant ~~for treasury securities~~dates. Fair value was computed using the Black-Scholes-Merton (“BSM”) option-pricing model and will result in the recognition of ~~similar maturity.~~compensation cost ratably over the expected vesting period of the stock options.

~~The Company has computed~~For the ~~fair value of all options granted during the six~~nine months ended ~~December~~March 31, ~~2017 using the following assumptions:~~
11
~~Expected volatility~~ 84 %
~~Risk free interest rate~~ ~~2.0 - 2.21~~ %
~~Expected term (years)~~ 7
~~Dividend yield~~ 0 %
~~Stock option activity is as follows:~~
Weighted Weighted Average
Number of Average Remaining
Options Exercise Price Contractual Life
Outstanding, June 30, 2017 21,290,751 $ 1.65 7.7
Granted 255,000 $ 1.08
Forfeited (457,000 ) $ 1.65
Outstanding, December 31, 2017 21,088,751 $ 1.65 7.7

Exercisable at December 31, 2017 9,250,001 $ 2.09 6.4
~~Stock-based compensation expense related to~~2023, the fair value of stock options was ~~included in~~estimated on the ~~statement~~respective dates of ~~operations as research and development –~~grant, with the following weighted-average assumptions:

Market price of common stock on grant date

$
1.98

Expected volatility


91
%
Risk free interest rate

3.7
%
Expected term (years)

6.0

Dividend yield

0
%

Share-based compensation ~~and benefits~~ expense ~~of $281,814 and $444,801 and as general and administrative – compensation and benefits expense of $912,215 and $792,137~~ for the three and nine months ended ~~December~~March 31, ~~2017~~2023 and ~~2016, respectively. Stock-based~~2022 is included under the following captions in the unaudited condensed consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended

Nine Months Ended

March 31,

March 31,

2023

2022

2023

2022

Research and development

$
849

$
327

$
2,449

$
1,014
General and administrative

1,006

523

3,016

1,687
Total

$
1,855

$
850

$
5,465

$
2,701

Unrecognized share-based compensation expense related to the fair value of stock options was included in the statement of operations as research and development – compensation and benefits expense of $580,769 and $749,770 and as general and administrative – compensation and benefits expense of $2,120,959 and $1,376,196 for the six months ended December 31, 2017 and 2016, respectively. The unrecognized stock-based compensation expense at December 31, 2017 is ~~$8,637,760. The Company determined the fair value~~approximately $18.8 million as of ~~the date~~March 31, 2023. This amount is expected to be recognized over a weighted average period of ~~grant using~~3.1 years.
Warrants
In connection with an underwritten offering in October 2021, the ~~Black-Scholes option pricing method and expenses the fair value ratably over the vesting period.~~
~~Warrants~~ ~~– The~~ Company issued 1,661,461 pre-funded warrants ~~to agents in conjunction with the closing of various financings and issued warrants in private placements as follows:~~
Weighted Weighted Average
Number of Average Remaining
Warrants Exercise Price Contractual Life
Outstanding, June 30, 2017 32,796,448 $ 1.71 3.7
Warrants issued for consulting services 650,000 $ 1.03
Warrants expired (285,407 ) $ 2.43
Outstanding, December 31, 2017 33,161,041 $ 1.69 3.2
~~For the Six Months Ended December 31, 2017:~~ ~~The Company issued warrants~~(“PFWs”) to purchase ~~100,000~~1,661,461 shares of common stock at aan issuance price of ~~$1.00~~$6.49 per warrant for gross proceeds of $10.8 million (the “2021 PFWs”). The 2021 PFWs may be exercised at any time by paying the exercise price of $0.01 per share, insubject to certain ownership restrictions.
In connection with a ~~consulting agreement. The~~registered direct offering in May 2022, the Company ~~also~~ issued ~~warrants~~1,973,684 Class A PFWs and 10,947,371 Class B PFWs to purchase ~~50,000~~an aggregate of 12,921,055 shares of common stock at aan issuance price of ~~$1.00~~$3.799 per warrant (collectively, the “2022 PFWs”). As of March 31, 2023, all of the 2022 PFWs may be exercised at any time by paying the exercise price of $0.001 per share, ~~in connection with investor services. The~~subject to certain ownership restrictions.
In addition, the Company has issued warrants ~~to purchase 500,000 shares of common stock at a price of $1.04 per share~~ in ~~connection~~conjunction with ~~a consulting agreement.~~
~~The warrants exercisable~~various debt and equity financings and for 16,667 shares of common stock at December 31, 2017 are accounted for under liability accounting. The fair value as of December 31, 2017 and June 30, 2017 were $90 and $588, respectively which is reflected as a liability with the fair value adjustment recorded as derivative gains or losses on the consolidated statements of operations.
12
~~The warrants exercisable for the 250,000 shares of common stock are accounted for under the equity method of accounting and are fair valued monthly at the date that the warrants vest.~~services. As of ~~June 30, 2017, warrants to purchase 15,624 shares of common stock had vested and $12,564 had been recorded into equity and investor relations expense. As of December~~March 31, ~~2017, warrants to purchase an additional 31,248 shares of common stock had vested and $27,333 had been recorded into equity and investor relations expense.~~
~~The warrants exercisable for 100,000 shares were accounted for under equity treatment and were fair valued as of the date of issuance. The fair value~~2023, all of the warrants ~~was valued at $66,643~~were vested.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the nine months ended March 31, 2023, no warrants were granted or exercised. Excluding the 2021 PFWs and ~~recorded~~the 2022 PFWs discussed above, the following table sets forth a summary of all other warrants for the nine months ended March 31, 2023 (shares in thousands):


Shares

Price ⁽¹⁾

Term ⁽²⁾

Outstanding, June 30, 2022

1,150

$
22.83

4.2
Warrants granted

—

—


Warrant expirations

(28)


20.36


Outstanding, March 31, 2023

1,122


22.90

3.5
(1) Represents the weighted average exercise price.
(2) Represents the weighted average remaining contractual term for the number of years until the warrants expire.

NOTE 9 — COMMITMENTS AND CONTINGENCIES
Licensing Commitments
Please refer to Note 5 for further discussion of commitments to make milestone payments and to pay royalties under license agreements with XOMA and ActiveSite.
Legal Matters
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of March 31, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations. At each reporting period, the Company evaluates known claims to determine whether a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as ~~additional paid-in-capital~~incurred.

NOTE 10 — RELATED PARTY TRANSACTIONS
Related Party Licensing Agreement
On September 15, 2020, the Company and ~~as general and administrative expenses. The warrants exercisable~~Handok entered into an exclusive license agreement (the “Handok License”) for ~~50,000 shares were accounted for under equity treatment and were fair valued as~~the territory of the ~~date~~Republic of ~~issuance.~~Korea. The ~~fair value~~Handok License relates to pharmaceutical products in final dosage form containing the pharmaceutical compounds developed or to be developed by the Company, including those related to RZ358 and RZ402. The Handok License is in effect for a period of 20 years after the first commercial sale of each product and requires (i) milestone payments to the Company of $0.5 million upon approval of a New Drug Application (“NDA”) for each product in the territory, and (ii) the Company will sell products ordered by Handok at a transfer price equal to 70% of the warrants was valued at $33,322 and recorded as additional paid-in-capital and as investor relations expense. The warrants exercisable for 500,000 shares were accounted for under equity treatment and were fair valued as of the date of issuance. The fair value of the warrants was valued at $407,605 and recorded as additional paid-in-capital and license costs.
These warrants were valued using the Black-Scholes option pricing model on the date of issuance. In order to calculate the fair value of the warrants, certain assumptions were made regarding components of the model, including the closingnet selling price of the ~~underlying common stock, risk-free interest rate, volatility, expected dividend yield,~~products. To date, no milestone payments have been earned by the Company.

Investors in 2022 Private Placement

Handok and ~~warrant term. Changes~~certain of its affiliates were the sole investors in the 2022 Private Placement and the Registered Direct Offering discussed in Note 7.

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Rezolute, Inc.

Notes to the assumptions could cause significant adjustments to valuation. Rezolute estimated a volatility factor utilizing comparable published volatilities of several peer companies. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity.Unaudited Condensed Consolidated Financial Statements

The Black-Scholes valuation methodology was used because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions for the warrant values calculated for the three months ended December 31, 2017 were as follows:

~~Expected volatility~~	~~53% - 85~~	%
~~Risk free interest rate~~	~~1.76% - 2.37~~	%
~~Warrant term (years)~~	~~1 - 10~~
~~Dividend yield~~	0	%

~~Note 9 Income Taxes~~

NOTE 11 — INCOME TAXES

Income tax expense during interim periods is based on applying an estimated ~~annual~~annualized effective income tax rate applied to ~~year-to-date income, plus any significant unusual or infrequently occurring~~the respective quarterly periods, adjusted for discrete tax items ~~which are recorded~~ in the ~~interim period.~~period in which they occur. The computation of the ~~annual~~annualized estimated effective tax rate atfor each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating ~~income~~results for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes. In connection with the New Tax Cuts and Jobs Act, all gross deferred tax assets and liabilities have been remeasured at the 21% Federal statutory rate. There was no change to the net deferred tax asset recorded as the valuation allowance was also adjusted offsetting these changes.

InFor the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2023 and 2022, the Company did not ~~record~~recognize any income tax ~~provision~~benefit due to ~~expected future losses and~~a full valuation allowance on its deferred tax assets.

~~Note 10 Commitments and Contingencies~~

~~Lease Commitments –~~In May 2014, the Company entered into a lease of approximately 27,000 square feet of office, laboratory and clean room space to be leased for seventy-two months. The lease requires monthly payments of $28,939 adjusted annually by approximately 3% plus triple net expenses monthly of $34,381 adjusted annually. The Company ~~also made a security deposit of $750,000 which~~did not have any material changes to its conclusions regarding valuation allowances for deferred income tax assets or uncertain tax positions for the three and nine months ended March 31, 2023 and 2022.

NOTE 12 — NET LOSS PER SHARE
Basic net loss per share is ~~held~~computed by dividing net loss by the ~~landlord,~~weighted average number of ~~which $375,000 has been returned to~~common shares, 2021 PFWs and 2022 PFWs outstanding during the ~~Company~~period, without consideration for other potentially dilutive securities. PFWs are included in the computation of basic and diluted net loss per share since the ~~remaining balance will be returned gradually over the next several years.~~
13
On March 17, 2017, the Company entered into a lease of approximately 20,000 square feet of office space to be leased for eighty-two months. The lease requires monthly payments of $28,425 adjusted annually plus triple net expenses monthly of $28,410 adjusted annually. The Company also made a security deposit of $56,851 which will be returned at the endexercise price is negligible and all of the ~~lease.~~
~~On March 17, 2017,~~PFWs are fully vested and exercisable. Accordingly, the ~~Company sub-leased their original approximately 10,000 square feet~~weighted average number of ~~office space to another company. The sublease~~shares outstanding is computed as follows for ~~eighty-two~~the three and nine months ~~unless the Company is unable to extend our current lease then the sub-lease will expire on~~ended March 31, ~~2020. The Company is to receive monthly payments of $12,523 adjusted annually plus triple~~2023 and 2022 (in thousands):

Three Months Ended

Nine Months Ended

March 31,

March 31,


2023

2022

2023

2022

Common Stock

36,827

15,557

36,531

12,735
2021 PFWs

1,661

1,661

1,661

1,013
2022 PFWs:

Class A PFWs

1,974

—

1,974

—
Class B PFWs

10,947

—

10,947

—
Total

51,409

17,218

51,113

13,748

For the three and nine ended March 31, 2023 and 2022, basic and diluted net ~~expenses monthly of $12,828 adjusted annually. The Company also received a security deposit of $25,046 which will be returned at~~loss per share were the ~~end of the lease.~~same since all other common stock equivalents were anti-dilutive.

As of ~~December~~March 31, ~~2017,~~2023 and 2022, the ~~minimum rental commitment under~~following outstanding potential common stock equivalents were excluded from the ~~leases are~~computation of diluted net loss per share since the impact of inclusion was anti-dilutive (in thousands):

2023

2022

Stock options

8,779

1,590
Warrants

1,122

1,158
Total

9,901

2,748

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 13 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS
Fair Value Measurements
Fair value is defined as ~~follows:~~
Operating Leases Sub-lease Income Total
Year Ending June 30,
2018 365,680 (76,866 ) 288,814
2019 747,953 (157,187 ) 590,766
2020 688,892 (148,551 ) 540,341
2021 338,392 - 338,392
2022 347,836 - 347,836
Thereafter 569,364 - 569,364
$ 3,058,117 $ (382,604 ) $ 2,675,513
~~License Agreements:~~ ~~On August 4, 2017,~~the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company ~~entered~~considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1—Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2—Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.
Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at the measurement date.
The following table presents information about the Company’s financial assets measured at fair value on a ~~Development~~recurring basis and ~~License Agreement (“~~~~License Agreement~~~~”) with ActiveSite Pharmaceuticals, Inc. (“~~~~ActiveSite~~~~”) pursuant to which~~indicates the fair value hierarchy classification of such fair values as of March 31, 2023 (in thousands):

Fair Value Measurement as of March 31, 2023

Total

Level 1

Level 2

Level 3
Cash and cash equivalents:

Money market funds

$
20,497

$
20,497

$
—

$
—
Marketable debt securities:

Corporate commercial paper

38,381

—

38,381

—
U.S. Government agencies

24,401

—

24,401

—
U.S. Government treasuries

5,942

5,942

—

—
Corporate notes and bonds

22,032

—

22,032

—
Asset-backed securities

4,773

—

4,773

—
Total

$
116,026

$
26,439

$
89,587

$
—

Marketable debt securities classified as Level 2 within the valuation hierarchy generally consist of U.S. government agency securities, corporate bonds, and commercial paper. The Company determines the fair value of marketable debt securities based upon valuations obtained from third-party pricing sources. Except for the amounts shown in the table above, the Company ~~acquired~~did not have any other assets measured at fair value on a recurring basis as of March 31, 2023. As of June 30, 2022, the ~~rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“~~~~PKI Program~~~~”). The~~ Company ~~desires to use the PKI Program to develop, file, manufacture, market and sell products for diabetic macular edema and other human therapeutic indications. The Company was~~did not have any assets required to ~~make an upfront payment~~be measured at fair value on a recurring basis.

Table of ~~$750,000~~Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company’s embedded derivative liabilities are classified under Level 3 of the hierarchy and are required to be measured and recorded at fair value on a recurring basis. Fair value is determined based on management’s assessment of the probability and timing of occurrence for the Exit Events discussed in Note 6 using a discount rate equal to the effective interest rate for the term A loan. The following table sets forth changes in the fair value of embedded derivative liabilities for the nine months ended March 31, 2023 and 2022 (in thousands):

2023

2022

Fair value, beginning of period

$
407

$
387
Loss from change in fair value

40

8
Fair value, end of period

$
447

$
395

Except for embedded derivative liabilities, the Company did not have any other liabilities measured at fair value on a recurring basis as of March 31, 2023 and June 30, 2022.
Due to the relatively short maturity of the respective instruments, the fair value of cash, accounts payable, ~~within five (5) days~~and accrued liabilities approximated their carrying values as of March 31, 2023 and June 30, 2022.
The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the ~~parties executed~~events or change in circumstances that caused the ~~License Agreement, which was expensed as research~~transfer. During the nine months ended March 31, 2023 and ~~development costs.~~2022, the Company did not have any transfers of its assets or liabilities between levels of the fair value hierarchy.
Significant Concentrations
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and investments in marketable debt securities. The Company ~~is required to pay up to an additional aggregate~~maintains its cash in demand accounts at a high-quality financial institution. As of ~~$36.5 million in development~~ and ~~regulatory milestone payments if certain clinical study objectives~~for the nine months ended March 31, 2023 and ~~regulatory filings, acceptances and approvals are achieved. In addition, we are required to pay up to~~2022, cash deposits have exceeded the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation.

As of March 31, 2023, the Company has an aggregate of ~~$10.0~~$53.1 million invested in ~~sales milestone payments if certain annual sales targets are achieved.~~
~~On December 6, 2017,~~the debt securities of issuers in the banking and financial services industries, and an aggregate of $24.4 million invested in the debt securities of a single agency of the U.S. government. While the Company’s investment policy requires investments in highly rated securities, a wide variety of broad economic factors and issuer-specific factors could result in credit agency downgrades below the Company’s minimum credit rating requirements that could result in losses regardless of whether the Company ~~entered into a License Agreement and Common Stock Purchase Agreement (collectively “~~~~Transaction Documents~~~~”) with XOMA LLC (“~~~~XOMA~~~~”) pursuant~~elects to ~~which~~sell the securities or hold them until maturity.

As of March 31, 2023, the Company acquired the exclusive rights to develop and commercialize XOMA 358 (now RZ358) for an orphan indication, Congenital Hyperinsulinism. The Company is responsible for all development, regulatory, manufacturing and commercialization activities associated with RZ358. Pursuant to the Transaction Documents, the Company is required to pay XOMA $6 million and to issue XOMA $12 millionhad cash equivalents consisting of the Company’s common stock based upon the Company’s financing activities in 2018. The Company would be required to issue additional shares and a put option to XOMA if certain financing activities did not occur in 2018, as more fully described in the license agreement. The Company also has a required development spend every year related to RZ358. The Company is also required to make certain clinical, regulatory and annual net sales milestone payments of up to $222$20.5 million in the ~~aggregate.~~MMF discussed in Note 2 and an aggregate of $13.2 million in checking and savings accounts at another large financial institution. As of June 30, 2022 the Company had cash and cash equivalents of $150.4 million in checking and savings accounts with a single financial institution. The Company ~~is also obliged~~has never experienced any losses related to ~~pay XOMA royalties ranging from the high single digits to the mid-teens based upon annual net sales~~its investments in cash and cash equivalents.

Table of ~~RZ358. Finally, under the terms of the License Agreement, the Company is required to pay XOMA a low single digit royalty on sales of the Company’s other products.~~Contents

~~Legal Matters~~ – From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of December 31, 2017, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our interest.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
~~General~~
~~This discussion~~Certain figures, such as interest rates and ~~analysis should be read~~other percentages included in ~~conjunction with~~this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the ~~accompanying~~basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our unaudited condensed consolidated financial statements and related notes. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.
~~Summary~~
~~In June 2017, we filed an IND for AB101 with the FDA and in July 2017, we dosed our first patient~~or in the ~~Phase 1 first-in-human~~associated text. Certain other amounts that appear in this section may similarly not sum due to rounding. As used in the discussion below, “we,” “our,” “us,” and the “Company” refers to Rezolute, Inc.

As a Company, we are focused on advancing our compounds through clinical ~~study (the “Study”). The study~~studies. Our lead clinical asset, RZ358, is a ~~first-in-human single ascending dose study to assess~~potential antibody treatment for congenital hyperinsulinism, an ultra-rare pediatric genetic disorder characterized by excessive production of insulin by the ~~safety and tolerability, pharmacokinetics and pharmacodynamics of AB101 in patients with Type 1 Diabetes Mellitus. The first part of the study~~pancreas. Our second clinical asset, RZ402, is a ~~sequential cohort dose ranging of AB101~~selective and there is an optional second study part to compare one or more tested doses of AB101 to Lantus®. In addition to safety and pharmacokinetic assessments, the time-action pharmacology of AB101 (onset, peak, and end of action) is being evaluated using several measures of glycemic response, including the hyperinsulinemic euglycemic clamp technique, continuous glucose monitoring, and background insulin use. In Q4 of calendar year 2017, we completed the first of up to five potential cohorts of the Study and having conducted the interim safety and dose escalation review meeting from that cohort, we plan on proceeding to a higher dose in the second cohort as planned per protocol. However, we will not begin dosing patients in the second cohort until we have raised additional capital. Further, as our clinical study is ongoing and we have not dose escalated beyond the first cohort, we do not anticipate announcing any results with respect to the Study until next year.
~~On August 4, 2017, we licensed from ActiveSite Pharmaceuticals, Inc. (“~~~~ActiveSite~~~~”) their oral~~potent plasma kallikrein inhibitor ~~portfolio~~ (“~~PKI Portfolio~~”PKI”) ~~targeting~~being developed as a potential oral therapy for the chronic treatment of diabetic macular edema (“~~DME~~”DME”).
RZ358

In May 2022, we announced positive topline results from the RZ358-606 Phase 2b study (“RIZE”) and ~~other plasma kallikrein-medicated diseases such~~through the first quarter of 2023, we finalized tables, figures and listings (“TFL”) for the study as ~~hereditary angioedema. ActiveSite has generated proof-of-concept data~~well as clinical study reports (“CSRs”). In addition, we have been actively engaged in discussions with both European regulatory authorities as well as the U.S. Food and Drug Administration (“FDA”) regarding plans for ~~their orally-administered plasma kallikrein inhibitors in clinically-relevant animal models of macular edema,~~a Phase 3 study (together the European regulatory authorities and ~~we are leveraging that data~~the FDA may be hereinafter referred to ~~complete IND-enabling toxicology studies and prepare for human clinical trials.~~
~~On December 6, 2017, we completed~~as the last phase of our corporate development strategy to create a focused metabolic disease company with multiple indications in which we in-licensed a fully human monoclonal antibody from XOMA LLC that is currently in Phase 2 clinical development targeting a treatment for an ultra-orphan pediatric indication, congenital hyperinsulinism (the “~~CHI Program~~”“Regulatory Authorities”). We ~~believe~~expect to commence the Phase 3 study during the Summer of 2023, but there can be no guarantee that we will be able to commence the ~~CHI Program~~study on this timeline. Based on our current enrollment estimates, we expect to have top line results available from this study in the first quarter of 2025.

RZ402

In December 2022, we initiated a Phase 2 multi-center, randomized, double-masked, placebo-controlled, parallel-arm study to evaluate the safety, efficacy, and pharmacokinetics of RZ402 administered as a monotherapy over a 12-week treatment period in participants with DME who are naïve to, or have received limited anti-VEGF injections. The study population will include DME patients with mild to moderate non-proliferative diabetic retinopathy. Eligible participants will be randomized equally, to one of three RZ402 active treatment arms at doses of 50, 200, and 400 mg, or a placebo control arm, and will receive study drug once daily for 12 weeks, before completing a four-week follow-up. The study is expected to enroll up to approximately 100 patients overall, across approximately 25 investigational sites in the United States. The principal endpoints of the trial include (i) changes in central subfield thickness of the macula, as measured by Spectral Domain Ocular Coherence Tomography, (ii) changes in visual acuity as measured by the early treatment diabetic retinopathy scale, (iii) the repeat dose pharmacokinetics of RZ402 in patients with DME, and (iv) the safety and tolerability of RZ402. We expect to complete enrollment in 2023 and to announce results from the study in the first quarter of 2024.
Recent Developments
Investment in Marketable Debt Securities
In January 2023, our Board of Directors determined that it was in the best interest of the Company and its shareholders to diversify its cash position and use a ~~compelling opportunity given~~portion of the Company’s cash to invest an aggregate of $115.0 million of cash held in demand deposit accounts in marketable debt securities and an overnight money market mutual fund with the objective of achieving higher returns on investment.
Headquarters Lease
In April 2022, we entered into a lease agreement for a new corporate headquarters facility in Redwood City, California. The space consists of approximately 9,300 square feet and provides for total base rent payments of approximately $2.9 million through the expected

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expiration of the lease in November 2027. The lease provides for a six-month rent abatement period that ~~there is no approved therapy~~began upon commencement of the lease term which occurred in October 2022.

Financing Activities

In July 2022, we entered into amended securities purchase agreements with Handok, Inc. (“Handok”) and certain of its affiliates (the “2022 Private Placement”), resulting in gross proceeds of $12.3 million in exchange for ~~this devastating childhood disease.~~the issuance of approximately 3.2 million shares of common stock. We incurred approximately $0.8 million for underwriting commissions and other offering costs, resulting in net proceeds of $11.5 million.

Termination of Loan Agreement

~~We believe that the CHI Program~~On April 14, 2021, we entered into a $30.0 million Loan and Security Agreement (the “Loan Agreement”) with Solar Investment Corp. (“SLR”) as collateral agent, and the ~~PKI Portfolio complement~~parties executing the Loan Agreement as lenders, including SLR in its capacity as a lender. The scheduled maturity date of the Loan Agreement was on April 1, 2026. In April 2021, we borrowed $15.0 million under the Loan Agreement. On June 30, 2022, we paid off the outstanding loan amount of $15.0 million in full and terminated the Loan Agreement in accordance with its terms.

Please refer to our ~~endogenous super long acting basal program, AB101, currently~~discussion under the caption Liquidity and Capital Resources for further discussion of our recent financing activities.

Factors Impacting our Results of Operations

We have not generated any meaningful revenues since our inception in ~~Phase 1 clinical development. We further believe that~~March 2010. Over the combination of these assets creates a potential highly valuable biopharmaceutical enterprise with a compelling investment thesis attractive to institutional investors. While we believe that our prospects are bright, we are currently significantly capital constrained and have elected to conduct a secured, convertible note financing to bridge the Company (the “~~Debt Financing~~~~”) until the Equity Financing is complete. We are seeking to raise $3,000,000 or more in the Debt Financing and~~last several years, we have conducted ~~our first for aggregate gross proceeds of $500,000 in January of 2018.~~

~~We have met with a variety of the large~~private placements and ~~mid-size health care funds to unveil the Rezolute story as we seek~~public offerings to raise ~~at least $25 million (the “~~~~Equity Financing~~”)additional capital, adopted a licensing model to pursue development of product candidates, conducted pre-clinical and ~~to date, as the funds have begun doing diligence~~clinical trials, and conducted other research and development activities on our ~~programs~~pipeline of product candidates.

Due to the time required to conduct clinical trials and ~~prospects,~~obtain regulatory approval for our product candidates, we ~~have experienced very favorable reception~~anticipate it will be several years before we generate substantial revenues, if ever. We expect to incur operating losses for the foreseeable future; therefore, we expect to continue efforts to raise additional capital to maintain our ~~strategy and expanded pipeline. Nonetheless,~~current operating plans over the next several years. We cannot assure you that we ~~recognize~~will secure such financing or that it will ~~take time~~be adequate for the long-term execution of our business strategy. Even if we obtain additional financing, it may be costly and may require us to ~~complete~~agree to covenants or other provisions that will favor new investors over our existing shareholders.

Key Components of Consolidated Statements of Operations and Comprehensive Loss

Research and development expenses. Research and development (“R&D”) expenses consist primarily of compensation and benefits for our personnel engaged in R&D activities, clinical trial costs, licensing costs, and consulting and outside services. Our R&D compensation costs include an allocable portion of our cash and share-based compensation, employee benefits, and consulting costs related to personnel engaged in the ~~Equity Financing~~design and development of product candidates and other scientific research projects. We also allocate a portion of our facilities and overhead costs based on the personnel and other resources devoted to R&D activities.

General and administrative expenses. General and administrative (“G&A”) expenses consist primarily of (i) an allocable portion of our cash and share-based compensation and employee benefits related to personnel engaged in our administrative, finance, accounting, and executive functions, and (ii) an allocable portion of our facilities and overhead costs related to such personnel. G&A expenses also include travel, legal, auditing, consulting, investor relations and other costs primarily related to our status as ~~we do not anticipate closing such~~ a ~~transaction until~~public company.

Interest and other income. Interest and other income consist primarily of interest income earned on investments and temporary cash investments.

Loss from change in fair value of derivative liabilities. We recognize liabilities for financial instruments that are required to be accounted for as derivatives, as well as embedded derivatives in our debt agreements. Derivative liabilities are adjusted to fair value at the end of ~~Q1 calendar year 2018~~each reporting period until the contracts are settled, expire, or ~~early Q2. Further, no assurance can be given that any such~~otherwise meet the conditions for equity classification. Changes in fair value are reflected as a gain or loss in our unaudited condensed consolidated statements of operations and of comprehensive loss.

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Employee retention credit. In response to the COVID-19 pandemic, the United States government has designed programs to assist businesses in dealing with the financial hardships caused by the pandemic. We recognize the right to receive governmental assistance payments in the period in which the related conditions on which they depend are substantially met.

Interest expense. The components of interest expense include the amount of interest payable in cash at the stated interest rate, and accretion of debt discounts and issuance costs (“DDIC”) using the effective interest method. DDIC arises from the issuance of debt instruments and other related contracts or agreements which possess certain terms and conditions resulting in additional financing ~~will be completed or will be timely completed on favorable terms. Currently, we cannot sustain operations without~~costs arising from origination, exit and final fees, and other incremental and direct costs incurred to consummate the ~~Debt Financing and without the larger Equity Financing we cannot continue to advance all of our current programs.~~financing.

~~Significant~~Critical Accounting Policies and Significant Judgments and Estimates

Overview

~~Our~~The discussion herein is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United ~~States of America.~~States. The preparation of ~~the~~these unaudited condensed consolidated financial statements requires ~~management~~us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, ~~and~~as well as the reported ~~amounts of~~revenue and expenses during the reporting ~~period. On an on-going basis, management evaluates its~~periods. These items are monitored and analyzed for changes in facts and circumstances, and material changes in these estimates ~~and judgments, including those related to~~could occur in the ~~estimated useful lives and impairment of depreciable assets, the fair value of share-based payments and warrants, fair value of derivative instruments,~~future. We base our estimates ~~of the probability and potential magnitude of contingent liabilities and income tax valuation allowances. Management bases its estimates and judgments~~ on historical experience and on various other factors that we believe are ~~believed to be~~ reasonable under the ~~circumstance,~~circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions. ~~The methods, estimates,~~

With respect to our significant accounting policies that are described in Note 1 to our consolidated financial statements included in Item 8 of our 2022 Form 10-K, we believe that the following accounting policies involve a greater degree of judgment and ~~judgments used by us in applying~~complexity. Accordingly, these are the policies we believe are the most critical ~~accounting policies have a significant impact on~~to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Accounting for Complex Financings

In order to account for complex financing transactions, we are required to make judgments, assumptions, and estimates to determine the ~~results we report~~appropriate amounts reported in our consolidated financial statements. These financing transactions typically involve entering into several distinct legal agreements, whereby we are required to identify and account for each freestanding financial instrument separately. The freestanding financial instruments may be classified as debt, temporary equity or permanent equity instruments depending on the results of our evaluation. In addition, we evaluate if any of the financial instruments contain embedded features that are required to be accounted for as derivatives at fair value. Each freestanding financial instrument is required to be recognized at fair value on the closing date of the financing. The fair value of warrants is generally determined using the Black-Scholes-Merton (“BSM”) valuation model and the fair value of common stock is based on the trading price of our shares on the closing date.

For financial instruments classified as debt, a discount is recognized if the stated principal balance exceeds the initial allocation of fair value as of the closing date. This discount is accreted to interest expense using the interest method that results in recognition of interest expense at a fixed rate through the expected maturity date.

Share-Based Compensation Expense

We measure the fair value of services received in exchange for all stock options granted based on the fair value of the award as of the grant date. We compute the fair value of stock options with time-based vesting using the BSM option-pricing model and recognize the cost of the equity awards over the period that services are provided to earn the award. For awards that contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized on a straight-line basis over the requisite service period as if the award was, in substance, a single award. We recognize the impact of forfeitures in the period that the forfeiture occurs, rather than estimating the number of awards that are not expected to vest in accounting for share-based compensation. For stock options that are voluntarily surrendered by employees, all unrecognized compensation is immediately recognized in the period the options are cancelled.

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Research and Development

R&D costs are expensed as incurred. Intangible assets related to in-licensing costs under license agreements with third parties are charged to expense unless we are able to determine that the licensing rights have an alternative future use in other R&D projects or otherwise.

Clinical Trial Accruals

Clinical trial costs are a component of R&D expenses. We accrue and recognize expenses for clinical trial activities performed by third parties based upon estimates of the percentage of work completed over the life of the individual study in accordance with agreements established with clinical research organizations and clinical trial sites. We determine the estimates through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. Nonrefundable advance payments for goods and services that will be used or rendered in future R&D activities, are deferred and recognized as expense in the period that the related goods are delivered, or services are performed.

Results of Operations

Three months ended March 31, 2023 and 2022

~~For Three and Six Months Ended December 31, 2017 and 2016~~

~~Results of operations~~Revenue. As a clinical stage company, we did not generate any revenue for the three months ended ~~December~~March 31, ~~2017 (the “2018 quarter”)~~2023 and 2022. We are at an early stage of development and do not currently have any commercial products. Our existing product candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenues. We do not expect to be able to generate revenue from any of our product candidates for several years.

Research and development expenses. R&D expenses for the three months ended ~~December~~March 31, ~~2016 (the “2017 quarter”) reflected losses~~2023 and 2022 were as follows (in thousands, except percentages):

Increase


2023

2022


Amount

Percent

Total R&D expenses

$
14,231

$
8,686

$
5,545

64
%

The increase in R&D expenses of $5.5 million for the three months ended March 31, 2023 was primarily attributable to an increase of RZ358 related program costs of approximately ~~$5,751,000~~$2.8 million. The increased expense consisted of an increase in manufacturing and ~~$4,888,000, respectively.~~
~~Results~~preclinical costs of ~~operations~~$1.8 million, clinical trial expense of $0.4 million, and other RZ358 program costs of $0.6 million. RZ358 costs increased due to Phase 3 clinical readiness activities. Compensation and benefits for our R&D workforce increased by approximately $1.1 million. Cash-based compensation and benefits increased by approximately $0.6 million that was primarily attributable to an increase in the average number of R&D employees from 26 for the ~~six~~three months ended ~~December~~March 31, ~~2017 (the “2018 period”) and~~2022 to 36 for the ~~six~~three months ended ~~December~~March 31, ~~2016 (the “2017 period”) reflected losses of~~2023. Share-based compensation and benefits increased by approximately ~~$12,468,000 and $8,704,000, respectively.~~
~~Revenues~~
~~We are a~~$0.5 million attributable to an increase in share-based compensation related to stock options granted in June 2022 where expense is recognized over the respective vesting periods. RZ402 program costs increased by approximately $0.4 million, primarily due to Phase 2 clinical ~~stage company and have not generated any revenues since inception.~~
~~Expenses~~
~~Research and development~~trial costs ~~include salaries, benefits and other staff-related costs; consultants and outside costs; material manufacturing costs; and facilities and other costs. Research and development~~which dosed its first patients in February 2023. Milestone related costs ~~were approximately $3,413,000 in~~increased by $1.0 million for the 2018 quarter compared to $3,075,000 in the 2017 quarter. Research and development costs were approximately $7,723,000 in the 2018 period compared to $5,561,000 in the 2017 period. The main increases arethree months ended March 31, 2023 due to the ~~Company continuing~~$3.0 million milestone due to ~~hire staff to manufacture clinical material during the 2018 period as well as the start~~ActiveSite upon dosing of the first ~~clinical trial~~patient in a Phase 2 study. Milestone costs for the quarter ended March 31, 2022 related to the payment of $2.0 million to XOMA upon last patient dosing in the ~~2018 period.~~Phase 2b study.
General and administrative ~~costs~~expenses. G&A expenses for the three months ended March 31, 2023 and 2022 were ~~approximately $2,338,000~~as follows (in thousands, except percentages):



Increase


2023

2022


Amount

Percent

Total G&A expenses

$
2,911

$
2,068

$
843

41
%

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The increase in G&A expenses of $0.8 million for the ~~2018 quarter compared~~three months ended March 31, 2023 was attributable to ~~$1,813,000~~increases in (i) share-based compensation expense of $0.5 million due to stock options granted in June 2022 where expense is recognized over the ~~2017 quarter. General~~respective vesting periods, and ~~administrative costs were approximately $4,774,000 in the 2018 period compared to $3,151,000 in the 2017 period. The main increase is~~(ii) cash-based compensation expense of $0.2 million due to an increase in ~~stock compensation expense during~~ the ~~2018 period as options were granted in the 2016 Stock Option Plan that were not in the 2017 period.~~

~~Impact~~average number of ~~the U.S. Tax Reform~~

On December 22, 2017, the U.S. President signed the Tax Cuts and Jobs Act (the “Act”) into law. Effective January 1, 2018, among other changes, the Act (a) reduces the U.S. federal corporate tax rate to 21 percent, provides for a deemed repatriation and taxation at reduced rates on historical earnings (a “transition tax”) of certain non-US subsidiaries owned by U.S. companies and establishes new mechanisms to tax such earnings going forward. The Act has wide ranging implications for the Company. However, the impact on the Company’s financial statementsemployees from 9 for the three months ended March 31, 2022 to 12 employees for the three months ended March 31, 2023.

Interest and ~~six-month periods~~Other Income. Interest and other income amounted to $1.5 million for the three months ended ~~December~~March 31, ~~2017 is immaterial,~~2023, compared to none for the three months ended March 31, 2022. This increase was primarily ~~because~~due to our decision in January 2023 to invest an aggregate of approximately $115.0 million in marketable debt securities and an overnight money market mutual fund that bear interest at a weighted average effective rate of approximately 5.0%, whereas our temporary cash investments for the ~~Company has~~three months ended March 31, 2022 provided for earnings that were less than 1.0%. The large increase in funds available for investment was attributable to the completion of equity financings between May 2022 and July 2022.

Interest Expense. We did not incur any interest expense for the three months ended March 31, 2023, whereas we incurred $0.4 million of interest expense for the three months ended March 31, 2022. Interest expense for the three months ended March 31, 2022 was solely attributable to the Loan Agreement and consisted of (i) interest expense of $0.3 million based on the weighted average contractual rate of 9.0%, and (ii) accretion of discount of $0.1 million. The Loan Agreement was repaid on June 30, 2022.

Income Taxes. For the three months ended March 31, 2023 and 2022, we did not recognize any income tax benefit due to our net losses, and our determination that a ~~full~~ valuation allowance onwas required for all of our deferred tax ~~assets~~assets.

Nine months ended March 31, 2023 and 2022

Revenue. As a clinical stage company, we did not generate any revenue for the nine months ended March 31, 2023 and 2022. We are at an early stage of development and do not currently have any commercial products. Our existing product candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenues. We do not expect to be able to generate revenue from any of our product candidates for several years.

Research and development expenses. R&D expenses for the nine months ended March 31, 2023 and 2022 were as follows (in thousands, except percentages):

Increase


2023

2022


Amount

Percent

Total R&D expenses

$
32,880

$
23,912

$
8,968

38
%

The increase in R&D expenses of $9.0 million for the nine months ended March 31, 2023 was partially attributable to compensation and benefits for our R&D workforce that increased by approximately $3.7 million. Cash-based compensation and benefits increased by approximately $2.3 million which was primarily attributable to an increase in the ~~U.S.~~average number of R&D employees from 24 for the nine months ended March 31, 2022 to 35 for the nine months ended March 31, 2023. In addition, approximately $1.4 million of this increase was attributable to an increase in share-based compensation related to stock options granted in June 2022 where expense is recognized over the respective vesting periods. In addition to the increases in compensation and benefits, an increase of $1.5 million was due to higher spending for RZ358 Phase 3 readiness manufacturing costs and $1.0 million for RZ402 Phase 2 clinical trial costs.
Milestone related costs under licensing agreements increased by $1.0 million for the nine months ended March 31, 2023 as a result of the $3.0 million milestone payment due to ActiveSite upon dosing of the first patient in a Phase 2 study. Milestone costs for the nine months ended March 31, 2022 related to the payment of $2.0 million to XOMA (as defined below) upon last patient dosing in the Phase 2b study.
Other R&D related costs increased by approximately $1.8 million for the nine months ended March 31, 2023 due an increase of $0.9 million related to R&D facilities costs driven by increased travel, rent and other facilities costs. Other pipeline development costs increased by $0.6 million.

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General and administrative expenses. G&A expenses for the nine months ended March 31, 2023 and 2022 were as follows (in thousands, except percentages):

Increase


2023

2022


Amount

Percent

Total G&A expenses

$
8,872

$
6,632

$
2,240

34
%

The increase in G&A expenses of $2.2 million for the nine months ended March 31, 2023 was primarily attributable to increases in (i) share-based compensation expense of $1.3 million due to stock options granted in June 2022 where expense is recognized over the respective vesting periods and (ii) cash-based compensation expense of $0.9 million that was primarily attributable to an increase in the average number of G&A employees from 8 for the nine months ended March 31, 2022 to 12 for the nine months ended March 31, 2023.
Interest and Other Income. Interest and other income amounted to $2.7 million for the nine months ended March 31, 2023, compared to $13,000 of interest income for the nine months ended March 31, 2022. The increase in interest income for the nine months ended March 31, 2023 was primarily due to our decision in January 2023 to invest an aggregate of approximately $115.0 million in marketable debt securities and overnight money market mutual fund that bear interest at a weighted average effective rate of approximately 5.0%, ~~which results~~whereas our temporary cash investments for the nine months ended March 31, 2022 provided for earnings that were less than 1.0%. The large increase in ~~there being no U.S.~~funds available for investment was attributable to the completion of equity financings between May 2022 and July 2022.
Employee Retention Credit. We did not generate any employee retention credit income for the nine months ended March 31, 2023, compared to $0.2 million for the nine months ended March 31, 2022. The income in the prior year was a result of CARES Act benefits. For the nine months ended March 31, 2023, governmental assistance was not available under the CARES Act.
Interest Expense. We did not incur any interest expense for the nine months ended March 31, 2023 due to the repayment of the Loan Agreement on June 30, 2022, whereas we incurred $1.3 million of interest expense for the nine months ended March 31, 2022. Interest expense for the nine months ended March 31, 2022 was solely attributable to the Loan Agreement and consisted of (i) interest expense of $1.0 million based on the weighted average contractual rate of 9.0%, and (ii) accretion of discount of $0.3 million.
Income Taxes. For the nine months ended March 31, 2023 and 2022, we did not recognize any income tax benefit due to our net losses, and our determination that a valuation allowance was required for all of our deferred tax assets or liabilities recorded on the balance sheet that need to be remeasured at the new 21% rate. The Company will continue to analyze the effects of the Act on its financial statements and operations. Any additional impacts from the enactment of the Act will be recorded as they are identified during the measurement period as provided for in Staff Accounting Bulletin 118.assets.
16
Liquidity and Capital Resources
Short-term Liquidity Requirements
As of ~~December~~March 31, ~~2017,~~2023, we ~~have approximately $0.8~~had cash and cash equivalents of $33.7 million, ~~in cash on hand~~short-term marketable debt securities of $69.3 million and working capital ~~deficit~~was approximately $101.1 million. We have incurred cumulative net losses of ~~approximately $1.1~~$248.3 million since our inception and as a clinical stage company we have not generated any meaningful revenue to date.
Our primary source of liquidity has historically been from the completion of private placements and public offerings of our equity securities, as well as proceeds from the issuance of debt securities. For the nine months ended March 31, 2023, as discussed above under the caption Recent Developments, we issued common stock in the 2022 Private Placement that resulted in net proceeds of $11.6 million. ~~During~~For the fiscal year ended June 30, ~~2017,~~2022, we ~~closed~~received net proceeds from the issuance of equity securities of $165.2 million. The completion of these equity financings is the primary factor that resulted in our cash and cash equivalents balance of $33.7 million and marketable debt securities investment balance of $95.5 million as of March 31, 2023. For further information about the key terms and results of our debt and equity financing activities, please refer to the discussion below under the captions 2022 Registered Direct Offering, 2021 Underwritten Public Offering and 2021 Registered Direct Offering.
Our most significant contractual obligations consist of milestone payments pursuant to licensing agreements with XOMA Corporation (“XOMA”) and ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) discussed below. Based on our expectations for the dates when certain

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clinical and regulatory milestones will be achieved, we anticipate that $5.0 million will be payable to XOMA within the next twelve months.

Based on our cash and cash equivalents balance of $33.7 million and short-term investment balance of $69.3 million as of March 31, 2023, we believe we have adequate capital resources to meet all of our contractual obligations and conduct all planned activities to advance our clinical trials through the fiscal quarter ending March 31, 2024.

Long-term Liquidity Requirements

Our most significant long-term contractual obligations consist of remaining clinical and regulatory milestone payments up to $35.0 million payable to XOMA and $32.5 million in remaining clinical and regulatory milestones payments to ActiveSite, for a total of $67.5 million. As discussed above, we expect that $5.0 million will be payable to XOMA within the next twelve months. Accordingly, the remainder of $62.5 million is considered a long-term liquidity requirement. Due to uncertainties in the timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the additional milestone payments to XOMA and ActiveSite during the fiscal year ending June 30, 2024 and thereafter.

Our long-term contractual obligations also include (i) operating lease payments up to approximately $0.7 million per year through calendar year 2027, and (ii) an ~~equity transaction in which~~exit fee of $0.6 million if we ~~issued units consisting~~enter into certain transactions (defined as “Exit Events”) prior to April 13, 2031. Exit Events include, but are not limited to, sales of ~~one share~~substantially all assets, certain mergers, change of control transactions, and issuances of common stock that result in new investors owning more than 35% of our common stock. As discussed above under the caption Recent Developments, on June 30, 2022 we terminated the Loan Agreement with SLR. However, we remain contingently obligated to pay the $0.6 million exit fee.

The following discussion provides additional information about the ongoing requirements pursuant to our license agreements with XOMA and ActiveSite, along with additional information about our recent financing activities that impacted our liquidity and capital resources through March 31, 2023.

XOMA License Agreement

In December 2017, we entered into a ~~warrant~~license agreement (the “XOMA License Agreement”) with XOMA through its wholly-owned subsidiary, XOMA (US) LLC, pursuant to which XOMA granted an exclusive global license to develop and commercialize XOMA 358 (formerly X358, now RZ358) for all indications. In January 2019, the XOMA License Agreement was amended with an updated payment schedule, as well as revised the amount we were required to expend on development of RZ358 and related licensed products, and revised provisions with respect to our diligence efforts in conducting clinical studies.

The XOMA License Agreement requires various clinical and regulatory milestone payments up to $37.0 million in aggregate. The first such milestone payment of $2.0 million was triggered upon dosing of the last patient in our Phase 2 clinical study in January 2022. The next milestone payment of $5.0 million will be due upon the dosing of the first patient in a Phase 3 study, which we believe will occur in the next twelve months. Additionally, upon the future commercialization of RZ358, we will be required to pay royalties to XOMA based on the net sales of the related products, and milestone payments up to an additional $185.0 million if future annual sales related to RZ358 exceed targets ranging from $100.0 million to $1.0 billion. Through March 31, 2023, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

ActiveSite License Agreement

In August 2017, we entered into a Development and License Agreement with ActiveSite (“ActiveSite License Agreement”) pursuant to which we acquired the rights to ActiveSite’s plasma kallikrein inhibitor portfolio (the “PKI Program”). We are planning to use the PKI Program to develop, file, manufacture, market and sell products for diabetic macular edema and other therapeutic indications. The ActiveSite License Agreement requires various milestone payments ranging from $1.0 million to $10.0 million when milestone events occur, up to $46.5 million of aggregate milestone payments. The first milestone payment for $1.0 million paid in December 2020 after completion of the preclinical work and submission of an IND to the FDA for RZ402. The second milestone payment for $3.0 million became due upon dosing of the first patient in a Phase 2 study in February 2023. We will also be required to pay royalties equal to 2.0% of any sales of products that use the PKI Program. Through March 31, 2023, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

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2022 Registered Direct Offering

On May 1, 2022, we entered into an underwriting agreement with Jefferies LLC, as representative of the underwriters listed therein, relating to the issuance and sale of equity securities in an underwritten registered direct offering (the “2022 RDO”). The 2022 RDO resulted in the issuance of (i) approximately 18.0 million shares of our common stock at a public offering price of $3.80 per share, (ii) Class A pre-funded warrants (the “Class A PFWs”) to purchase ~~either one-half or one share of common stock. During the year ended June 30, 2017, we also closed on an equity transaction in which we issued straight~~up to 2.0 million shares of common ~~stock. During the six months ended December 31, 2017, we had an additional close on an equity transaction in which we issued straight~~stock at a public offering price of $3.799 per Class A PFW, and (iii) Class B pre-funded warrants (the “Class B PFWs”) to purchase up to 10.9 million shares of common ~~stock.The Company received~~stock at a public offering price of $3.799 per Class B PFW. On May 4, 2022, the 2022 RDO closed resulting in net proceeds of approximately ~~$14~~$110.1 million. The gross amount of the 2022 RDO was $117.6 million, before deduction of an aggregate of $7.1 million for underwriting discounts and approximately $0.4 million for professional fees and other offering expenses payable by us. We believe the additional funding from the 2022 RDO along with the funding received in July 2022 from the 2022 Private Placement provides us with sufficient cash to fund a Phase 3 clinical program for RZ358, as well as a Phase 2 proof of concept study for RZ402.

2021 Underwritten Public Offering and Registered Direct Offering

In October 2021, we entered into an underwriting agreement with Oppenheimer & Co., Inc., as representative of the underwriters listed therein (the “2021 Underwriters”) for the planned issuance and sale of equity securities in an underwritten public offering (the “2021 Underwritten Offering”). On October 15, 2021, closing occurred for the 2021 Underwritten Offering resulting in the issuance of (i) 6,030,847 shares of common stock at $6.50 per share for gross proceeds of $39.2 million, and (ii) 1,661,461 pre-funded warrants to purchase 1,661,461 shares of common stock at an issuance price of $6.49 per warrant (the “2021 PFWs”) for gross proceeds of $10.8 million. We granted the Underwriters a 30-day option to purchase up to an additional 1,153,845 shares of its common stock in the 2021 Underwritten Offering at a public offering price of $6.50 per share, less underwriting discounts and commissions (the “Underwriters’ Option”). In November 2021, the Underwriters’ Option was partially exercised for 116,266 shares resulting in gross proceeds of approximately $0.8 million. The aggregate gross proceeds from the 2021 Underwritten Offering amounted to $50.7 million, excluding the Underwriters’ Option, and before deductions for underwriting commissions of 6.0% of the gross proceeds and other offering costs of approximately $0.3 million. After deducting total offering costs of $3.3 million, the net proceeds of the 2021 Underwritten Offering amounted to approximately $47.2 million.

Concurrently with the 2021 Underwritten Offering, Handok, an entity affiliated with a member of the Board of Directors, entered into a subscription agreement for a registered direct offering (the “2021 RDO”) pursuant to which we agreed to sell to the Handok an aggregate of 769,231 shares of our common stock at a purchase price of $6.50 per share. The closing for the 2021 RDO occurred on October 27, 2021, whereby we received gross proceeds of $5.0 million.

EDA and LPC Financings

In December 2020, we entered into an Equity Distribution Agreement (the “EDA”) with Oppenheimer & Co. Inc. as sales agent that provided for an “at the market offering” for the sale of up to $50.0 million in shares of our common stock (the “Placement Shares”). For the nine months ended March 31, 2022, we sold 138,388 Placement Shares for which aggregate net proceeds of approximately $1.5 million were received. In August 2021, we entered into a purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), that provided for issuances up to an aggregate of $20.0 million of shares of our common stock (the “Purchase Shares”). For the three months ended March 31, 2022, LPC did not purchase any shares of our common stock. In May 2022, we terminated the EDA and the LPC Purchase Agreement whereby no further equity securities are issuable under these agreements.

Loan Agreement

In April 2021, we borrowed $15.0 million under the Loan Agreement discussed above under the caption Recent Developments. Outstanding borrowings under the Loan Agreement provided for interest at a floating rate equal to (a) 8.75% per annum plus (b) the greater of (i) the rate per annum published by the Intercontinental Exchange Benchmark Administration Ltd. for a term of one month and (ii) 0.12% per annum. On June 30, 2022, we paid off the outstanding loan amount of $15.0 million and terminated the Loan Agreement in accordance with its terms. In addition to the repayment of principal and accrued interest, we paid (i) a prepayment fee equal to 2.00% of the outstanding principal balance for a total of $300,000, and (ii) a final fee equal to 4.75% of the aggregate amount of the term loans funded for a total of $712,500. The terminated Loan Agreement was secured by substantially all of our assets. The security interests and liens granted in connection with the terminated Loan Agreement were released on June 30, 2022.

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Cash Flows Summary

Presented below is a summary of our operating, investing, and financing cash flows for the nine months ended March 31, 2023 and 2022 (in thousands):

2023

2022

Change
Net cash provided by (used in):







Operating activities

$
(33,131)

$
(27,506)

$
(5,625)
Investing activities

(95,107)

—

(95,107)
Financing activities

11,571

54,875

(43,304)

Cash Used in Operating Activities
For the nine months ended March 31, 2023 and 2022, cash used in operating activities amounted to $33.1 million and $27.5 million, respectively. The key components in the calculation of our cash used in operating activities are as follows (in thousands):


2023

2022

Change

Net loss

$
(39,059)

$
(31,637)

$
(7,422)
Non-cash expenses

5,759

3,259

2,500
Non-cash gains, net

(708)

—

(708)
Changes in operating assets and liabilities, net

877

872

5
Total

$
(33,131)

$
(27,506)

$
(5,625)

For the nine months ended March 31, 2023, our net loss was $39.1 million compared to $31.6 million for the nine months ended March 31, 2022. For further discussion about changes in our operating results for the nine months ended March 31, 2023 and 2022, please refer to Results of Operations above.
For the nine months ended March 31, 2023 and 2022, our non-cash expenses of $5.8 million and $3.3 million, respectively, were primarily attributable to share-based compensation expense, non-cash lease expense, and accretion of debt discount and issuance costs. For the nine months ended March 31, 2023, net non-cash gains of $0.7 million were attributable to accretion of discounts, net of amortization of premiums, related to our investments in marketable debt securities. For the nine months ended March 31, 2023, net changes in operating assets and liabilities increased operating cash flow by $0.9 million, primarily driven by an increase of $1.7 million in accounts payable and other accrued liabilities primarily. This amount was partially offset by reduced cash flows resulting from an increase in prepaid expenses and other assets of $0.8 million. For the nine months ended March 31, 2022, net changes in operating assets and liabilities increased operating cash flow by $0.9 million, primarily driven by an increase in accounts payable and other accrued liabilities.
Cash Provided by Investing Activities
For the nine months ended March 31, 2023, our net cash utilized in investing activities amounted to $95.1 million, primarily related to the purchase of $95.0 million of marketable debt securities. Additionally, $0.1 million of cash utilized in investing activities related to the purchase of furniture and equipment primarily for use in our new office location in Redwood City, California. We did not have any cash flows from investing activities for the nine months ended March 31, 2022.
Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended March 31, 2023 amounted to $11.6 million. This amount consisted of proceeds of $12.3 million from the ~~transactions above.~~
2022 Private Placement. The ~~Company is currently conducting a convertible note~~total proceeds from the 2022 Private Placement of $12.3 million were partially offset by payments of $0.8 million for underwriting commissions and other costs related to this offering.

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Net cash provided by financing activities for the nine months ended March 31, 2022 amounted to ~~raise $3~~$54.9 million. This amount consisted of proceeds of (i) $50.7 million ~~in which we have closed on $500,000~~from the Underwritten Offering, (ii) $5.0 million from the Registered Direct Offering, (iii) $1.5 million from the EDA, and (iv) $1.2 million from the Purchase Agreement. The total proceeds from equity financing activities of ~~the note financing. The notes also come with warrants at the time the notes are issued. The Company will continue~~$58.4 million were partially offset by payments of $3.4 million for underwriting discounts and other costs related to ~~close on the note financing while the Company works to complete an Equity Financing. There are no assurances that any~~equity offerings, and $0.1 million of ~~the above financings will be completed or will be completed timely and on favorable terms.~~

~~Going Concern~~

~~The continuation of our business is dependent upon obtaining further financing and achieving a break even or profitable level of operations in our business. The~~payments for debt issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There are no assurances that we will be able to obtain additional financing through either private placements, and/or bank financing or other loans necessary to support our working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. These conditions raise substantial doubt about our ability to continue as a going concern.

costs.

Recent Accounting Pronouncements

~~See~~Please refer to Note 21 to ~~the~~our unaudited condensed consolidated financial statements ~~included~~ in Part I, Item 1 of this ~~Form 10-Q~~Report regarding the impact of ~~certain~~recent accounting ~~pronouncements on our consolidated financial statements.~~

pronouncements.

Off-Balance Sheet Arrangements

We ~~had no~~did not have any off-balance sheet ~~transactions.~~transactions for the periods covered by this Report.

~~ITEM~~

Item 3. ~~QUALITATIVE AND QUANTITATIVE DISCUSSION ABOUT MARKET RISK.~~

Quantitative and Qualitative Disclosures About Market Risk.

Not ~~required for smaller reporting companies.~~applicable.

~~ITEM~~Item 4. ~~CONTROLS AND PROCEDURES.~~
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive ~~officer)~~ and ~~our Chief Accounting Officer (our principal accounting~~financial officer), of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based on that ~~evaluation and~~assessment under those criteria, our management has determined that our internal control over financial reporting was not effective due to a material weakness in the system of internal control. A material weakness is a deficiency, or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely manner.
As previously reported on our Annual Report on Form 10-K for the year ended June 30, 2022 in connection with the our assessment of the effectiveness of its internal control over financial reporting at the end of its last fiscal year, the material weakness identified by management is primarily that due to our limited number of employees, we have not adequately segregated certain duties to prevent employees from overriding the internal control system. During the fiscal year ended June 30, 2022, we implemented a more robust accounting software that is expected to result in stronger controls. In October 2022, we hired additional personnel, which will enable us to better segregate many functions. While we believe these are important steps in our ongoing remediation efforts, we cannot provide assurance that these or other measures will eventually result in the elimination of the material weakness described below, our management concluded that we did not maintain effective disclosure controls and procedures as of December 31, 2017 in ensuring that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that it is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our management has identified control deficiencies regarding a lack of segregation of duties, a need for a stronger internal control environment, and minimal review of complex accounting issues. Our management believes that these deficiencies, which in the aggregate constitute a material weakness, are due to the small size of our staff, which makes it challenging to maintain adequate disclosure controls.
above.
Changes in internal controls over financial reporting
During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting ~~(as defined in Rule 13(a)-15(f) or 15(d)-15(f))~~ that ~~occurred during the period covered by this quarterly report that have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS.~~
Legal Proceedings.
None

Item 1A. Risk Factors.
~~ITEM~~Our risk factors are set forth under “Item 1A. ~~RISK FACTORS.~~Risk Factors” in our 2022 Form 10-K (referred to as our “Legacy Risk Factor Disclosures”). As of the date of this Report, there have been no material changes with respect to Legacy Risk Factor Disclosures except for the risk factors set forth below.

~~Certain~~We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

As of March 31, 2023, the fair value of the investments in our marketable debt securities portfolio was approximately $95.5 million. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example, fixed-rate securities acquired by us are generally subject to decreases in market value when interest rates rise. Additional factors ~~exist~~include, but are not limited to, rating agency downgrades of the securities or our own analysis of the value of the security, defaults by the issuer with respect to the underlying securities, and continued instability in the credit markets. Any of the foregoing factors could cause other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

As of March 31, 2023, we had $132,000 in net unrealized losses in our marketable securities available-for-sale portfolio, and unrealized losses in our securities portfolio may increase in the future due to the aforementioned economic factors. While our goal is to hold each security until maturity, that may not be possible in light of our policy to preserve capital and liquidity and because investment in securities with unrealized losses has a diminished utility as a source of liquidity prior to maturity. Selling securities with an unrealized loss would result in the realization of such losses, which could have an adverse effect on our financial condition and results of operations.

The collapse of certain banks and potentially other financial institutions may adversely impact us.

On March 10, 2023, Silicon Valley Bank (“SVB”) was shut down, followed on March 11, 2023 by Signature Bank and on May 1, 2023 by First Republic Bank whereby, the Federal Deposit Insurance Corporation was appointed as receiver for each of those banks. As a result, there have been reports of instability at other banks across the globe. Despite the steps taken to date by U.S. agencies to protect depositors, the follow-on effects of the events surrounding the failures of SVB, Signature Bank, and First Republic Bank and the pressure on other banks are unknown. Such effects could include failures of other financial institutions to which we face direct or more significant exposure, and the extent of the impacts relating to financial institution instability or failure is uncertain. Our investment portfolio did not and currently does not contain any securities of SVB, and we did not have any deposit accounts with SVB. We are monitoring the situation and intend to minimize any disruptions to our operations should they arise. However, there may be risks that we have not yet identified, and we cannot guarantee that we will be able to avoid negative consequences directly or indirectly from the foregoing events or other impacts on financial institutions.
Any delays in the commencement or completion, or termination or suspension, of our future clinical trials, if any, could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

Before obtaining approval from the Regulatory Authorities for our drug candidates, we must conduct extensive clinical studies to demonstrate safety and efficacy. Clinical testing is expensive, time consuming and uncertain as to outcome. Any delays in the commencement or completion of our ongoing, planned or future clinical trials could significantly increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues. We do not know whether our planned trials will begin on time or at all, or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

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●

Regulatory Authorities disagreeing as to the design or implementation of our clinical trials or with our recommended dose for any of our pipeline programs;

●

obtaining Regulatory Authority authorization to commence a trial or reaching a consensus with such Regulatory Authorities on trial design;

●

obtaining approval from one or more independent institutional review board (“IRB”) or Ethics Committee (“EC”) at each clinical trial site before each trial may be initiated;

●

IRBs/ECs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;

●

changes to clinical trial protocol;

●

clinical sites deviating from trial protocol or dropping out of a trial;

●

failing to manufacture or obtain sufficient quantities of drug candidate, or, if applicable, combination therapies for use in clinical trials;

●

patients failing to enroll or remain in our trial at the rate we expect, or failing to return for post-treatment follow-up;

●

patients choosing an alternative treatment, or participating in competing clinical trials;

●

lack of adequate funding to continue the clinical trial;

●

patients experiencing severe or unexpected drug-related adverse effects;

●

occurrence of serious adverse events in trials of the same class of agents conducted by other companies;

●

selecting or being required to use clinical end points that require prolonged periods of clinical observation or analysis of the resulting data;

●

a facility manufacturing our drug candidates, or any of their components, including without limitation, our own facilities being ordered by Regulatory Authorities to temporarily or permanently shut down due to violations of current good manufacture practices, regulations or other applicable requirements, or infections or cross-contaminations in the manufacturing process;

●

lack of stability of our clinical trial material or any quality issues that arise with the clinical trial material;

●

any changes to our manufacturing process that may be necessary or desired;

●

our, or our third-party contractors, not performing data collection or analysis in a timely or accurate manner or improperly disclosing data prematurely or otherwise in violation of a clinical trial protocol; or

●

any third-party contractors becoming debarred or suspended or otherwise penalized by Regulatory Authorities or other government or regulatory bodies for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs/ECs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by Regulatory Authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by Regulatory Authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using the product under investigation, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs/ECs for reexamination, which may ~~affect~~impact the ~~Company’s business and~~costs, timing or successful completion of a clinical trial.

Any delay in, or failure to receive or maintain, approval for any of our product candidates could ~~cause actual results to differ materially~~prevent us from those expressed in any forward-looking statements. The Company has not experienced any material changes from those risk factors as previously disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 22, 2017 (the “Form 10-K”).ever generating meaningful revenues or achieving profitability.

~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~
Unregistered Sales of Equity Securities and Use of Proceeds.
None.

~~ITEM~~Item 3. ~~DEFAULTS UPON SENIOR SECURITIES.~~
Defaults Upon Senior Securities.
None.

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~~ITEM~~Item 4. ~~MINE SAFETY DISCLOSURES.~~
Mine Safety Disclosures.
Not applicable.

18
~~ITEM~~Item 5. ~~OTHER INFORMATION.~~
Other Information.
None.

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Item 6. Exhibits.
~~ITEM 6. EXHIBITS.~~
The following exhibits are incorporated by reference or filed as part of this Quarterly Report on Form 10-Q:
Exhibit Number
Description of Exhibits
10.1*

Amended and Restated Employment Agreement of Nevan Elam, dated January 8, 2023
~~10.1~~
10.2*

~~License~~Amended and Restated Employment Agreement ~~with XOMA*%~~of Brian Roberts, dated January 8, 2023
31.1*

~~10.2~~
~~Common Stock Purchase Agreement with XOMA*%~~
~~31.1~~ Certification of Chief Executive and Principal Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1*

~~31.2~~
Certification of Chief Accounting Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
~~32.1~~ Certification of Chief Executive and Principal Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS*

Inline XBRL Instance Document
~~32.2~~
101.SC*

Certification of Chief Accounting Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
Inline XBRL Taxonomy Extension Schema
101.CA*

Inline XBRL Taxonomy Extension Calculation Linkbase
~~101~~
101.DEF*

~~The following materials from our Quarterly Report on Form 10-Q for the quarter ended December 31, 2017~~
Inline XBRL Taxonomy Extension Definition Linkbase
101.LA*

Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase
104

Cover Page Interactive Data File, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Balance Sheet, (ii) Statement of Operations, (iii) Statements of Cash Flows, (iv) Statements of Stockholders Equity and (v) related notes to these financial statements*(included as Exhibit 101)
* Filed herewith.
* ~~Filed herewith~~
% ~~Certain portions of this exhibit have been redacted pursuant to a confidential treatment request filed with the Commission on February 14, 2018.~~

19
36

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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~REZOLUTE, INC.~~

REZOLUTE, INC.

Date: ~~February 14, 2018~~May 11, 2023
By:
/s/ Nevan Charles Elam

Nevan Charles Elam

Chief Executive Officer

(Principal Executive and Financial Officer)
~~Date: February 14, 2018~~ ~~By:~~ ~~/s/ Morgan Fields~~
~~Morgan Fields~~
~~Chief Accounting Officer~~
~~(Principal Accounting Officer)~~

x		~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
~~For the quarterly period ended December 31, 2017~~
OR
¨		~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~Delaware~~		~~27-3440894~~
Nevada		27-3440894
(State ofor other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


275 Shoreline Drive, Suite 500, Redwood City, California		94065
~~1450 Infinite Drive, Louisville, Colorado~~		~~80027~~
(Address of ~~Principal Executive Offices)~~principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		RZLT		Nasdaq Capital Market

Large accelerated filer ¨☐	Accelerated filer ¨☐

Non-accelerated filer ¨☒	Smaller reporting company x☒
~~(Do not check if a smaller reporting company)~~
	Emerging ~~Growth Company~~ ¨growth company ☐

	Page
PART I - FINANCIAL INFORMATION
~~PART I – FINANCIAL INFORMATION~~	2
Item 1. Financial Statements
~~ITEM 1. FINANCIAL STATEMENTS~~	2

Unaudited Condensed Consolidated Balance Sheets – ~~December~~March 31, ~~2017~~2023 and June 30, ~~2017~~2022	2 3

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss – Three and ~~six months ended December~~Nine Months Ended March 31, ~~2017~~2023 and ~~2016~~2022	3 4

Unaudited Condensed Consolidated Statements of ~~Stockholders’~~Shareholders’ Equity – ~~From June 30, 2017 to December~~Nine Months Ended March 31, ~~2017~~2023 and 2022	4 5

Unaudited Condensed Consolidated Statements of Cash Flows – ~~Six months ended December~~Nine Months Ended March 31, ~~2017~~2023 and ~~2016~~2022	5 6

Notes to Unaudited Condensed Consolidated Financial Statements	6 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Item 3. Quantitative and Qualitative Disclosures About Market Risk	15 32
~~ITEM 3. QUALITATIVE AND QUANTITATIVE DISCUSSION ABOUT MARKET RISK~~Item 4. Controls and Procedures	17 32
~~ITEM 4. CONTROLS AND PROCEDURES~~	18

PART II – OTHER INFORMATION	18

~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS~~Legal Proceedings	18 33
~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors	18 33
~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds	18 34
~~ITEM~~Item 3. ~~DEFAULTS UPON SENIOR SECURITIES~~Defaults Upon Senior Securities	18 34
~~ITEM~~Item 4. ~~MINE SAFETY DISCLOSURE~~Mine Safety Disclosures	18 35
~~ITEM~~Item 5. ~~OTHER INFORMATION~~Other Information	19 35
~~ITEM~~Item 6. ~~EXHIBITS~~Exhibits	36

19Signatures	37

	December 31, 2017			June 30, 2017
	(Unaudited)
Assets

Current assets
Cash	$	868,071		$	4,486,538
Other current assets		295,728			442,015
Total current assets		1,163,799			4,928,553

Non-current assets
Fixed assets, net		4,797,823			5,325,401
Intangible assets, net		40,676			44,322
Deferred lease asset		74,831			86,293
Deposits		244,341			244,341
Total non-current assets		5,157,671			5,700,357

Total Assets	$	6,321,470		$	10,628,910

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable and accrued expenses	$	2,121,854		$	1,652,677
Convertible notes payable		10,000			10,000
Deferred lease liability, current portion		116,234			105,295
Interest payable		2,762			2,762
Warrant derivative liability		90			588
Total current liabilities		2,250,940			1,771,322

Non-current liabilities:
Deferred lease liability, less current portion		243,686			304,575
Deposit liability		25,046			25,046
Total non-current liabilities		268,732			329,621

Total Liabilities		2,519,672			2,100,943

Commitments and Contingencies (Note 10)

Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized; none issued and outstanding		-			-
Common stock, $0.001 par value, 200,000,000 shares authorized; 54,073,309 and 49,228,640 shares issued and outstanding, December 31, 2017 and June 30, 2017		54,075			49,230
Additional paid-in capital		80,472,885			72,800,699
Accumulated deficit		(76,725,162	)		(64,321,962	)
Total stockholders’ equity		3,801,798			8,527,967

Total Liabilities and Stockholders’ Equity	$	6,321,470		$	10,628,910

	Three Months						Six Months
	Ended December 31,						Ended December 31,
	2017			2016			2017			2016
	(Unaudited)						(Unaudited)
Operating expenses
Research and development
Compensation and benefits	$	1,482,946		$	1,909,518		$	2,983,810		$	3,213,358
Consultants and outside costs		233,798			194,783			364,159			466,258
Material manufacturing costs		227,602			567,430			653,691			1,079,137
Clinical trial costs		581,988			-			1,561,754			-
License costs		407,605			-			1,178,505			-
Facilities and other costs		479,149			403,648			981,807			802,555
		3,413,088			3,075,379			7,723,726			5,561,308

General and administrative
Compensation and benefits		1,672,494			1,285,052			3,467,921			2,151,953
Professional fees		213,399			139,865			436,993			286,016
Investor relations		133,705			87,428			193,576			155,535
General and administrative		318,272			301,520			645,872			558,115
		2,337,870			1,813,865			4,744,362			3,151,619

Total operating expenses		5,750,958			4,889,244			12,468,088			8,712,927

Loss from operations		(5,750,958	)		(4,889,244	)		(12,468,088	)		(8,712,927	)

Other income (expense)
Interest income		524			-			861			-
Rent income		31,838			-			63,676			-
Interest expense		(147	)		-			(147	)		(1,595	)
Derivative gains		156			1,313			498			10,725
Total other income		32,371			1,313			64,888			9,130

Net loss	$	(5,718,587	)	$	(4,887,931	)	$	(12,403,200	)	$	(8,703,797	)

Net loss per common share - basic and diluted	$	(0.11	)	$	(0.12	)	$	(0.23	)	$	(0.23	)

Weighted average number of common shares outstanding - basic and diluted		53,762,358			40,788,241			53,327,558			38,091,406

					Additional						Total
	Common Stock, $0.001 Par Value				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Capital			Deficit			Equity

Balance at June 30, 2017		49,228,640	$	49,230	$	72,800,699		$	(64,321,962	)	$	8,527,967

Stock-based compensation net of forfeitures of $317,674 (Unaudited)		-		-		2,701,728			-			2,701,728

Fair value of warrants issued for consulting services (Unaudited)		-		-		535,303			-			535,303

Issuance of common stock, net of issuance costs of $60,000 (Unaudited)		4,500,000		4,500		4,435,500			-			4,440,000

Commitment fee for issuance of common stock (Unaudited)		344,669		345		(345	)		-			-

Net loss for the six months ended December 31, 2017 (Unaudited)		-		-		-			(12,403,200	)		(12,403,200	)

Balance at December 31, 2017 (Unaudited)		54,073,309	$	54,075	$	80,472,885		$	(76,725,162	)	$	3,801,798

	Six Months
	Ended December 30,
	2017			2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(12,403,200	)	$	(8,703,797	)
Amortization of intangible asset		3,646			3,646
Depreciation expense		533,394			546,429
Stock-based compensation expense		2,701,728			2,125,966
Derivative gains		(498	)		(10,725	)
Warrant expense for consulting services		535,303			-
Changes in operating assets and liabilities:
Decrease in other assets		146,287			29,153
Decrease in deferred lease asset		11,462			-
Increase in accounts payable and accrued expenses		469,177			12,097
Decrease in interest payable		-			(2,800	)
Decrease in deferred lease liability		(49,950	)		(58,924	)
Net Cash Used In Operating Activities		(8,052,651	)		(6,058,955	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(5,816	)		(272,587	)
Return of security deposit		-			187,500
Net Cash Used In Investing Activities		(5,816	)		(85,087	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on lease payable		-			(23,128	)
Proceeds from issuance of equity financing		4,500,000			6,361,499
Payment of placement agent compensation and issuance costs		(60,000	)		(683,194	)
Net Cash Provided by Financing Activities		4,440,000			5,655,177

Net decrease in cash		(3,618,467	)		(488,865	)

Cash - Beginning of Period		4,486,538			4,062,013

Cash - End of Period	$	868,071		$	3,573,148

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:
Taxes	$	-		$	-
Interest	$	-		$	-

Non-Cash Transactions:
Fixed assets acquired through accounts payable and accrued expenses	$	-		$	18,016
Warrant value recorded as issuance costs	$	-		$	516,550
Conversion of note payable into common stock	$	-		$	50,000
Conversion of interest payable into common stock	$	-		$	9,517

Balance as of June 30, 2017	$	(588	)
Total unrealized gains (losses):
Included in earnings		498
Balance as of December 31, 2017	$	(90	)


	Estimated Fair Value at
	March 31,		June 30,
	2023		2022
Cash and cash equivalents	$	33,743	$	150,410
Short-term investments in marketable debt securities		69,319		—
Long-term investments in marketable debt securities		26,210		—
Total cash, cash equivalents and investments in marketable debt securities	$	129,272	$	150,410


	March 31, 2023								June 30,
			Gross Unrealized						2022
	Amortized Cost		Gains		Losses		Fair Value		Fair Value
Corporate commercial paper	$	38,416	$	2	$	(37)	$	38,381	$	—
Obligations of U.S. government agencies		24,379		23		(1)		24,401		—
U.S. Treasury obligations		5,941		1		—		5,942		—
Corporate notes and bonds		22,150		4		(122)		22,032		—
Asset-backed securities		4,775		—		(2)		4,773		—
Available-for-sale investments	$	95,661	$	30	$	(162)	$	95,529	$	—
Money market funds								20,497		—
Cash								13,246		150,410
Total cash, cash equivalents and investments in marketable debt securities							$	129,272	$	150,410


Fiscal year ending June 30,
Remainder of fiscal year 2023	$	80
2024		689
2025		627
2026		646
2027		666
Thereafter		224
Total lease payments		2,932
Less imputed interest		(558)
Present value of operating lease liabilities	$	2,374

	Useful
	Life		December 31, 2017			June 30, 2017
Furniture and fixtures		5 - 7 years	$	118,450		$	118,450
Lab equipment		3 - 15 years		3,951,855			3,946,040
Leasehold Improvements		5 - 7 years		3,247,038			3,247,038
				7,317,343			7,311,528
Less: accumulated depreciation and amortization				(2,519,520	)		(1,986,127	)
			$	4,797,823		$	5,325,401


	Plan Termination	Number of Shares
Description	Date	Authorized	Outstanding	Available

2015 Plan	February 2020	17	17	—
2016 Plan	October 2021	140	140	—
2019 Plan	July 2029	200	200	—
2021 Plan	March 2031	10,700	8,422	2,278
Total		11,057	8,779	2,278


	Shares	Price ⁽¹⁾		Term ⁽²⁾

Outstanding, June 30, 2022	8,506	$	5.24	9.7
Grants to employees	668		1.98
Expired	(116)		40.73
Forfeited	(279)		3.78
Outstanding, March 31, 2023	8,779		4.57	9.1
Vested, March 31, 2023	966		11.65	7.73

~~Expected volatility~~	84	%
~~Risk free interest rate~~	~~2.0 - 2.21~~	%
~~Expected term (years)~~	7
~~Dividend yield~~	0	%

				Weighted		Weighted Average
	Number of			Average		Remaining
	Options			Exercise Price		Contractual Life
Outstanding, June 30, 2017		21,290,751		$	1.65		7.7
Granted		255,000		$	1.08
Forfeited		(457,000	)	$	1.65
Outstanding, December 31, 2017		21,088,751		$	1.65		7.7

Exercisable at December 31, 2017		9,250,001		$	2.09		6.4


Market price of common stock on grant date	$	1.98
Expected volatility		91	%
Risk free interest rate		3.7	%
Expected term (years)		6.0
Dividend yield		0	%


	2023	2022

Stock options	8,779	1,590
Warrants	1,122	1,158
Total	9,901	2,748

	Operating Leases		Sub-lease Income			Total
Year Ending June 30,
2018		365,680		(76,866	)		288,814
2019		747,953		(157,187	)		590,766
2020		688,892		(148,551	)		540,341
2021		338,392		-			338,392
2022		347,836		-			347,836
Thereafter		569,364		-			569,364
	$	3,058,117	$	(382,604	)	$	2,675,513



	Fair Value Measurement as of March 31, 2023
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Money market funds	$	20,497	$	20,497	$	—	$	—
Marketable debt securities:
Corporate commercial paper		38,381		—		38,381		—
U.S. Government agencies		24,401		—		24,401		—
U.S. Government treasuries		5,942		5,942		—		—
Corporate notes and bonds		22,032		—		22,032		—
Asset-backed securities		4,773		—		4,773		—
Total	$	116,026	$	26,439	$	89,587	$	—



	2023		2022

Fair value, beginning of period	$	407	$	387
Loss from change in fair value		40		8
Fair value, end of period	$	447	$	395


					Increase
	2023		2022			Amount	Percent

Total R&D expenses	$	14,231	$	8,686	$	5,545	64	%


	2023		2022		Change
Net cash provided by (used in):
Operating activities	$	(33,131)	$	(27,506)	$	(5,625)
Investing activities		(95,107)		—		(95,107)
Financing activities		11,571		54,875		(43,304)


Exhibit Number		Description of Exhibits
10.1*		Amended and Restated Employment Agreement of Nevan Elam, dated January 8, 2023
~~10.1~~ 10.2*		~~License~~Amended and Restated Employment Agreement ~~with XOMA*%~~of Brian Roberts, dated January 8, 2023
31.1*
~~10.2~~		~~Common Stock Purchase Agreement with XOMA*%~~

~~31.1~~		Certification of Chief Executive and Principal Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1*
~~31.2~~		Certification of Chief Accounting Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

~~32.1~~		Certification of Chief Executive and Principal Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS*		Inline XBRL Instance Document
~~32.2~~ 101.SC*		Certification of Chief Accounting Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* Inline XBRL Taxonomy Extension Schema
101.CA*		Inline XBRL Taxonomy Extension Calculation Linkbase
~~101~~ 101.DEF*		~~The following materials from our Quarterly Report on Form 10-Q for the quarter ended December 31, 2017~~ Inline XBRL Taxonomy Extension Definition Linkbase
101.LA*		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Balance Sheet, (ii) Statement of Operations, (iii) Statements of Cash Flows, (iv) Statements of Stockholders Equity and (v) related notes to these financial statements*(included as Exhibit 101)

	~~REZOLUTE, INC.~~
		REZOLUTE, INC.

Date: ~~February 14, 2018~~May 11, 2023	By:	/s/ Nevan Charles Elam
		Nevan Charles Elam
		Chief Executive Officer
		(Principal Executive and Financial Officer)


~~Date: February 14, 2018~~	~~By:~~	~~/s/ Morgan Fields~~
		~~Morgan Fields~~
		~~Chief Accounting Officer~~
		~~(Principal Accounting Officer)~~