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:

•●

expectations regarding clinical development and the timing of clinical trials in the United States and outside of the United States;

●

projected operating or financial results, including anticipated cash flows to be used in ~~operations;~~operating activities;

•●

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

•●

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

•●

our ability to obtain regulatory approvals or remove regulatory holds for clinical trials and our ~~pharmaceutical drugs~~drug candidates; and ~~diagnostics; and~~

•●

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, 2023 (the “2023 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on September 14, 2023.

•

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

•

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

•

~~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;~~

•

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

•

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

•

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

•

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

•

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

•

~~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.

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


	September 30,		June 30,
	2023		2023
Assets
Current assets:
Cash and cash equivalents	$	8,057	$	16,036
Investments in marketable debt securities		90,673		85,860
Prepaid expenses and other		3,915		3,014
Total current assets		102,645		104,910

Long-term assets:
Investments in marketable debt securities		8,144		16,470
Right-of-use assets		1,933		2,054
Property and equipment, net		129		139
Deposits and other		148		148
Total assets	$	112,999	$	123,721

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	2,432	$	3,269
Accrued liabilities:
Accrued clinical and other		2,557		507
Compensation and benefits		1,681		883
Current portion of operating lease liabilities		525		541
Total current liabilities		7,195		5,200

Long term liabilities:
Operating lease liabilities, net of current portion		1,814		1,937
Embedded derivative liability		426		412
Total liabilities		9,435		7,549

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 shares as of September 30, 2023 and June 30, 2023		37		37
Additional paid-in capital		379,320		377,471
Accumulated other comprehensive loss		(284)		(351)
Accumulated deficit		(275,509)		(260,985)
Total shareholders’ equity		103,564		116,172
Total liabilities and shareholders’ equity	$	112,999	$	123,721

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

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
	September 30,
	2023		2022
Operating expenses:
Research and development	$	12,214	$	7,704
General and administrative		3,700		2,514
Total operating expenses		15,914		10,218
Operating loss		(15,914)		(10,218)
Non-operating income (expense):
Interest and other income, net		1,404		400
Loss from change in fair value of derivative liability		(14)		(13)
Total non-operating income, net		1,390		387

Net loss		(14,524)		(9,831)

Other comprehensive income:
Net unrealized gain on available-for-sale marketable debt securities		67		—

Comprehensive loss	$	(14,457)	$	(9,831)

Net loss per common share:
Basic and diluted	$	(0.28)	$	(0.19)

Weighted average number of common shares outstanding:
Basic and diluted		51,409		50,528

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

Rezolute, Inc.

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

~~From June~~Three Months Ended September 30, ~~2016 to December 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
Three Months Ended September 30, 2023:
Balances, June 30, 2023	36,827	$	37	$	377,471	$	(351)	$	(260,985)	$	116,172
Share-based compensation	—		—		1,849		—		—		1,849
Net change in accumulated other comprehensive loss	—		—		—		67		—		67
Net loss	—		—		—		—		(14,524)		(14,524)
Balances, September 30, 2023	36,827	$	37	$	379,320	$	(284)	$	(275,509)	$	103,564

Three Months Ended September 30, 2022:
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	—		—		1,879		—		—		1,879
Net loss	—		—		—		—		(9,831)		(9,831)
Balances, September 30, 2022	36,827	$	37	$	372,082	$	—	$	(219,029)	$	153,090

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.

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


	Three Months Ended
	September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(14,524)	$	(9,831)
Share-based compensation expense		1,849		1,879
Non-cash lease expense		122		23
Loss from change in fair value of derivative liability		14		13
Accretion of discounts and amortization of premiums on marketable debt securities, net		973		—
Depreciation and amortization expense		10		3
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other assets		(902)		388
Decrease in accounts payable		(836)		(22)
Increase (decrease) in accrued liabilities		2,709		(42)
Net Cash Used in Operating Activities		(10,585)		(7,589)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable debt securities		(15,989)		—
Proceeds from maturities of marketable debt securities		18,595		—
Purchase of property and equipment		—		(70)
Total Cash Provided by (Used In) Investing Activities		2,606		(70)

CASH FLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from issuance of common stock for cash in 2022 Private Placement		—		12,330
Payment of commissions and other offering costs		—		(759)
Net Cash Provided by Financing Activities		—		11,571

Net increase (decrease) in cash and cash equivalents		(7,979)		3,912
Cash and cash equivalents at beginning of period		16,036		150,410
Cash and cash equivalents at end of period	$	8,057	$	154,322

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest	$	—	$	—
Cash paid for income taxes		—		—
Cash paid for amounts included in the measurement of operating lease liabilities		171		29

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

Table of Contents

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, 2023, 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~~2023 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.~~

2023.

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 months ended ~~December 31, 2017~~September 30, 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, 2024.

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~~an embedded derivative liability, 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~~related 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, international conflicts and wars, pandemics and other risks associated with a clinical stage ~~company,~~business.

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Significant Accounting Policies

The Company’s significant accounting policies are described in Note 1 to the financial statements in Item 8 of the 2023 Form 10-K.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. 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 expected credit loss model, if declines in fair value below amortized costs are due to the deterioration of an issuer’s credit quality, the Company is required to record an allowance for credit losses related to such investments with a corresponding loss recognized in the consolidated statements of operations. Allowances for credit losses may be reversed in subsequent periods if conditions improve and credit-related losses are no longer expected. For declines in fair value that are 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. Effective as of July 1, 2023, the Company implemented the guidance in ASU 2016-13. The adoption of ASU 2016-13 did not have any impact on the Company’s unaudited condensed consolidated financial statements for the three months ended September 30, 2023.

Other accounting standards that have been issued or proposed by the 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 the Company’s financial statements upon adoption.

NOTE 2 — LIQUIDITY

As a clinical stage business, the Company has not yet generated any revenues and had an accumulated deficit of $275.5 million as of September 30, 2023. For the three months ended September 30, 2023, the Company incurred a net loss of $14.5 million and net cash used in operating activities amounted to $10.6 million. For the fiscal year ended June 30, 2023, the Company incurred a net loss of $51.8 million and net cash used in operating activities amounted to $44.5 million. As of September 30, 2023, the Company’s capital resources consist of cash and cash equivalents of $8.1 million, short-term investments in marketable debt securities of $90.7 million and long-term investments in marketable debt securities of $8.1 million.

As of September 30, 2023, the Company has total liabilities of $9.4 million, including current liabilities of $7.2 million. As discussed in Note 5, the ~~potential risk~~Company is subject to license agreements that provide for future contractual payments upon achievement of ~~business failure. See Note~~various milestone events. 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 ~~regarding going concern matters.~~clinical trial for RZ358 and an additional $5.0 million milestone payment will be due upon the dosing of the last patient in a Phase 3 clinical trial for RZ358. The first patient dosing milestone event in connection with the 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 through November 2024, at a minimum.

Table of Contents

~~Fixed Assets~~Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 3 —INVESTMENTS IN MARKETABLE DEBT SECURITIES

~~Fixed~~Investments in marketable debt securities, are accounted for as available-for-sale investments consisting of the following (in thousands):


	September 30,		June 30,
	2023		2023
Short-term investments	$	90,673	$	85,860
Long-term investments		8,144		16,470
Total investments	$	98,817	$	102,330

The Company’s investments in debt securities are subject to interest rate risk and credit risk that results in differences between amortized cost basis and the fair value of investments. 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 September 30, 2023, investments in marketable debt securities with an aggregate fair value of $90.7 million are scheduled to mature during the 12-month period ending September 30, 2024. Substantially all of the remaining investments, with an aggregate fair value of $8.1 million, are scheduled to mature during the 12-month period ending September 30, 2025.

During the three months ended September 30, 2023, marketable debt securities for $18.6 million matured and approximately $16.0 million of the proceeds were reinvested in additional marketable debt securities. The Company did not sell any marketable debt securities prior to the scheduled maturity dates for the three months ended September 30, 2023.

Accrued interest receivable on all marketable debt securities amounted to $0.4 million and $0.3 million as of September 30, 2023 and June 30, 2023, respectively. Accrued interest receivable is included in other current assets in the accompanying condensed consolidated balance sheets.

For the three months ended September 30, 2023, the Company did not recognize any allowance for credit losses related to investments in marketable debt securities. The following table summarizes the cumulative unrealized gains and losses that result in differences between the amortized cost basis and fair value of the Company’s marketable debt securities held as of September 30, 2023 (in thousands):


			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
Corporate commercial paper	$	40,944	$	—	$	(45)	$	40,899
Obligations of U.S. government agencies		24,698		1		(59)		24,640
U.S. Treasury obligations		5,478		—		(13)		5,465
Corporate notes and bonds		23,742		—		(163)		23,579
Asset-backed securities		4,239		5		(10)		4,234
Total	$	99,101	$	6	$	(290)	$	98,817

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 4 — OPERATING LEASES

The Company’s right-of-use assets and operating lease liabilities are ~~carried at cost less accumulated depreciation. Depreciation~~as follows (in thousands):


	September 30,		June 30,
	2023		2023

Right-of-use assets	$	1,933	$	2,054

Operating lease liabilities:
Current	$	525	$	541
Long-term		1,814		1,937
Total	$	2,339	$	2,478

For the three months ended September 30, 2023 and 2022, operating lease expense is ~~computed~~included under the following captions in the accompanying condensed consolidated statements of operations and comprehensive loss (in thousands):


	2023		2022

Research and development	$	131	$	77
General and administrative		42		23
Total	$	173	$	100

As of September 30, 2023, the weighted average remaining lease term under operating leases was 4.1 years, and the weighted average discount rate for operating lease liabilities was 6.8%. Future cash payments under all operating lease agreements as of September 30, 2023 are as follows (in thousands):


Fiscal year ending June 30,
Remainder of fiscal year 2024	$	509
2025		627
2026		646
2027		666
Thereafter		224
Total lease payments		2,672
Less imputed interest		(333)
Present value of operating lease liabilities	$	2,339

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 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

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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. There have been no events that would result in any royalty payments owed under the XOMA License Agreement to date. 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

In August 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 ~~straight-line method over~~PKI Portfolio to develop an oral PKI therapeutic for diabetic macular edema (RZ402) and may use the ~~estimated useful lives.~~

~~Research and Development Costs~~

~~Research and development costs~~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 expensed as incurred and include salaries, benefits and 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 value is defined as the exchange price that would be~~achieved. The first milestone payment for $1.0 million was paid in December 2020 after clearance was received for an ~~asset~~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 trial for RZ402. The next milestone payment of $5.0 million will be due upon dosing of the first patient in a Phase 3 clinical trial. The Company is also required to ~~transfer~~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.

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 6 — EMBEDDED DERIVATIVE LIABILITY

On April 14, 2021, the Company entered into a ~~liability (an~~$30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp. and certain other lenders (collectively, the “Lenders”). The Lenders agreed to loan up to $30.0 million but the actual amount borrowed by the Company amounted to $15.0 million. The maturity date of the outstanding borrowings was April 1, 2026 (the “Maturity Date”), but the Company elected to repay the entire amount and terminated the Loan Agreement on June 30, 2022.

Concurrently with the execution of the Loan Agreement, the Company entered into an exit ~~price)~~fee agreement (the “Exit Fee Agreement”) that provides for a fee of 4.00% of the funded principal balance for a total of $0.6 million in the ~~principal or most advantageous market~~event certain transactions (defined as “Exit Events”) occur prior to April 13, 2031. The Exit Fee Agreement was not impacted by the termination of the Loan Agreement discussed above. The Company is accounting for the ~~asset or liability in~~Exit Fee Agreement as an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value are as follows:

~~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 to the relatively short maturity of the respective instruments.

~~The warrant~~embedded derivative liability ~~recorded as of December 31, 2017 and June 30, 2017 is recorded at~~with an estimated fair value ~~based on a Black-Scholes pricing model. The warrant~~of $0.4 million as of September 30, 2023 and June 30, 2023. 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 shares. Fair value of this embedded derivative liability is ~~a level 3~~reassessed at the end of each reporting period with changes in fair value ~~measurement~~recognized as a nonoperating gain or loss.

NOTE 7 — SHAREHOLDERS’ EQUITY

In May 2022, the Company entered into securities purchase agreements (“SPAs”) with Handok, Inc. (“Handok”) and certain of its affiliates. Handok is an affiliate of a member of the ~~entire change~~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 ~~balance recorded~~issuance of approximately 3.2 million shares of common stock. The Company incurred approximately $0.8 million for underwriting commissions and other offering costs, resulting in net proceeds of $11.5 million.

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 September 30, 2023 (in thousands):


	Plan Termination	Number of Shares
Description	Date	Authorized	Outstanding	Available

2015 Plan	February 2020	17	17	—
2016 Plan	October 2021	123	123	—
2019 Plan	July 2029	200	200	—
2021 Plan	March 2031	10,700	8,769	1,931
Total		11,040	9,109	1,931

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 purchase the Company’s common stock through ~~earnings. See significant assumptions in Note 8.~~ accumulated payroll deductions.

The 2022 ESPP has consecutive offering periods that begin approximately every 6 months commencing on the first trading day on or after July 1 and terminating on the last trading day of the 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 2022 ESPP reserves 0.5 million shares for purchases. There have been no offering periods under the 2022 ESPP through September 30, 2023.

Stock Options Outstanding

The following table sets forth a ~~reconciliation of changes in the fair value of financial instruments classified as level 3 in the fair value hierarchy:~~

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

~~Recent Accounting Pronouncements~~

~~In January 2016, the FASB issued ASU 2016-01,~~~~Financial Instruments – Overall~~:~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 will be effective for us starting on July 1, 2018, 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,~~~~Leases (Topic 842)~~. This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. This ASU is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities assummary 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.~~~~The update will affect~~activity under 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 do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.

~~Note 3 Going Concern~~

As reflected in the accompanying financial statements, the Company has a net loss of $12,403,200 and net cash used in operations of $8,052,651 for the six months ended December 31, 2017, working deficit of $1,087,141 and stockholders’ equity of $3,801,798 and an accumulated deficit of $76,725,162 at December 31, 2017. In addition, the Company is in the clinical stage and has not yet generated any revenues. These factors raise substantial doubt about the Company’s ~~ability to continue as a going concern.~~

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’sstock option 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.~~

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.

~~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~~ for the three months ended ~~December 31, 2017 and 2016, respectively and was $533,394 and $546,429~~September 30, 2023 (shares in thousands):


	Shares	Price ⁽¹⁾		Term ⁽²⁾

Outstanding, June 30, 2023	8,745	$	4.56	8.8
Grants to employees	415		1.51
Expired	(27)		12.67
Forfeited	(24)		4.06
Outstanding, September 30, 2023	9,109		4.40	8.6
Vested, September 30, 2023	3,188		6.21	8.2

(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.

For the ~~six~~three months ended ~~December 31, 2017 and 2016, respectively~~

~~Note 5 Related Party Transactions~~

~~During~~September 30, 2023, the ~~three and six months ended December 31, 2017, the Company incurred investor relations expense~~aggregate fair value of ~~$33,322 and $33,322 and general and administrative expenses of $67,439 and $67,439, see Note 8~~stock options granted for discussion related to warrants issued 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 parties of the Company and were included in the statement 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~~approximately 0.4 million shares of common stock amounted to ~~a related party. The Note bears interest at 12% per annum and matures at the earlier of January 31, 2019~~$0.5 million 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 share of common stock and one-half of one common share purchase warrant. If the investor had previously invested in the Company they were eligible for a Class B Unit which received one share of common stock and one common share purchase warrant. Each common share purchase warrant is exercisable at $1.65approximately $1.18 per share and will expire 60 months following the issuance. As of June 30, 2017, the Company received net proceeds 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 to which Lincoln Park has agreed to purchase from us up to an aggregate of $10.0 million of the Company’s common stock (subject to certain limitations) from time to time over the 36-month term of the agreement. We also entered into a registration rights agreement with Lincoln Park pursuant to which the Company filed with the Securities and Exchange Commission (the “SEC”) the registration statement to register for resale under the Securities Act 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 shares of the Company’s common stock, equal to three percent of the $10 million availability, were issued to Lincoln Park as consideration for Lincoln Park’s commitment to purchase shares of the Company’s common stock under the agreement.

Under the terms and subject to the conditions of the Lincoln Park Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $10.0 million worth of shares of the Company’s common stock. Such future 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 the Company may direct Lincoln Park, at its sole discretion to purchase up to 65,000 shares of its common stock on any business day, provided that five business day has passed since the most recent purchase. The price per share for such purchases will be equal to the lower of: (i) the lowest sale price on the applicable purchase date and (ii) the arithmetic average of the three (3) lowest closing sale prices for the Company’s common stock during the twelve (12) consecutive business days ending on the business day immediately preceding such purchase date (in each case, to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction that occurs on or after the date of the purchase agreement). The maximum amount of shares subject to any single regular purchase increases as the Company’s share price increases, subject to a maximum 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 pay 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 shares of common stock 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 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.

~~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~~three months ended ~~December 31, 2017 using the following assumptions:~~

~~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~~September 30, 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	$	1.51
Expected volatility		94	%
Risk free interest rate		4.2	%
Expected term (years)		6.1
Dividend yield		0	%

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 months ended ~~December 31, 2017~~September 30, 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):


	2023		2022

Research and development	$	840	$	870
General and administrative		1,009		1,009
Total	$	1,849	$	1,879

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 $15.4 million as of ~~the date~~September 30, 2023. This amount is expected to be recognized over a weighted average period of ~~grant using~~2.7 years.

Pre-Funded 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 September 30, 2023, all of the 2022 PFWs may be exercised at any time by paying the exercise price of $0.001 per share, subject to certain ownership restrictions.

On October 4, 2023, a holder of Class B PFW’s provided notice of cashless exercise of their 2,800,000 Class B PFW’s, resulting in ~~connection with investor services. The Company issued warrants to purchase 500,000~~the issuance of 2,797,404 shares of common stock aton October 6, 2023. No cash proceeds were received by the Company as a ~~price~~result of ~~$1.04 per share in~~this exercise.

Other Warrants

In connection with ~~a consulting agreement.~~

~~The~~an equity financing in October 2020, the Company issued warrants ~~exercisable for 16,667~~entitling the holders to purchase approximately 0.8 million 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.

stock. The warrants are exercisable at $19.50 per share for a period of seven years, may be exercised on a cash or cashless basis at the ~~250,000 shares~~election of the holders, and holders are entitled to share in any dividends or distributions payable to holders of common stock ~~are accounted~~on an as-converted basis. In addition, the Company has issued warrants in conjunction with various debt and equity financings and for ~~under the equity method of accounting and are fair valued monthly at the date that the warrants vest.~~services. As of ~~June~~September 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 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 and recorded as additional paid-in-capital and as general and administrative expenses. The warrants exercisable for 50,000 shares~~ were ~~accounted for under equity treatment and were fair valued as of~~vested.

For the date of issuance. The fair value 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~~three months ended September 30, 2023, no warrants were ~~valued using~~granted, exercised or expired. Excluding the ~~Black-Scholes option pricing model on~~2021 PFWs and the ~~date~~2022 PFWs discussed above, the following table sets forth a summary of ~~issuance. In order to calculate the fair value of the~~all other warrants certain assumptions were made regarding components of the model, including the closing price of the underlying common stock, risk-free interest rate, volatility, expected dividend yield, and warrant term. Changes 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.

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:~~September 30, 2023 (shares in thousands):


	Shares	Price ⁽¹⁾		Term ⁽²⁾

Outstanding, June 30, 2023	888	$	22.10	4.1
Outstanding, September 30, 2023	888		22.10	3.8

~~Expected volatility~~(1)

Represents the weighted average exercise price.

(2)	~~53% - 85~~	%
~~Risk free interest rate~~		~~1.76% - 2.37~~	%
~~Warrant~~Represents the weighted average remaining contractual term ~~(years)~~		~~1 - 10~~
~~Dividend yield~~		0	%for the number of years until the warrants expire.

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Licensing Commitments

Please refer to Note ~~9 Income Taxes~~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 September 30, 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 incurred.

NOTE 10 — RELATED PARTY TRANSACTIONS

Related Party Licensing Agreement

On September 15, 2020, the Company and Handok entered into an exclusive license agreement (the “Handok License”) for the territory of the Republic of Korea. The 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 net selling price of the products. To date, no milestone payments have been earned by the Company.

Investors in 2022 Private Placement

Handok and certain of its affiliates were the sole investors in the 2022 Private Placement discussed in Note 7.

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 income 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~~ months ended ~~December 31, 2017,~~September 30, 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 income 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~~did not have any material changes to its conclusions regarding valuation allowances for deferred income tax assets or uncertain tax positions for the three months ended September 30, 2023 and 2022.

Table of ~~$750,000 which~~Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.~~

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.~~PFWs are fully vested and exercisable. Accordingly, the weighted average number of shares outstanding is computed as follows for the three months ended September 30, 2023 and 2022 (in thousands):


	2023		2022

Common Stock		36,827		35,946
2021 PFWs		1,661		1,661
2022 PFWs:
Class A PFWs		1,974		1,974
Class B PFWs		10,947		10,947
Total		51,409		50,528

~~On March 17, 2017,~~For the ~~Company sub-leased their original approximately 10,000 square feet of office space to another company. The sublease is for eighty-two~~three months ~~unless~~ended September 30, 2023 and 2022, basic and diluted net loss per share were the Company is unable to extend our current lease then the sub-lease will expire on March 31, 2020. The Company is to receive monthly payments of $12,523 adjusted annually plus triple net expenses monthly of $12,828 adjusted annually. The Company also received a security deposit of $25,046 which will be returned at the end of the lease.same since all other common stock equivalents were anti-dilutive.

As of ~~December 31, 2017,~~September 30, 2023 and 2022, the ~~minimum rental commitment~~following outstanding potential common stock equivalents were excluded from the computation of diluted net loss per share since the impact of inclusion was anti-dilutive (in thousands):


	2023	2022

Stock options	9,109	8,482
Other warrants	888	1,150
Total	9,997	9,632

NOTE 13 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS

Fair Value Measurements

Fair value is defined as 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 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.

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy classification of such fair values as of September 30, 2023 and June 30, 2023 (in thousands):



	Fair Value Measurement of Assets as of September 30, 2023
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Money market funds	$	5,323	$	5,323	$	—	$	—
Marketable debt securities:
Corporate commercial paper		40,899		—		40,899		—
U.S. Government agencies		24,640		—		24,640		—
U.S. Government treasuries		5,465		5,465		—		—
Corporate notes and bonds		23,579		—		23,579		—
Asset-backed securities		4,234		—		4,234		—
Total	$	104,140	$	10,788	$	93,352	$	—


	Fair Value Measurement of Assets as of June 30, 2023
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Money market funds	$	5,464	$	5,464	$	—	$	—
Corporate commercial paper		4,481		4,481		—		—
Marketable debt securities:
Corporate commercial paper		41,597		—		41,597		—
U.S. Government agencies		26,394		—		26,394		—
U.S. Government treasuries		10,404		10,404		—		—
Corporate notes and bonds		19,240		—		19,240		—
Asset-backed securities		4,694		—		4,694		—
Total	$	112,274	$	20,349	$	91,925	$	—

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 did not have any other assets measured at fair value on a recurring basis as of September 30, 2023 and June 30, 2023.

The Company’s embedded derivative liability discussed in Note 6 is classified under Level 3 of the fair value hierarchy and is 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 under the ~~leases are as follows:~~Loan Agreement. The following table sets forth changes in the fair value of the Company’s embedded derivative liability for the three months ended September 30, 2023 and 2022 (in thousands):

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



	2023		2022

Fair value, beginning of period	$	412	$	407
Loss from change in fair value		14		13
Fair value, end of period	$	426	$	420

Table of Contents

~~License Agreements:~~ ~~On August 4, 2017,~~Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Except for the embedded derivative liability, the Company ~~entered into~~did not have any other liabilities measured at fair value on a ~~Development~~recurring basis as of September 30, 2023 and ~~License Agreement (“~~~~License Agreement~~~~”) with ActiveSite Pharmaceuticals, Inc. (“~~~~ActiveSite~~~~”) pursuant~~June 30, 2023.

Due to ~~which~~ the ~~Company acquired 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 required to make an upfront payment of $750,000 payable within five (5) daysrelatively short maturity of the respective instruments, the fair value of cash, accounts payable, and accrued liabilities approximated their carrying values as of September 30, 2023 and June 30, 2023.

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 three months ended September 30, 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, cash equivalents and investments in marketable debt securities. The Company ~~is required to pay up to an additional aggregate~~maintains 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 three months ended September 30, 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 September 30, 2023, the Company has an aggregate of ~~$10.0~~$41.9 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 $24.6 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 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 millionsecurities or hold them until maturity.

Table 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 million in the aggregate. The Company is also obliged to pay XOMA royalties ranging from the high single digits to the mid-teens based upon annual net sales 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 (“HI”), 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”).

Clinical Development

Our key objectives in the fourth quarter of 2023 are completing enrollment for the RZ402 Phase 2 study in DME” as well as initiation of the sunRIZE Phase 3 study for RZ358.

RZ358 Regulatory Status

As discussed in our disclosures on Current Reports on Form 8-K filed with the SEC, toxicology studies in rats and monkeys were conducted as part of the early RZ358 development program and in these studies, rats demonstrated a microvascular liver injury at potentially clinically relevant doses and exposures (“rat findings”). However, there were no adverse liver findings in monkeys at dose levels that were more than 10 times higher than doses that were toxic in rats, and more than 4 times higher than human doses evaluated in clinical studies. Based on the absence of liver toxicity in monkeys and the lack of adverse liver findings in closely monitored human trials, the Company believes that the toxicity is unique to rats and unlikely relevant to humans.

As is customary in pediatric drug development, there is a progression of the inclusion of younger participants as a program advances through different stages and continues to demonstrate a good safety profile and a prospect of benefit for children based on previous stages. After the completion of Phase 1 adult healthy volunteer studies for RZ358, Phase 2a single-dose proof of concept studies (“Phase 2a”) were conducted in participants with congenital HI who were 12 years of age and older in countries governed by the Regulatory Authorities in the European Union and elsewhere in Europe. In the U.S., the Food and Drug Administration (“FDA”) restricted enrollment in Phase 2a to participants 18 years of age and older and, based on the rat findings, imposed a human drug exposure limit equating to repeat doses of approximately 3 mg/kg per week (“exposure cap”).

Subsequently, in the RIZE study European Authorities and other ~~plasma kallikrein-medicated diseases such~~regulatory bodies continued the expected downward age progression, lowering the age for study participants down from 12 years of age to 2 years of age and older. At the start of the RIZE study the clinical program in the U.S. remained under the 18 years of age and older restriction as ~~hereditary angioedema. ActiveSite has generated proof-of-concept~~well as the exposure cap. However, in the first half of 2020, while the RIZE study was underway, we reached agreement with FDA to proceed with the RIZE study in the U.S. at all dose levels (no exposure cap) and in younger participants (ages 12 and older). Following these developments, the study protocol was harmonized globally, other than a regional difference in the minimum permitted age (12 years and older in the US versus 2 years and older in all other geographies).

After the completion of the RIZE study, in the second half of 2022 and the first half of 2023, the Company conducted scientific advice meetings with the Regulatory Authorities in Europe which resulted in alignment with our proposed Phase 3 program including overall study design, dosing regimen, endpoints, sample size and patient population. Notably, with all available nonclinical (including the rat findings) and clinical information under review, European Authorities aligned with a further downward age progression whereby participants 3 months of age and older will be permitted to be enrolled in the Phase 3 study.

Prior to engaging FDA on Phase 3 planning in the U.S., we began interacting with the agency in the second half of 2022 to further liberalize the age restriction to achieve alignment with the parameters established by the European Authorities in the RIZE study. Over

Table of Contents

the course of these post-RIZE regulatory interactions with FDA, the agency revisited prior concerns regarding the rat findings and, despite the absence of new clinical or nonclinical data ~~for their orally-administered plasma kallikrein inhibitors~~(other than the RIZE data), the agency decided to maintain the age restriction of 12 years and above and re-imposed the previous exposure cap which had been removed during the RIZE study (collectively, “New Restrictions”). In the second half of 2022 and the first half of 2023, we interacted with FDA to resolve the New Restrictions, particularly in ~~clinically-relevant animal models~~the context of ~~macular edema,~~the advancement of the clinical program in the rest of the world. Nonetheless, FDA affirmed the New Restrictions at a meeting held with us on May 24, 2023.

We have concluded pre-Phase 3 regulatory and ~~we are leveraging~~scientific advice meetings with Regulatory Authorities outside of the U.S. and have reached agreement on the design of the Phase 3 study that ~~data to complete IND-enabling toxicology studies~~will include participants 3 months of age and ~~prepare for human clinical trials.~~

On December 6, 2017, we completed 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~~~~”).~~older. We believe that the ~~CHI Program is a compelling opportunity~~New Restrictions make it infeasible to include the U.S. in the Phase 3 study at this time, particularly given that ~~there is no approved therapy for this devastating childhood disease.~~

~~We believe that~~ the ~~CHI Program and~~pediatric population with congenital HI has the PKI Portfolio complement our endogenous super long acting basal program, AB101, currently in Phase 1 clinical development. We further believe that 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.~~greatest therapeutic need. We are ~~seeking~~evaluating potential nonclinical studies to ~~raise $3,000,000 or more~~address FDA’s concerns in parallel with the initiation and advancement of the Phase 3 study outside of the U.S.

Specifically, in the ~~Debt Financing~~fourth quarter of 2023, we plan to initiate the Phase 3 sunRIZE clinical study of RZ358 which will be a randomized, double-blind, placebo-controlled, parallel arm evaluation of RZ358 in participants with congenital HI who are not adequately responding to standard of care medical therapies. Topline results from the study are anticipated to be available in the first half 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 is comprised of DME patients with mild to moderate non-proliferative diabetic retinopathy. Eligible participants are being randomized equally, to one of three RZ402 active treatment arms at doses of 50, 200, and 400 mg, or a placebo control arm, to 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 provide an update on the study prior to year end.

Recent Developments

On October 4, 2023, an investor from our May 2022 registered direct offering provided notice of cashless exercise of their Class B PFWs. This resulted in the issuance of 2,797,704 shares of our common stock on October 6, 2023.

Factors Impacting our Results of Operations

We have not generated any meaningful revenues since our inception in March 2010. Over the 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

Table of Contents

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 marketable debt securities and temporary cash investments, amortization of investment premiums and accretion of investment discounts.

Loss from change in fair value of derivative liability. 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 financing will be completed~~otherwise meet the conditions for equity classification. Changes in fair value are reflected as a gain or ~~will be timely completed on favorable terms. Currently, we cannot sustain~~loss in our unaudited condensed consolidated statements of operations ~~without the Debt Financing~~ and ~~without the larger Equity Financing we cannot continue to advance all of our current programs.~~comprehensive loss.

~~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 2023 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 the~~to aid in fully understanding and evaluating our consolidated financial condition and results ~~we report~~of operations.

Investments in Marketable Debt Securities

We account for investments in marketable debt securities as available-for-sale securities whereby they are recorded in our consolidated ~~financial statements.~~balance sheets at fair value. Interest income consists 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 which approximates the interest method. Unrealized gains and 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 individual debt securities in our portfolio are subject to credit risk in the event of default by the issuers. We review the components of our portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below amortized cost have resulted from a credit-related loss or other factors. To the extent that declines in fair value are due to a deterioration of credit quality of the issuer, we will recognize an allowance for credit losses related to such investments with a corresponding loss in the consolidated statements of operations. Allowances for credit losses may be reversed in subsequent periods if conditions improve and credit-related losses are no longer expected. For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if we have 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.

Table of Contents

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.

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.

Results of Operations

Three months ended September 30, 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 31, 2017 (the “2018 quarter”)~~September 30, 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 31, 2016 (the “2017 quarter”) reflected losses~~September 30, 2023 and 2022 were as follows (in thousands, except percentages):


					Increase
	2023		2022			Amount	Percent

Total R&D expenses	$	12,214	$	7,704	$	4,510	59	%

The increase in R&D expenses of $4.5 million for the three months ended September 30, 2023 was primarily attributable to an increase of RZ358 related program costs of approximately ~~$5,751,000~~$3.1 million. The increased expense consisted of an increase in manufacturing and ~~$4,888,000, respectively.~~

~~Results~~preclinical costs of ~~operations~~$2.0 million and clinical trial expense of $1.1 million. RZ358 costs increased due to Phase 3 clinical readiness activities. Compensation and benefits for our R&D workforce increased by approximately $1.0 million. Cash-based compensation and benefits increased by approximately $1.0 million that was primarily attributable to the ratable accrual of annual performance bonuses and an increase in the average number of R&D employees from 34 for the ~~six~~three months ended ~~December 31, 2017 (the “2018 period”) and~~September 30, 2022 to 36 for the ~~six~~three months ended ~~December 31, 2016 (the “2017 period”) reflected losses of~~September 30, 2023. RZ402 program costs increased by approximately ~~$12,468,000 and $8,704,000, respectively.~~

~~Revenues~~

~~We are a clinical stage company and have not generated any revenues since inception.~~

~~Expenses~~

Research and development costs include salaries, benefits and other staff-related costs; consultants and outside costs; material manufacturing costs; and facilities and other costs. Research and development costs were approximately $3,413,000 in 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 are$0.5 million, primarily due to ~~the Company continuing to hire staff to manufacture clinical material during the 2018 period as well as the start of the first~~Phase 2 clinical trial costs associated with the dosing of its first patients in ~~the 2018 period.~~February 2023.

Table of Contents

General and administrative ~~costs~~expenses. G&A expenses for the three months ended September 30, 2023 and 2022 were ~~approximately $2,338,000~~as follows (in thousands, except percentages):


					Increase
	2023		2022			Amount	Percent

Total G&A expenses	$	3,700	$	2,514	$	1,186	47	%

The increase in G&A expenses of $1.2 million for the ~~2018 quarter compared~~three months ended September 30, 2023 was primarily attributable to ~~$1,813,000~~increases in ~~the 2017 quarter. General~~(i) cash-based compensation expense of $0.5 million 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) market research expense of $0.2 million. Cash based compensation expense was 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 10 for the three months ended September 30, 2022 to 14 employees for the three months ended September 30, 2023. Market research expense increased due to the preparation for a post approval launch of RZ358, such as conducting global market assessments. Remaining increases of $0.4 million in G&A expenses are primarily attributable to facilities and ~~six-month periods~~other employee related costs.

Interest and Other Income. Interest and other income amounted to $1.4 million for the three months ended ~~December 31, 2017 is immaterial,~~September 30, 2023, compared to $0.4 million for the three months ended September 30, 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 September 30, 2022 provided for earnings that were less than 1.0%.

Income Taxes. For the three months ended September 30, 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 in the U.S., which results in there being no U.S. 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.

Liquidity and Capital Resources

Short-term Liquidity Requirements

As of ~~December 31, 2017,~~September 30, 2023, we ~~have approximately $0.8~~had cash and cash equivalents of $8.1 million, ~~in cash on hand~~short-term marketable debt securities of $90.7 million and working capital ~~deficit~~was approximately $95.5 million. We have incurred cumulative net losses of ~~approximately $1.1 million. During~~$275.5 million since our inception and as a clinical stage company we have not generated any meaningful revenue to date.

Accordingly, our primary source of liquidity has historically been from the completion of private and public offerings of our securities. For the three months ended September 30, 2023, no financing activities were consummated. For the fiscal year ended June 30, ~~2017,~~2023, we ~~closed on an~~received net proceeds from the issuance of equity ~~transaction in which we issued units consisting~~securities of ~~one share~~$11.6 million. The completion of ~~common stock and a warrant to purchase either one-half or one share of common stock. During~~equity financings during the fiscal year ended June 30, ~~2017,~~2022 was the primary factor that resulted in our cash and cash equivalents balance of $8.1 million and short-term marketable debt securities investment balance of $90.7 million as of September 30, 2023.

In April 2022 we ~~also closed on an equity transaction~~entered into a lease agreement for a new corporate headquarters facility in Redwood City, California. This lease, which ~~we issued straight shares of common stock. During the six months ended December 31, 2017, we had an additional close on an equity transaction~~commenced in ~~which we issued straight shares of common stock.The Company received net proceeds~~October 2022, provides for total base rent payments of approximately ~~$14~~$2.9 million ~~from~~through the ~~transactions above.~~expected expiration of the lease in July 2027. Remaining cash payments related to existing contractual obligations for the 12-months ending September 30, 2024 include approximately (i) $0.5 million under all of our operating lease agreements, and (ii) a potential milestone payment to XOMA of $5.0 million that will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358 and (iii) a potential milestone payment to XOMA of $5.0 million that will be due upon dosing of the last patient in a Phase 3 clinical trial for RZ358 that we expect will occur in the next twelve months. Due to uncertainties in the timing associated with clinical trial activities, it is possible that this milestone payment to XOMA could be delayed beyond September 30, 2024

~~The Company is currently conducting a convertible note financing~~Our most significant contractual obligations consist of milestone payments pursuant to ~~raise $3~~licensing agreements with XOMA Corporation (“XOMA”) and ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) discussed below. Based on our expectations for the dates when certain clinical and regulatory milestones will be achieved, we anticipate that $10.0 million ~~in which~~will be payable to XOMA within the next twelve months.

Table of Contents

Based on our cash and cash equivalents balance of $8.1 million and short-term investment balance of $90.8 million as of September 30, 2023, we believe we have ~~closed on $500,000~~adequate capital resources to meet all of our contractual obligations and conduct all planned activities to advance our clinical trials at least through the next 12 months.

Long-term Liquidity Requirements

Our most significant long-term contractual obligations consist of additional clinical and regulatory milestone payments up to $35.0 million payable to XOMA and additional milestone payments up to $25.0 million payable to ActiveSite. Of this total, we expect that $10.0 million will be payable to XOMA during the 12-months period ending September 30, 2024 as discussed above under the caption Short-term Liquidity Requirements. Up to $50.0 million of the ~~note financing. The notes also come with warrants at the time the notes~~remaining milestone payments that may become payable are ~~issued. The Company will continue~~considered a long-term liquidity requirement. Due to close on the note financing while the Company works to complete an Equity Financing. There are no assurances that any 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 issuance of additional equity securities by us could result in a significant dilutionuncertainties in the ~~equity interests~~timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the timing of ~~our current or~~ future ~~stockholders. Obtaining commercial loans, assuming those loans would~~clinical and regulatory milestone payments to XOMA and ActiveSite that may be ~~available, will increase our liabilities~~beyond the next 12 months.

In addition to the clinical and regulatory milestone payments discussed above, upon the future ~~cash commitments. There are no assurances that~~commercialization of RZ358 and RZ402 we will be ~~able~~obligated to ~~obtain~~pay additional ~~financing through either private placements, and/or bank financing or other loans necessary~~milestone payments and royalties based on the net sales of the related products sales-based and alternative indication regulatory approvals to ~~support our working capital requirements. To the extent that funds generated from operations~~XOMA and ~~any private placements, public offerings and/or bank financing are insufficient, we will have~~ActiveSite for an additional $202.5 million. These future milestones include $185.0 million in potential payments to ~~raise additional working capital.~~XOMA and $17.5 million to ActiveSite for various sales-based milestones and alternative indication regulatory approvals. No assurance can be ~~given~~provided that ~~additional financing~~commercialization will ever be achieved for either of RZ358 and RZ402, whereby none of these future payments may ever be required.

In addition to our licensing obligations, we also have long-term contractual obligations under existing operating lease agreements ranging between approximately $0.6 million to $0.7 million for each of the fiscal years ending June 30, 2025 through 2027. Based on our current forecast, we expect that our existing cash, cash equivalents and investments in marketable debt securities will be ~~available,~~sufficient to fund our contractual obligations and conduct all planned activities to advance our clinical trials at least through the third quarter of calendar year 2025. Therefore, we will need to obtain additional equity or ~~if available,~~debt financing in order to fund all of our long-term liquidity requirements.

Presented below is an additional discussion about the ongoing requirements pursuant to our license agreements with XOMA and ActiveSite, along with additional information about our ongoing financing activities that impacted our liquidity and capital resources through September 30, 2023.

XOMA License Agreement

In December 2017, we entered into a 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.

Upon the achievement of certain clinical and regulatory events, we will be required to make up to $37.0 million in aggregate milestone payments to XOMA. The first such milestone payment of $2.0 million was triggered upon enrollment of the last patient in our ongoing phase 2 clinical study in January 2022. The next milestone payments of $5.0 million each, will be due upon the enrollment of the first patient in a Phase 3 study and the dosing of the last 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 ~~terms acceptable~~the net sales of the related products, and milestone payments up to ~~us. These conditions raise substantial doubt~~an additional $185.0 million if future annual sales related to RZ358 exceed targets ranging from $100.0 million to $1.0 billion. Through September 30, 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 PKI portfolio. 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

Table of Contents

various milestone payments ranging from $1.0 million to $10.0 million when milestone events occur, up to an aggregate of $46.5 million of aggregate milestone payments. The first milestone payment for $1.0 million was paid in December 2020 after completion of 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. Remaining milestone payments under the ActiveSite License Agreement for various clinical and regulatory milestones amount to $25.0 million and milestones after commercial success or alternative indication approvals amount to $17.5 million. We will also be required to pay royalties equal to 2.0% of any sales of products that use the PKI Program. Through September 30, 2023, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

Cash Flows Summary

Presented below is a summary of our operating, investing, and financing cash flows for the three months ended September 30, 2023 and 2022 (in thousands):


	2023		2022		Change
Net cash provided by (used in):
Operating activities	$	(10,585)	$	(7,589)	$	(2,996)
Investing activities		2,606		(70)		2,676
Financing activities		—		11,571		(11,571)

Cash Used in Operating Activities

For the three months ended September 30, 2023 and 2022, cash used in operating activities amounted to $10.6 million and $7.6 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	$	(14,524)	$	(9,831)	$	(4,693)
Non-cash expenses		2,968		1,918		1,050
Changes in operating assets and liabilities, net		971		324		647
Total	$	(10,585)	$	(7,589)	$	(2,996)

For the three months ended September 30, 2023, our net loss was $14.5 million compared to $9.8 million for the three months ended September 30, 2022. For further discussion about changes in our ~~ability~~operating results for the three months ended September 30, 2023 and 2022, please refer to ~~continue as~~Results of Operations above.

For the three months ended September 30, 2023 and 2022, our non-cash expenses of $3.0 million and $1.9 million, respectively, were primarily attributable to share-based compensation expense, accretion of discounts and amortization of premiums on marketable debt securities and non-cash lease expense. For the three months ended September 30, 2023, net changes in operating assets and liabilities increased operating cash flow by $1.0 million, primarily driven by an increase of $1.9 million in accounts payable and other accrued liabilities. This amount was partially offset by cash outflows resulting from an increase in prepaid expenses and other assets of $0.9 million. For the three months ended September 30, 2022, net changes in operating assets and liabilities decreased operating cash flow by $0.3 million, primarily driven by an increase in prepaid expenses and other assets of $0.4 million, offset by a ~~going concern.~~net decrease of $0.1 million in accounts payable and other accrued liabilities.

Cash Provided by Investing Activities

For the three months ended September 30, 2023, our net cash provided by investing activities amounted to $2.6 million, primarily related to the maturity of marketable debt securities $18.6 million partially offset by $16.0 million of purchases of marketable debt securities.

Table of Contents

For the three months ended September 30, 2022, our net cash utilized in investing activities amounted to $70,000, related to the purchase of furniture and equipment.

Cash Provided by Financing Activities

There was no net cash provided by financing activities for the three months ended September 30, 2023.

Net cash provided by financing activities for the three months ended September 30, 2022 amounted to $11.6 million. This amount consisted of proceeds of $12.3 million from the 2022 Private Placement. The 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.

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 the material weakness described below, our management concluded that we did not maintain effective disclosure~~Disclosure controls and procedures ~~as of December 31, 2017 in ensuring~~include, without limitation, controls and procedures designed to ensure that information ~~that we are~~ required to ~~disclose~~be disclosed by a company in the reports that ~~we file~~it files or ~~submit~~submits 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~~company’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~~In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Based on that assessment under those criteria, our management has ~~identified control deficiencies regarding a lack of segregation of duties, a need for a stronger~~determined that our internal control ~~environment, and minimal review~~over financial reporting was effective as 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.

September 30, 2023.

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.

Table of Contents

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 2023 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 factor set forth below.

~~Certain factors exist~~The Israel-Hamas conflict may have a material impact on our clinical trial site plans.

The recent Israel-Hamas conflict could have a negative impact on our clinical trial site plans. Prior to October 7, 2023, we had plans to locate one of the sites for our RZ358 clinical trials in Israel. In the event the Israel-Hamas conflict continues for an extended period of time or if we deem the conditions to be unsafe for trial participants or our contractors, we will have to change these plans and seek an alternative site which ~~may affect the Company’s business~~could delay our timing and could ~~cause actual results~~impact our expected timing to differ materially 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”).receive clinical data.

~~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.

~~ITEM~~Item 4. ~~MINE SAFETY DISCLOSURES.~~

Mine Safety Disclosures.

Not applicable.

~~ITEM~~Item 5. ~~OTHER INFORMATION.~~

Other Information.

None.

Table of Contents

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
31.1*
~~10.1~~		~~License Agreement with XOMA*%~~

~~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.~~

Table of Contents

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~~November 13, 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 31, 2017~~September 30, 2023 and June 30, ~~2017~~2023	2 1

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss – Three Months Ended September 30, 2023 and ~~six months ended December 31, 2017 and 2016~~2022	3 2

Unaudited Condensed Consolidated Statements of ~~Stockholders’~~Shareholders’ Equity – ~~From June~~Three Months Ended September 30, ~~2017 to December 31, 2017~~2023 and 2022	4 3

Unaudited Condensed Consolidated Statements of Cash Flows – ~~Six months ended December 31, 2017~~Three Months Ended September 30, 2023 and ~~2016~~2022	5 4

Notes to Unaudited Condensed Consolidated Financial Statements	6 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Item 3. Quantitative and Qualitative Disclosures About Market Risk	15 24
~~ITEM 3. QUALITATIVE AND QUANTITATIVE DISCUSSION ABOUT MARKET RISK~~Item 4. Controls and Procedures	17 24
~~ITEM 4. CONTROLS AND PROCEDURES~~	18

PART II – OTHER INFORMATION	18

~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS~~Legal Proceedings	18 25
~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors	18 25
~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds	18 25
~~ITEM~~Item 3. ~~DEFAULTS UPON SENIOR SECURITIES~~Defaults Upon Senior Securities	18 25
~~ITEM~~Item 4. ~~MINE SAFETY DISCLOSURE~~Mine Safety Disclosures	18 25
~~ITEM~~Item 5. ~~OTHER INFORMATION~~Other Information	19 25
~~ITEM~~Item 6. ~~EXHIBITS~~Exhibits	26

19Signatures	27

	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	)

	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

				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

	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