UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~December 31, 2023

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39683

REZOLUTE, INC.

(Exact Name of Registrant as Specified in its Charter)


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


275 Shoreline Drive, Suite 500, Redwood City, California		94065
(Address of principal executive offices)		(Zip Code)

(650) 206-4507

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.). ☒ Yes ☐ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, and an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒

	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 17(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

The registrant had ~~36,827,567~~39,625,271 shares of its $0.001 par value common stock outstanding as of ~~May 8, 2023.~~February 9, 2024.

Table of Contents

	Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets – ~~March~~December 31, 2023 and June 30, ~~2022~~2023	31
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss – Three and ~~Nine~~Six Months Ended ~~March~~December 31, 2023 and 2022	42
Unaudited Condensed Consolidated Statements of Shareholders’ Equity – ~~Nine~~Six Months Ended ~~March~~December 31, 2023 and 2022	53
Unaudited Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~March~~December 31, 2023 and 2022	64
Notes to Unaudited Condensed Consolidated Financial Statements	85
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2318
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3228
Item 4. Controls and Procedures	3229

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	3330
Item 1A. Risk Factors	3330
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3430
Item 3. Defaults Upon Senior Securities	3430
Item 4. Mine Safety Disclosures	3530
Item 5. Other Information	3530
Item 6. Exhibits	3631

Signatures	3732

Table of Contents

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, 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:

●

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

●

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;

●

~~our~~ expectations regarding capital expenditures, research and development expenses and ~~other payments;~~the timing of milestone payments required under license agreements;

●

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

●

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

●

~~our ability to obtain regulatory approvals and the speed of such approvals, for our pharmaceutical drugs 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 and unknown risks, uncertainties and other factors including, but not limited to, the risks described in Part II, Item 1.A Risk Factors, of this report as well as “Risk Factors” described in (i) Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2022~~2023 (the ~~“2022~~“2023 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on September ~~15, 2022.~~14, 2023, and (ii) in Part I, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 filed with the SEC on November 13, 2023.

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 Report, 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 Report 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 Report, except as otherwise required by applicable law.

~~Table of Contents~~

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Rezolute, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)


	March 31,		June 30,		December 31,		June 30,
	2023		2022		2023		2023
Assets
Current assets:
Cash and cash equivalents	$	33,743	$	150,410	$	12,504	$	16,036
Investments in marketable debt securities		69,319		—		80,094		85,860
Prepaid expenses and other		2,464		1,694		3,487		3,014
Total current assets		105,526		152,104		96,085		104,910

Long-term assets:
Investments in marketable debt securities		26,210		—		3,352		16,470
Right-of-use assets		2,172		152		2,130		2,054
Property and equipment, net		149		16		119		139
Deposits and other		148		148		464		148
Total assets	$	134,205	$	152,420	$	102,150	$	123,721

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	2,947	$	1,132	$	3,593	$	3,269
Accrued liabilities:
Accrued clinical and other		1,121		979		1,394		507
Insurance premiums		—		243
Compensation and benefits						2,483		883
Current portion of operating lease liabilities		319		108		538		541
Total current liabilities		4,387		2,462		8,008		5,200

Long term liabilities:
Operating lease liabilities, net of current portion		2,055		80		1,975		1,937
Embedded derivative liabilities		447		407
Embedded derivative liability						439		412
Total liabilities		6,889		2,949		10,422		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 and 33,582 shares as of March 31, 2023 and June 30, 2022, respectively		37		34
Common stock, $0.001 par value; 100,000 shares authorized; issued and outstanding 39,625 and 36,827 shares as of December 31, 2023 and June 30, 2023, respectively						40		37
Additional paid-in capital		375,668		358,635		381,154		377,471
Accumulated other comprehensive loss		(132)		—		(48)		(351)
Accumulated deficit		(248,257)		(209,198)		(289,418)		(260,985)
Total shareholders’ equity		127,316		149,471		91,728		116,172
Total liabilities and shareholders’ equity	$	134,205	$	152,420	$	102,150	$	123,721

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

~~Table of Contents~~

Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts)


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	March 31,				March 31,				December 31,				December 31,
	2023		2022		2023		2022		2023		2022		2023		2022
Operating expenses:
Research and development	$	14,231	$	8,686	$	32,880	$	23,912	$	12,039	$	10,945	$	24,253	$	18,649
General and administrative		2,911		2,068		8,872		6,632		3,155		3,447		6,855		5,961
Total operating expenses		17,142		10,754		41,752		30,544		15,194		14,392		31,108		24,610
Operating loss		(17,142)		(10,754)		(41,752)		(30,544)		(15,194)		(14,392)		(31,108)		(24,610)
Non-operating income (expense):
Interest and other income, net		1,484		—		2,733		13		1,303		849		2,707		1,249
Loss from change in fair value of derivative liabilities		(14)		(12)		(40)		(8)
Employee retention credit		—		—		—		231
Interest expense		—		(442)		—		(1,329)
Total non-operating income (expense), net		1,470		(454)		2,693		(1,093)
Loss from change in fair value of derivative liability										(18)		(13)		(32)		(26)
Total non-operating income, net										1,285		836		2,675		1,223

Net loss	$	(15,672)	$	(11,208)	$	(39,059)	$	(31,637)		(13,909)		(13,556)		(28,433)		(23,387)

Other comprehensive loss:
Net unrealized loss on available-for-sale marketable debt securities		(132)		—		(132)		—
Other comprehensive income:
Net unrealized gain on available-for-sale marketable debt securities										236		—		303		—

Comprehensive loss	$	(15,804)	$	(11,208)	$	(39,191)	$	(31,637)	$	(13,673)	$	(13,556)	$	(28,130)	$	(23,387)

Net loss per common share:
Basic and diluted	$	(0.30)	$	(0.65)	$	(0.76)	$	(2.30)	$	(0.27)	$	(0.26)	$	(0.55)	$	(0.46)

Weighted average number of common shares outstanding:
Basic and diluted		51,409		17,218		51,113		13,748		51,408		51,410		51,409		50,969

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

~~Table of Contents~~

Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

~~Nine~~Six Months Ended ~~March~~December 31, 2023 and 2022

(In thousands)


						Accumulated											Accumulated
				Additional		Other				Total					Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Shareholders'		Common Stock			Paid-in		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Loss		Deficit		Equity		Shares	Amount		Capital		Loss		Deficit		Equity
Nine Months Ended March 31, 2023:
Six Months Ended December 31, 2023:
Balances, June 30, 2023												36,827	$	37	$	377,471	$	(351)	$	(260,985)	$	116,172
Share-based compensation												—		—		3,686		—		—		3,686
Exercise of pre-funded warrants												2,798		3		(3)		—		—		—
Net change in accumulated other comprehensive loss												—		—		—		303		—		303
Net loss												—		—		—		—		(28,433)		(28,433)
Balances, December 31, 2023												39,625	$	40	$	381,154	$	(48)	$	(289,418)	$	91,728

Six Months Ended December 31, 2022:
Balances, June 30, 2022	33,582	$	34	$	358,635	$	—	$	(209,198)	$	149,471	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	3,245		3		12,327		—		—		12,330
Underwriting commissions and other equity offering costs	—		—		(759)		—		—		(759)	—		—		(759)		—		—		(759)
Share-based compensation	—		—		5,465		—		—		5,465	—		—		3,610		—		—		3,610
Net change in accumulated other comprehensive loss	—		—		—		(132)				(132)
Net loss	—		—		—		—		(39,059)		(39,059)	—		—		—		—		(23,387)		(23,387)
Balances, March 31, 2023	36,827	$	37	$	375,668	$	(132)	$	(248,257)	$	127,316

Nine Months Ended March 31, 2022:
Balances, June 30, 2021	8,352	$	8	$	194,229	$	—	$	(168,138)	$	26,099
Gross proceeds from issuance of equity securities for cash in Underwritten Public Offering:
Common stock	6,147		6		39,950		—		—		39,956
Pre-Funded warrants	—		—		10,783		—		—		10,783
Gross proceeds from issuance of common stock for cash:
In Registered Direct Offering	769		1		4,999		—		—		5,000
Under Equity Distribution Agreement	138		1		1,518		—		—		1,519
Under LPC Purchase Agreement	116		—		1,172		—		—		1,172
Underwriting discounts and other equity offering costs	—		—		(4,136)		—		—		(4,136)
Share-based compensation	—		—		2,701		—		—		2,701
Issuance of commitment shares	34		—		450		—		—		450
Net loss	—		—		—		—		(31,637)		(31,637)
Balances, March 31, 2022	15,556	$	16	$	251,666	$	—	$	(199,775)	$	51,907
Balances, December 31, 2022												36,827	$	37	$	373,813	$	—	$	(232,585)	$	141,265

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

~~Table of Contents~~

Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Nine Months Ended

March 31,


2023

2022
CASH FLOWS FROM OPERATING ACTIVITIES:




Net loss

$
(39,059)

$
(31,637)
Share-based compensation expense

5,465

2,701
Non-cash lease expense

233

221
Accretion of discounts and amortization of premiums on marketable debt securities, net

(708)

—
Loss from change in fair value of derivative liabilities

40

8
Depreciation and amortization expense

21

10
Accretion of debt discount and issuance costs

—

319
Changes in operating assets and liabilities:




Decrease (increase) in prepaid expenses and other assets

(770)

17
Increase in accounts payable

1,815

548
Increase (decrease) in accrued liabilities

(168)

307
Net Cash Used in Operating Activities

(33,131)

(27,506)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of marketable debt securities

(94,954)

—
Purchase of property and equipment

(153)

—
Total Cash Used in Investing Activities

(95,107)

—

CASH FLOWS FROM FINANCING ACTIVITIES:




Gross proceeds from issuance of equity securities for cash:

2022 Private Placement

12,330

—
Proceeds from 2021 Underwritten Public Offering

—

50,738
Proceeds from 2021 Registered Direct Offering

—

5,000
Under Equity Distribution Agreement

—

1,519
Under LPC Purchase Agreement

—

1,171
Payment of commissions and other offering costs

(759)

(3,449)
Payment of debt discount and issuance costs

—

(104)
Net Cash Provided by Financing Activities

11,571

54,875

Net increase (decrease) in cash, cash equivalents and restricted cash

(116,667)

27,369
Cash, cash equivalents and restricted cash at beginning of period

150,410

41,047
Cash, cash equivalents and restricted cash at end of period

$
33,743

$
68,416

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

~~Table of Contents~~

~~Rezolute, Inc.~~

~~Unaudited Condensed Consolidated Statements of Cash Flows, Continued~~

~~(In thousands)~~

Nine Months Ended

March 31,

2023

2022
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents, end of period

$
33,743

$
63,416
Restricted cash, end of period

—

5,000
Total cash, cash equivalents and restricted cash, end of period

$
33,743

$
68,416

SUPPLEMENTARY CASH FLOW INFORMATION:




Cash paid for interest

$
—

$
1,011
Cash paid for income taxes

—

—
Cash paid for amounts included in the measurement of operating lease liabilities

87

254
Operating lease liabilities incurred in exchange for right-of-use assets

2,204

—

NON-CASH INVESTING AND FINANCING ACTIVITIES:




Issuance of commitment shares for deferred offering costs subsequently charged to additional paid-in capital

$
—

$
450


	Six Months Ended
	December 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(28,433)	$	(23,387)
Share-based compensation expense		3,686		3,610
Non-cash lease expense		276		112
Loss from change in fair value of derivative liability		27		26
Accretion of discounts and amortization of premiums on marketable debt securities, net		(1,181)		—
Depreciation and amortization expense		20		10
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other assets		(494)		783
Increase in accounts payable		325		1,708
Increase in accrued liabilities		2,169		2,056
Net Cash Used in Operating Activities		(23,605)		(15,082)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable debt securities		(40,156)		—
Proceeds from maturities of marketable debt securities		60,522		—
Purchase of property and equipment		—		(153)
Total Cash Provided by (Used in) Investing Activities		20,366		(153)

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 deferred offering costs		(293)		(759)
Net Cash Provided by (Used in) Financing Activities		(293)		11,571

Net decrease in cash and cash equivalents		(3,532)		(3,664)
Cash and cash equivalents at beginning of period		16,036		150,410
Cash and cash equivalents at end of period	$	12,504	$	146,746

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		361		58
Operating lease liabilities incurred in exchange for right-of-use-assets		352		2,204

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Payables for deferred offering costs	$	22	$	—

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

Table of Contents

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

Nature of Operations

Rezolute, Inc. (the “Company”) is a clinical stage biopharmaceutical 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.

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 (“GAAP”), the rules and regulations of the SEC for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X.

The condensed consolidated balance sheet as of June 30, ~~2022,~~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 ~~2022~~2023 Form 10-K, 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, ~~2022.~~2023.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all information and footnote disclosures necessary for a comprehensive presentation of financial position, results of operations, and cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) that are necessary for a fair financial statement presentation have been made. The interim results for the three and ~~nine~~six months ended ~~March~~December 31, 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 fiscal year ending June 30, ~~2023.~~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 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. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the 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 an allowance for credit losses is required or if other than temporary impairment exists for marketable debt securities, the fair value of an embedded derivative ~~liabilities,~~liability, fair value of share-based payments, management’s assessment of going concern, and estimates related to clinical trial accrued liabilities. Actual results could differ from those estimates.

Risks and Uncertainties

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

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Significant Accounting Policies

~~There have been no changes to the~~The Company’s significant accounting policies ~~from those~~are described in Note 1 to the financial statements in Item 8 of the ~~2022~~2023 Form ~~10-K other than the policy described below.~~

~~Investments in Marketable Debt Securities~~

10-K.

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

The Company accounts for its investments in marketable debt securities as available-for-sale securities whereby they are recorded in the unaudited condensed consolidated balance sheet at fair value. Interest income is recognized in the unaudited condensed consolidated statement of operations, consisting of accrued interest earned based on the coupon rate of the security, plus the impact of accreting discounts and amortizing premiums to maturity using the straight-line method 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 Company reviews the components of its 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. If declines in fair value are due to a deterioration of credit quality of the issuer, the Company recognizes (i) a loss in other comprehensive income (loss) if the reduction in fair value is considered temporary, or (ii) a loss in the consolidated statement of operations if the reduction in fair value is considered other than temporary. For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if the Company has the ability and intent to hold the investment until maturity. The cost basis of any securities sold prior to maturity will be determined using the specific identification method.

Recent Accounting Pronouncements

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

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

~~Standard Required to be Adopted in Future Periods.~~ The following accounting standard is not yet effective; management has not completed its evaluation to determine the impact that adoption of this standard will have on the Company’s consolidated financial statements.

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

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 ~~new guidance,~~expected credit loss model, if declines in fair value below amortized costs are due to the deterioration of an ~~entity recognizes, as~~issuer’s credit quality, the Company is required to record an allowance ~~its estimate~~for credit losses related to such investments with a corresponding loss recognized in the consolidated statements of ~~expected~~operations. Allowances for credit ~~losses. In November 2019,~~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 was amended by ASU 2019-10,~~ ~~Financial Instruments- Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)~~ ~~whereby the effective date for ASU 2016-13 for smaller reporting companies is now required for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.~~2016-13. The ~~Company does not expect the~~ adoption of ASU 2016-13 ~~will~~did not have ~~a material~~any impact on ~~its~~the Company’s unaudited condensed consolidated financial ~~statements.~~statements for the six months ended December 31, 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 ~~$248.3~~$289.4 million as of ~~March~~December 31, 2023. For the ~~nine~~six months ended ~~March~~December 31, 2023, the Company incurred a net loss of ~~$39.1~~$28.4 million and net cash used in operating activities amounted to ~~$33.1~~$23.6 million. For the fiscal year ended June 30, ~~2022,~~2023, the Company incurred a net loss of ~~$41.1~~$51.8 million and net cash used in operating activities amounted to ~~$39.6~~$44.5 million. As of ~~March~~December 31, 2023, the Company’s capital resources consist of cash and cash equivalents of ~~$33.7~~$12.5 million, short-term investments in marketable debt securities of ~~$69.3~~$80.1 million and long-term investments in marketable debt securities of ~~$26.2~~$3.4 million.

As discussed in Note 7, in November 2023 the Company entered into an agreement for an “at-the-market” offering for the sale of ~~March~~up to $50.0 million in shares of common stock. The net proceeds from the “at-the-market” offering, if any, will be used to fund a portion of the Company’s liquidity requirements. However, even if the entire $50.0 million is obtained in the “at-the-market” offering, the Company will need to obtain additional equity or debt financing in order to fund all of its long-term capital requirements.

As of December 31, 2023, the Company has total liabilities of ~~$6.9~~$10.4 million, including current liabilities of ~~$4.4~~$8.0 million. As discussed in Note 5, the Company is subject to license agreements that provide for future contractual payments upon achievement of various milestone events. ~~Pursuant to the ActiveSite License Agreement (as defined below), a $3.0 million milestone payment was paid in February 2023 upon dosing of the first patient in a Phase 2 clinical trial for RZ402.~~ Pursuant to the XOMA License Agreement (as defined below), a $5.0 million milestone payment will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358, 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. ~~First~~Both the first patient dosing milestone and last patient dosing milestone events in connection with the RZ358 Phase 3 clinical trial isare 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 February 2025, at ~~least through May 2024.~~

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

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 3 —INVESTMENTS IN MARKETABLE DEBT SECURITIES

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


	December 31,		June 30,
	2023		2023
Short-term investments	$	80,094	$	85,860
Long-term investments		3,352		16,470
Total investments	$	83,446	$	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 to reductions in fair value if long term interest rates rise, 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 December 31, 2023, investments in marketable debt securities with an aggregate fair value of $80.1 million are scheduled to mature during the 12-month period ending December 31, 2024. Substantially all of the remaining investments, with an aggregate fair value of $3.4 million, are scheduled to mature during the 12-month period ending December 31, 2025.

During the six months ended December 31, 2023, marketable debt securities for $60.5 million matured and approximately $40.2 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 six months ended December 31, 2023.

Accrued interest receivable on all marketable debt securities amounted to $0.3 million as of December 31, 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 and six months ended December 31, 2023, the Company did not recognize any allowance for credit losses or other than temporary impairment 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 December 31, 2023 (in thousands):


			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
Corporate commercial paper	$	32,733	$	29	$	(10)	$	32,752
Obligations of U.S. government agencies		18,770		—		(21)		18,749
U.S. Treasury obligations		1,002		—		(5)		997
Corporate notes and bonds		27,645		8		(57)		27,596
Asset-backed securities		3,344		11		(3)		3,352
Total	$	83,494	$	48	$	(96)	$	83,446

NOTE 4 — OPERATING LEASES

In October 2023, the Company entered into an addendum to the lease agreement for its office in Bend, Oregon. The addendum provided for a 36-month extension, which extends the lease through February 2027. The average base rent payable over the remaining lease term

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~NOTE 3 —INVESTMENTS IN MARKETABLE DEBT SECURITIES~~

~~Investments in marketable debt securities, including cash and cash equivalents, are as follows (in thousands):~~

Estimated Fair Value at

March 31,

June 30,

2023

2022
Cash and cash equivalents
$
33,743

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

69,319

—
Long-term investments in marketable debt securities

26,210

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

$
150,410

~~The Company only invests in liquid, high quality debt securities. Our investments in debt securities are subject to interest rate risk. To minimize~~is approximately $9,000. Upon execution of the ~~exposure due to an adverse shift in interest rates,~~addendum, the Company generally invests in securities with expected maturities of two years or less and maintains a weighted average maturity of one year or less. As of March 31, 2023 investments in marketable debt securities with a fair value of $69.3 million are scheduled to mature duringre-measured the 12-month period ending March 31, 2024 and substantially all of the remaining investments, which have a fair value of $26.2 million, are scheduled to mature during the 12 month period ending March 31, 2025.

~~During the nine months ended March 31, 2023 and 2022, we sold no available-for-sale securities.~~

Accrued interest receivable on all marketable debt securities amounted to $0.3 million which is included in other current assets in the accompanying condensed consolidated balance sheet as of March 31, 2023. We did not have any accrued interest receivable as of June 30, 2022.

The following table summarizes the unrealized gains and losses that result in differences between the amortized cost basis and fair value of the Company’s cash, cash equivalents and marketable debt securities held as of March 31, 2023 and June 30, 2022 (in thousands):

March 31, 2023

June 30,

Gross Unrealized

2022

Amortized Cost

Gains

Losses

Fair Value

Fair Value
Corporate commercial paper

$
38,416

$
2

$
(37)

$
38,381

$
—
Obligations of U.S. government agencies

24,379

23

(1)

24,401

—
U.S. Treasury obligations

5,941

1

—

5,942

—
Corporate notes and bonds

22,150

4

(122)

22,032

—
Asset-backed securities

4,775

—

(2)

4,773

—
Available-for-sale investments

$
95,661

$
30

$
(162)

$
95,529

$
—
Money market funds

20,497

—
Cash

13,246

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

$
129,272

$
150,410

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~NOTE 4 — OPERATING LEASES~~

In April 2022, the Company entered into a lease agreement for a new corporate headquarters in Redwood City, California. The space consists of approximately 9,300 square feet and provides for total base rent payments of approximately $2.9 million through the expected expiration of the lease in November 2027. The landlord was required to make improvements to the facility before the Company could occupy the space. These improvements were completed in October 2022, triggering the commencement of the lease. The lease provided for a six-month rent abatement period beginning upon commencement of the lease term. In addition, the lease provided an allowance of approximately $0.1 million that may be utilized by the Company for the purchase of furniture and equipment. The average base rent payable in cash over the ~~60-month~~ ~~lease term is approximately $48,000 per month. Upon commencement of the lease, the Company recognized a right-of-use asset for approximately $2.3 million, and a related~~Bend, Oregon operating lease liability at approximately $345,000 using a discount rate of 10.0%, and the related right-of-use asset was recognized for approximately ~~$2.2 million.~~$351,000.

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


	March 31,		June 30,		December 31,		June 30,
	2023		2022		2023		2023

Right-of-use assets	$	2,172	$	152	$	2,130	$	2,054

Operating lease liabilities:
Current	$	319	$	108	$	538	$	541
Long-term		2,055		80		1,975		1,937
Total	$	2,374	$	188	$	2,513	$	2,478

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


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	March 31,				March 31,				December 31,				December 31,
	2023		2022		2023		2022		2023		2022		2023		2022

Research and development	$	139	$	66	$	331	$	216	$	130	$	115	$	261	$	192
General and administrative		34		32		105		75		39		48		81		71
Total	$	173	$	98	$	436	$	291	$	169	$	163	$	342	$	263

As of ~~March~~December 31, 2023, the weighted average remaining lease term under operating leases was ~~4.4~~3.8 years, and the weighted average discount rate for operating lease liabilities was ~~6.8%~~7.2%. Future cash payments under all operating lease agreements as of ~~March~~December 31, 2023 are as follows (in thousands):

Fiscal year ending June 30,

Remainder of fiscal year 2023

$
80
2024

689
2025

627
2026

646
2027

666
Thereafter

224
Total lease payments

2,932
Less imputed interest

(558)
Present value of operating lease liabilities

$
2,374

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~


Fiscal year ending June 30,
Remainder of fiscal year 2024	$	367
2025		748
2026		770
2027		750
Thereafter		224
Total lease payments		2,859
Less imputed interest		(346)
Present value of operating lease liabilities	$	2,513

NOTE 5 — LICENSE AGREEMENTS

XOMA License Agreement

In December 2017, the Company entered into a license agreement (the “XOMA License Agreement”) with XOMA Corporation (“XOMA”), through its wholly-owned subsidiary, XOMA (US) LLC, pursuant to which XOMA granted an exclusive global license to the Company to develop and commercialize XOMA 358 (formerly X358, now RZ358) for all indications. ~~In January 2019, the XOMA License Agreement was amended with an updated payment schedule, as well as revising the amount the Company was required~~

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Rezolute, Inc.

Notes to ~~expend on development of RZ358 and related licensed products, and revised provisions with respect to the Company’s diligence efforts in conducting clinical studies.~~Unaudited Condensed Consolidated Financial Statements

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

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

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 6 — EMBEDDED DERIVATIVE LIABILITY

On April 14, 2021, the Company entered into a $30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp. and certain other lenders ~~(the~~(collectively, the “Lenders”). The Lenders agreed to loan up to $30.0 million ~~in three tranches consisting of (i) a~~but the actual amount borrowed by the Company amounted to $15.0 million term A loan that was funded on April 14, 2021, (ii) term B and term C loans for an aggregate of $15.0 million, which were subject to the Company’s ability to obtain prescribed amounts of financing and the achievement of certain clinical milestones.million. The ~~Company did not achieve the initial clinical milestones by January 2022 and, accordingly, the term B and term C loans were no longer a source of liquidity. The term A loan had a~~ maturity date of the outstanding borrowings was April 1, 2026 (the “Maturity Date”), but ~~was repaid in full~~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 fee agreement (the “Exit Fee Agreement”) that provides for a fee of 4.00% of the funded principal balance for a total of ~~each term loan~~$0.6 million in the 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 Exit Fee Agreement as an embedded derivative liability with an estimated fair value of $0.4 million as of December 31, 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

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

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

NOTE 7 — SHAREHOLDERS’ EQUITY

~~Quarterly~~ Changes in Shareholders’ Equity for the Three Months Ended December 31, 2023 and 2022

The following table presents changes in shareholders’ equity for the three months ended ~~March~~December 31, 2023 and 2022:


						Accumulated											Accumulated
				Additional		Other				Total					Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Shareholders'		Common Stock			Paid-in		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		Capital		Loss		Deficit		Equity		Shares	Amount		Capital		Loss		Deficit		Equity
Three Months Ended March 31, 2023:
Balances, December 31, 2022	36,827	$	37	$	373,813	$	—	$	(232,585)	$	141,265
Three Months Ended December 31, 2023:
Balances, September 30, 2023												36,827	$	37	$	379,320	$	(284)	$	(275,509)	$	103,564
Share-based compensation	—		—		1,855		—		—		1,855	—		—		1,837		—		—		1,837
Exercise of pre-funded warrants												2,798		3		(3)		—		—		—
Net change in accumulated other comprehensive loss	—		—		—		(132)		—		(132)	—		—		—		236		—		236
Net loss	—		—		—		—		(15,672)		(15,672)	—		—		—		—		(13,909)		(13,909)
Balances, March 31, 2023	36,827	$	37	$	375,668	$	(132)	$	(248,257)	$	127,316
Balances, December 31, 2023												39,625	$	40	$	381,154	$	(48)	$	(289,418)	$	91,728

Three Months Ended March 31, 2022:
Balances, December 31, 2021	15,556	$	16	$	250,816	$	—	$	(188,567)	$	62,265
Three Months Ended December 31, 2022:
Balances, September 30, 2022												36,827	$	37	$	372,082	$	—	$	(219,029)	$	153,090
Share-based compensation	—		—		850		—		—		850	—		—		1,731		—		—		1,731
Net loss	—		—		—		—		(11,208)		(11,208)	—		—		—		—		(13,556)		(13,556)
Balances, March 31, 2022	15,556	$	16	$	251,666	$	—	$	(199,775)	$	51,907
Balances, December 31, 2022												36,827	$	37	$	373,813	$	—	$	(232,585)	$	141,265

~~July~~ Jefferies Open Market Sales Agreement

On November 14, 2023, the Company and Jefferies LLC (the “Agent) entered into an Open Market Sale Agreement^SM (the “Sales Agreement”) that provides for an “at the market” offering for the sale of up to $50.0 million in shares of the Company’s common stock (the “Placement Shares”) through the Agent. The Agent is acting as sales agent and is required to use commercially reasonable efforts to sell all of the Placement Shares requested to be sold by the Company, consistent with the Agent’s normal trading and sales practices,

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

on mutually agreed terms between the Agent and the Company. The Sales Agreement will terminate when all of the Placement Shares have been sold, or earlier upon the election of either the Company or the Agent.

The Company has no obligation to sell any of the Placement Shares under the Sales Agreement. The Company intends to use the net proceeds, if any, from amounts sold under the Sales Agreement for general corporate purposes, including working capital. Under the terms of the Sales Agreement, the Company agreed to pay the Agent a commission equal to 3.0% of the gross sales price of the Placement Shares plus certain expenses incurred by the Agent in connection with the offering.

For the six months ended December 31, 2023, the Company sold no shares of its common stock pursuant to the Sales Agreement. Accordingly, the maximum amount remaining for sale under the Sales Agreement amounts to $50.0 million as of December 31, 2023.

2022 ~~Financing~~Class B PFW Exercise

As discussed in Note 8, in October 2023, a holder of Class B PFW’s provided notice of cashless exercise of their 2,800,000 Class B PFW’s, resulting in the issuance of 2,797,404 shares of common stock on October 6, 2023.

2022 Private Placement

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 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 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.

~~Underwritten Public Offering~~

On October 12, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Oppenheimer & Co., Inc., as representative of the underwriters listed therein (the “Underwriters”) for the planned issuance and sale of equity securities in an underwritten public offering (the “Underwritten Offering”). On October 15, 2021, closing occurred for the Underwritten Offering resulting in the issuance of (i) 6,030,847 shares of common stock at $6.50 per share for gross proceeds of $39.2 million, and (ii) 1,661,461 pre-funded warrants to purchase 1,661,461 shares of common stock at an issuance price of $6.49 per warrant (the “Pre-Funded Warrants”) for gross proceeds of $10.8 million. The aggregate gross proceeds from the Underwritten Offering amounted to $50.0 million, excluding the exercise of the Underwriters’ Option discussed below, and before deductions for underwriting discounts

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

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

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

~~Pre-Funded Warrants~~

The Pre-Funded Warrants issued in the Underwritten Offering have an exercise price of $0.01 per share, which is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. Each Pre-Funded Warrant is exercisable at any time and from time to time after issuance with no stated expiration date. In the event of certain corporate transactions, the holders of the Pre-Funded Warrants will be entitled to receive, upon exercise of the Pre-Funded Warrants, the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such transaction. The Pre-Funded Warrants do not entitle the holders thereof to any voting rights or any of the other rights or privileges to which holders of the Company’s common stock are entitled.

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

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~Registered Direct Offering~~

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

~~Equity Distribution Agreement~~

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

Under the terms of the EDA, the Company agreed to pay the Agent a commission equal to 3.0% of the gross sales price of the Placement Shares plus certain expenses incurred by the Agent in connection with the offering. For the nine months ended March 31, 2022, the Company sold 138,388 shares of its common stock pursuant to the EDA for net proceeds of approximately $1.5 million.

~~LPC Purchase Agreement~~

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

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

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

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

NOTE 8 — SHARE-BASED COMPENSATION AND WARRANTS

Stock Option Plans

Presented below is a summary of the number of shares authorized, outstanding, and available for future grants under each of the Company’s stock option plans as of ~~March~~December 31, 2023 (in thousands):


	Plan Termination	Number of Shares			Plan Termination	Number of Shares
Description	Date	Authorized	Outstanding	Available	Date	Authorized	Outstanding	Available

2015 Plan	February 2020	17	17	—	February 2020	17	17	—
2016 Plan	October 2021	140	140	—	October 2021	123	123	—
2019 Plan	July 2029	200	200	—	July 2029	200	200	—
2021 Plan	March 2031	10,700	8,422	2,278	March 2031	10,700	8,673	2,027
Total		11,057	8,779	2,278		11,040	9,013	2,027

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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 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. ~~The first~~There have been no offering ~~period concluded on December 31, 2022, and no purchases were made~~periods under the 2022 ~~ESPP. As of March~~ESPP through December 31, ~~2023, no shares have been purchased under the 2022 ESPP.~~2023.

Stock Options Outstanding

The following table sets forth a summary of the activity under all of the Company’s stock option plans for the ~~nine~~six months ended ~~March~~December 31, 2023 (shares in thousands):


	Shares	Price ⁽¹⁾		Term ⁽²⁾	Shares	Price ⁽¹⁾		Term ⁽²⁾

Outstanding, June 30, 2022	8,506	$	5.24	9.7
Outstanding, June 30, 2023					8,745	$	4.56	8.8
Grants to employees	668		1.98		475		1.44
Expired	(116)		40.73		(42)		9.49
Forfeited	(279)		3.78		(165)		2.11
Outstanding, March 31, 2023	8,779		4.57	9.1
Vested, March 31, 2023	966		11.65	7.73
Outstanding, December 31, 2023					9,013		4.42	8.4
Vested, December 31, 2023					3,726		5.91	8.1

(1)	Represents the weighted average exercise price.

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

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

For the ~~nine~~six months ended ~~March~~December 31, 2023, the aggregate fair value of stock options granted for approximately ~~0.7~~0.5 million shares of common stock amounted to ~~$1.0~~$0.5 million or approximately ~~$1.51~~$1.13 per share as of the grant dates. Fair value was computed using the Black-Scholes-Merton (“BSM”) option-pricing model and will result in the recognition of compensation cost ratably over the expected vesting period of the stock options.

For the ~~nine~~six months ended ~~March~~December 31, 2023, the fair value of stock options was estimated on the respective dates of grant, with the following weighted-average assumptions:


Market price of common stock on grant date	$	1.98		$	1.44
Expected volatility		91	%		95	%
Risk free interest rate		3.7	%		4.3	%
Expected term (years)		6.0			6.1
Dividend yield		0	%		0	%

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Share-based compensation expense for the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022 is included under the following captions in the unaudited condensed consolidated statements of operations and comprehensive loss (in thousands):


	Three Months Ended					Nine Months Ended			Three Months Ended				Six Months Ended
	March 31,					March 31,			December 31,				December 31,
	2023		2022		2023		2022		2023		2022		2023		2022

Research and development	$	849	$	327	$	2,449	$	1,014	$	841	$	730	$	1,681	$	1,600
General and administrative		1,006		523		3,016		1,687		996		1,001		2,005		2,010
Total	$	1,855	$	850	$	5,465	$	2,701	$	1,837	$	1,731	$	3,686	$	3,610

Unrecognized share-based compensation expense is approximately ~~$18.8~~$13.5 million as of ~~March~~December 31, 2023. This amount is expected to be recognized over a weighted average period of ~~3.1~~2.5 years.

Pre-Funded Warrants

In connection with an underwritten offering in October 2021, the Company issued 1,661,461 pre-funded warrants (“PFWs”) to purchase 1,661,461 shares of common stock at an issuance price of $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, subject to certain ownership restrictions.

In connection with a registered direct offering in May 2022, the Company issued 1,973,684 Class A PFWs and 10,947,371 Class B PFWs to purchase an aggregate of 12,921,055 shares of common stock at an issuance price of $3.799 per warrant (collectively, the “2022 PFWs”). 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 the issuance of 2,797,404 shares of common stock on October 6, 2023. No cash proceeds were received by the Company as a result of this exercise.

As of ~~March~~December 31, 2023, ~~all~~there are 10,121,055 of the 2022 PFWs which may be exercised at any time by paying the exercise price of $0.001 per share, subject to certain ownership restrictions.

Other Warrants

In connection with an equity financing in October 2020, the Company issued warrants entitling the holders to purchase approximately 0.8 million shares of common 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 election of the holders, and holders are entitled to share in any dividends or distributions payable to holders of common stock on an as-converted basis. In addition, the Company has issued warrants in conjunction with various debt and equity financings and for services. As of ~~March~~December 31, 2023, all of the warrants were vested.

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

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

Shares

Price ⁽¹⁾

Term ⁽²⁾

Outstanding, June 30, 2022

1,150

$
22.83

4.2
Warrants granted

—

—


Warrant expirations

(28)


20.36


Outstanding, March 31, 2023

1,122


22.90

3.5


	Shares	Price ⁽¹⁾		Term ⁽²⁾

Outstanding, June 30, 2023	888	$	22.10	4.1
Expirations	(27)		78.60
Outstanding, December 31, 2023	861		20.28	3.7

(1)	Represents the weighted average exercise price.

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

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Licensing Commitments

Please refer to Note 5 for further discussion of commitments to make milestone payments and to pay royalties under license agreements with XOMA and ActiveSite.

Legal Matters

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of ~~March~~December 31, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations. At each reporting period, the Company evaluates known claims to determine whether a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as 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 and the Registered Direct Offering discussed in Note 7.

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

NOTE 11 — INCOME TAXES

Income tax expense during interim periods is based on applying an estimated annualized effective income tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. The computation of the annualized estimated effective tax rate for each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating 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.

For the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, the Company did not recognize any income tax benefit due to a full valuation allowance on its deferred income tax assets. The Company did not have any material changes to its conclusions regarding valuation allowances for deferred income tax assets or uncertain tax positions for the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 12 — NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares, 2021 PFWs and 2022 PFWs outstanding during the period, without consideration for other potentially dilutive securities. PFWs are included in the computation of basic and diluted net loss per share since the exercise price is negligible and all of the PFWs are fully vested and immediately exercisable. Accordingly, the weighted average number of shares outstanding is computed as follows for the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022 (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	March 31,				March 31,				December 31,				December 31,
	2023		2022		2023		2022		2023		2022		2023		2022

Common Stock		36,827		15,557		36,531		12,735		39,443		36,828		38,135		36,387
2021 PFWs		1,661		1,661		1,661		1,013		1,661		1,661		1,661		1,661
2022 PFWs:
Class A PFWs		1,974		—		1,974		—		1,974		1,974		1,974		1,974
Class B PFWs		10,947		—		10,947		—		8,330		10,947		9,639		10,947
Total		51,409		17,218		51,113		13,748		51,408		51,410		51,409		50,969

For the three and ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, basic and diluted net loss per share were the same since all other common stock equivalents were anti-dilutive.

As of ~~March~~December 31, 2023 and 2022, the 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	2023	2022

Stock options	8,779	1,590	9,013	8,500
Warrants	1,122	1,158
Other warrants			861	1,145
Total	9,901	2,748	9,874	9,645

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

NOTE 13 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS

Fair Value Measurements

Fair value is defined as 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.

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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 ~~March~~December 31, 2023 and June 30, 2023 (in thousands):



	Fair Value Measurement as of March 31, 2023								Fair Value Measurement of Assets as of December 31, 2023
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Money market funds	$	20,497	$	20,497	$	—	$	—	$	5,272	$	5,272	$	—	$	—
U.S. Government treasuries										3,500		3,500		—		—
Corporate commercial paper										1,990		1,990		—		—
Marketable debt securities:
Corporate commercial paper		38,381		—		38,381		—		32,752		—		32,752		—
U.S. Government agencies		24,401		—		24,401		—		18,749		—		18,749		—
U.S. Government treasuries		5,942		5,942		—		—		997		997		—		—
Corporate notes and bonds		22,032		—		22,032		—		27,596		—		27,596		—
Asset-backed securities		4,773		—		4,773		—		3,352		—		3,352		—
Total	$	116,026	$	26,439	$	89,587	$	—	$	94,208	$	11,759	$	82,449	$	—


	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 ~~March~~December 31, ~~2023. As of~~2023 and June 30, ~~2022, the Company did not have any assets required to be measured at fair value on a recurring basis.~~2023.

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~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

The Company’s embedded derivative ~~liabilities are~~liability discussed in Note 6 is classified under Level 3 of the fair value hierarchy and ~~are~~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 ~~for~~under the ~~term A loan.~~Loan Agreement prior to termination. The following table sets forth changes in the fair value of the Company’s embedded derivative ~~liabilities~~liability for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022 (in thousands):



	2023		2022		2023		2022

Fair value, beginning of period	$	407	$	387	$	412	$	407
Loss from change in fair value		40		8		27		26
Fair value, end of period	$	447	$	395	$	439	$	433

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Except for the embedded derivative ~~liabilities,~~liability, the Company did not have any other liabilities measured at fair value on a recurring basis as of ~~March~~December 31, 2023 and June 30, ~~2022.~~2023.

Due to the relatively short maturity of the respective instruments, the fair value of cash, accounts payable, and accrued liabilities approximated their carrying values as of ~~March~~December 31, 2023 and June 30, ~~2022.~~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 events or change in circumstances that caused the transfer. During the ~~nine~~three and six months ended ~~March~~December 31, 2023 and 2022, the Company did not have any transfers of its assets or liabilities between levels of the fair value hierarchy.

Significant Concentrations

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, ~~and~~ cash equivalents and investments in marketable debt securities. The Company maintains ~~its~~ cash in demand deposit accounts at a high-quality financial institution. As of and for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, cash deposits have exceeded the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation.

As of ~~March~~December 31, 2023, the Company has an aggregate of ~~$53.1~~$33.2 million invested in the debt securities of issuers in the banking and financial services industries, and an aggregate of ~~$24.4~~$18.8 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 elects to sell the securities or hold them until maturity. To date, the Company has not experienced any credit losses or impairments of marketable debt securities due to credit rating agency downgrades.

AsNOTE 14 — SUBSEQUENT EVENTS

Inducement Grant

On January 23, 2024, the Company’s Board of ~~March 31, 2023,~~Directors appointed Daron Evans to serve as the ~~Company had cash equivalents consisting of $20.5 million~~Company’s Chief Financial Officer. In connection with the appointment, Mr. Evans received an inducement grant (the “Inducement Grant”) pursuant to Nasdaq Listing Rule 5635(c)(4) in the ~~MMF discussed~~form of a stock option to purchase 275,000 shares of the Company’s common stock at an exercise price of $1.02 in ~~Note 2~~connection with his employment. The Inducement Grant is exercisable until January 23, 2029 and ~~an aggregate~~vests as follows: one-fourth on the one-year anniversary of ~~$13.2 million in checking~~the grant date and ~~savings accounts at another large financial institution. As~~one thirty-sixth of ~~June 30, 2022~~ the ~~Company had cash and cash equivalents~~remaining options shall vest on the same day of ~~$150.4 million in checking and savings accounts with a single financial institution. The Company has never experienced any losses related to its investments in cash and cash equivalents.~~

each month thereafter until the Inducement Grant is 100% vested.

2217

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Certain figures, such as interest rates and other percentages included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the 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 or in the 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 studies.~~Rezolute is developing transformative therapies for devastating rare and chronic metabolic diseases. Our lead ~~clinical asset,~~compound, RZ358, is a ~~potential~~fully human monoclonal antibody for the treatment of hypoglycemia resulting from excessive pancreatic secretion of insulin (“hyperinsulinism” or “HI”). We have commenced a global Phase 3 study (“sunRIZE”) for congenital ~~hyperinsulinism,~~HI (“cHI”), an ultra-rare pediatric and genetic ~~disorder characterized by excessive production~~form of ~~insulin by~~HI. In addition, through our expanded access program (“EAP”), U.S. physician-investigators have been administering RZ358 on a compassionate use basis for the ~~pancreas. Our second clinical asset, RZ402, is a selective and potent~~management of their patients suffering with tumor-associated hyperinsulinism (“taHI”), due to pancreatic neuroendocrine tumors (“insulinomas”). We are also developing an oral plasma kallikrein inhibitor, ~~(“PKI”) being developed as~~RZ402, which is currently in a ~~potential oral therapy for the chronic treatment of~~Phase 2 study in participants with diabetic macular edema (“DME”).

Our primary objectives for the first half of 2024 are to complete the Phase 2 study for RZ402 to enable announcement of topline results in second quarter of 2024, as well as to initiate a majority of our global clinical trial sites and enroll patients into sunRIZE to support our goal of completing enrollment by the end of this calendar year.

RZ358 for cHI

cHI

cHI is the most common cause of recurrent and persistent hypoglycemia in children. Individuals with cHI typically present with signs or symptoms of hypoglycemia within the first month of life. These episodes can result in significant brain injury and death if not recognized and managed appropriately. Additionally, recurrent, or cumulative, hypoglycemia can lead to progressive and irreversible damage over time, including serious and devastating brain injury, seizures, neuro-developmental problems, feeding difficulties, and significant impact on patient and family quality of life. In cases of cHI that are unresponsive to medical management, surgical removal of the pancreas may be required. In those with diffuse cHI where the whole pancreas is affected, a near-total pancreatectomy can be undertaken, although about half of these children will continue to have hypoglycemia and require medical treatment for cHI.

sunRIZE Phase 3 Study

In ~~May 2022,~~December 2023, we announced ~~positive~~that we initiated sunRIZE, a randomized, double-blind, placebo-controlled, parallel arm evaluation of RZ358 in participants with cHI who are not adequately responding to standard of care medical therapies. We plan to enroll approximately 56 participants from up to approximately 20 clinical trial sites in more than 15 countries in Europe, the Middle East, Asia and North America, and to complete enrollment by the end of calendar year 2024, to enable announcement of topline results ~~from~~in mid-2025.

sunRIZE is currently not being studied in the ~~RZ358-606 Phase 2b study~~U.S. because of partial clinical holds (“~~RIZE”~~PCHs") and through the first quarter of 2023, we finalized tables, figures and listings (“TFL”) for the study as well as clinical study reports (“CSRs”). In addition, we have been actively engaged in discussions with both European regulatory authorities as well asimposed by the U.S. Food and Drug ~~Administration~~Administration’s (“~~FDA”~~FDA’s”) ~~regarding plans~~Office of Cardiology, Hematology, Endocrinology and Nephrology – Division of Diabetes, Lipid Disorders, and Obesity (“Division”). As part of the preclinical program for RZ358, Sprague Dawley rats (“SD rats”) demonstrated a microvascular injury in liver sinusoidal endothelial cells (“LSECs”) at potentially clinically relevant doses and exposures (“rat findings”). Consequently, the Division- mandated PCHs that prevent us from dosing participants under the age of 12 and restrict us from dosing participants above the lowest dose studied to date, 3mg/kg. We do not believe that the toxicity observed in SD rats is relevant to humans particularly since no adverse liver findings were observed in monkeys during the preclinical program at significantly higher RZ358 dose levels (up to 90 mg/kg tested) with drug levels that were more than 10 times higher than those that showed toxicity in SD rats. Moreover, in clinical studies conducted to date, human doses and exposures were more than four times higher than the SD rat and there have been no adverse human liver findings.

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We have been, and continue to be, actively engaged with the Division in the attempt to resolve the PCHs. To that end, in the attempt to understand the mechanism of toxicity in the SD rat, we have retained a former senior FDA pharmacology-toxicology official as a consultant and partnered with a research group with LSEC biology expertise. In the second half of 2023, we conducted additional in-vivo and in-vitro non-clinical studies to enhance our understanding of the mechanism of toxicity in SD rats and its potential relevance to humans, including experiments in SD rat LSECs studies and a toxicology study in another rodent species. We have been unable to reproduce or characterize the toxicity observed in SD rat toxicology studies in our LSEC experiments and we therefore believe that the mechanism of toxicity cannot be characterized in vitro. In addition, we conducted a CD-1 mice study to determine if we could reproduce the toxicity (rat findings) in a different rodent species. CD-1 mice were administered significantly higher dose levels of RZ358 (up to 120 mg/kg tested) with drug levels that were more than 20 times higher than those that caused the rat findings. No adverse liver findings were observed in this study at any dose level. We believe that the lack of findings in CD-1 mice further bolsters the hypothesis that such findings are specific to rats. While the precise mechanism of liver microvascular injury in SD rats remains unknown, we believe that the SD rat may be hypersensitive to exaggerated pharmacology and severe insulin resistance with RZ358, due to its baseline predisposition to obesity, metabolic syndrome, and insulin resistance. Notably, individuals who suffer with cHI are the opposite of insulin resistant – they have excessive insulin activity.

We plan to continue to work with the Division to explore strategies for lifting the PCHs and potentially enabling the inclusion of U.S. patients in the sunRIZE study. There can be no assurance that the Division will agree to remove the holds or that removal of the holds would be sufficiently timely to enable enrollment of patients in the U.S. To the extent the holds are not removed by the Division to allow for the inclusion of U.S. clinical sites, we believe if we generate positive data ex-U.S. in the sunRIZE study, this data could be supportive of a potential submission to FDA for approval for RZ358 for cHI should sunRIZE meet its efficacy objectives, with a good safety profile.

RZ358 has received Orphan Drug Designation in the U.S. and European Union for the treatment of cHI, as well as Pediatric Rare Disease Designation in the U.S., a prerequisite for a request for Rare Pediatric Disease Priority Review Voucher upon Biologics License Application (“BLA”) submission. In the Phase 32 RIZE study, ~~(together~~participants with cHI ages 2 and older nearly universally achieved significant improvements in hypoglycemia across multiple endpoints, including the ~~European regulatory authorities~~primary and key secondary endpoints planned for the ~~FDA may be hereinafter referred to as the “Regulatory Authorities”). We expect to commence~~sunRIZE study. At doses and exposures that are planned for the Phase 3 study, ~~during~~RZ358 was generally safe and well-tolerated, and resulted in median improvements in hypoglycemia exceeding 80%. Based on the ~~Summer~~RIZE clinical trial outcomes and the evidence of benefit in this serious condition with substantial unmet medical need, RZ358 was subsequently granted a priority medicines (“PRIME”) designation by the European Medicines Agency (“EMA”) and an Innovation Passport designation by the UK Innovative Licensing and Access Pathway (“ILAP”) Steering Group for the treatment of cHI.

RZ358 for taHI

Tumor-associated Hyperinsulinism (taHI)

Insulinomas can cause hypoglycemia through the excessive secretion of insulin with subsequent activation of the insulin receptor (insulin-mediated HI). Insulinomas are the most common type of functional pancreatic neuroendocrine tumor and tend to be small and challenging to diagnose. Current therapies for insulinomas can be grouped into two main categories: (a) tumor directed therapies (e.g. surgery, chemotherapy, or radiotherapy), which may indirectly and/or eventually lead to improved control of taHI and related hypoglycemia as a result of tumor de-bulking; and/or (b) medical therapies that directly treat taHI and the associated hypoglycemia. Tumor-directed therapies do not directly target or treat the HI and resulting hypoglycemia caused by insulinomas. In many cases, tumor-directed therapies are administered concurrently with medical therapies for hypoglycemia and in other cases successful treatment of hypoglycemia often enables the initiation and/or continuation of tumor-directed therapies, as indicated. During the period from diagnosis to surgical treatment, or if surgery is contraindicated or refused, medical treatments are often necessary to directly manage the HI and hypoglycemia induced by the tumor. Additionally, chronic medical management of refractory hypoglycemia is often necessary for patients who cannot be cured by surgery, such as those with extensive disease of the pancreas, multi-focal insulinomas, inoperable or unresectable benign or malignant insulinomas, metastatic Insulinomas, or non-pancreatic insulinomas. There are approximately 10,000-15,000 patients in the U.S. living with Insulinoma, of which approximately 10 percent have malignant/unresectable tumors requiring chronic treatment to control their HI.

A significant unmet need exists for treatment options with improved efficacy and tolerability as normalization of glucose levels is crucial to ensure patients are fit to receive cancer treatment and to reduce mortality. Unfortunately, some patients are unresponsive to the current standard of care medical therapies for taHI and experience debilitating hypoglycemia that is otherwise untreatable. Currently available medical therapies are directed at reducing or eliminating insulin production and/or secretion from tumors, which may be challenging when the tumor is differentiated or dysregulated, and therefore not responding to usual control mechanisms for

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suppressing insulin production. In some cases, commonly utilized somatostatin analog therapies may even worsen hypoglycemia due to suppression of glucagon. Therefore, currently available medical therapies, directed at suppressing insulin production, may have limited effectiveness in taHI, and individuals with insulinoma may have refractory hypoglycemia.

Expanded Access Program

RZ358 has been shown to counteract excessive insulin action downstream, at the insulin-receptor on target organs. The unique mechanism of action of RZ358 makes the therapy a potential universal treatment for any form of hyperinsulinism, including taHI resulting from insulinoma.

We maintain an EAP for a variety of HI indications for the purpose of making RZ358 available on a compassionate use basis when available therapeutic options have failed and an individual’s hypoglycemia is unmanageable. In the fourth quarter of 2022, we received and approved an EAP request from Dr. Mary Elizabeth Patti, Director of the Hypoglycemia Clinic at the Harvard Medical School and Beth Israel Medical Center-affiliated Joslin Diabetes Center, for a patient with intractable hypoglycemia caused by a metastatic insulinoma. Dr. Patti received a single patient investigational new drug (“IND”) approval from the Division to treat the patient with RZ358. Dr. Patti reported that the patient safely achieved correction of hypoglycemia with RZ358, enabling the patient to wean off continuous intravenous dextrose and several other medications for hypoglycemia, leave the hospital after a prolonged stay, and resume receiving concurrent treatment for his cancer with tumor-directed therapies. The patient remained on RZ358 for more than a year until he eventually passed away due to progression of his underlying malignant/metastatic insulinoma.

Dr. Patti’s use of RZ358 in a patient with insulinoma under our EAP, marked the first usage of RZ358 in the taHI setting. Dr. Patti submitted a late-breaking abstract and presented her case report titled, “Treatment of Severe Refractory Hypoglycemia Due to Malignant Insulinoma With A Novel Anti-insulin Receptor Antibody,” in poster form in June 2023 ~~but~~at the 105^th Annual Scientific Meeting of the Endocrine Society. Subsequently, in August 2023, Dr. Patti’s case report was also published in the New England Journal of Medicine as a letter to the editor titled, “Anti-Insulin Receptor Antibody for Malignant Insulinoma and Refractory Hypoglycemia.”

Following publication of Dr. Patti’s report, we have received and approved four additional requests for use of RZ358 in patients with taHI caused by metastatic insulinomas and other insulin secreting metastatic cancer (cervical). In the U.S., these requests have all been approved by the Division. These patients have been refractory to usual standard of care therapies for chronic management of hypoglycemia and required continuous high volume/concentration intravenous dextrose or nutritional infusion and were hospitalized and in life-threatening or hospice-bound condition because of uncontrollable hypoglycemia. Further treatment with tumor-directed therapies (e.g., embolization, radiotherapy, chemotherapy) had been deferred as a result of the debilitating hypoglycemia.

Generally, dosing for taHI patients has been either 6 mg/kg or 9 mg/kg every 1-2 weeks. In all cases to date, RZ358 has led to substantial improvement in hypoglycemia and has been well tolerated. Within a relatively short period of time after administration of RZ358, continuous intravenous dextrose was discontinued and hospitalized patients were able to be discharged and receive maintenance RZ358 doses on an outpatient basis, with durable benefit. In most cases, other background medical therapies for hypoglycemia were able to be weaned or stopped, and patients were able to resume tumor-directed therapies for treatment of their underlying cancer. Patients with metastatic taHI often have underlying hepatic injury (abnormal enzymes) at baseline due to hepatic metastases or previous tumor-directed treatments (e.g., partial liver resection or embolization). The patients with hepatic injury that have been treated under the EAP have not exhibited any indication of hepatic toxicity with the use of RZ358.

Evaluation of a Clinical and Regulatory Development Path

On January 11, 2024, we had a Type B pre-IND meeting with the Division to discuss a potential IND application and a clinical and regulatory development strategy for taHI. The Division acknowledged the unmet need in taHI as well as the potential therapeutic benefit of RZ358 as demonstrated by the cases under the EAP as well as the efficacy demonstrated in previous clinical experience in cHI. The Division is aligned with us that RZ358 could be next studied in an IND-opening late-stage (registrational) clinical trial, which we are currently evaluating as a development program and second rare disease indication for RZ358.

In addition to other factors that impact a decision and timing of initiation of a new development program, we are not resourced to support an additional late stage registrational study. While we are optimistic about the positive impact RZ358 is already having on the lives of taHI patients, there can be no ~~guarantee~~assurance that we will expand its pipeline to include taHI as a new indication for RZ358 nor can there be

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any assurance that such a program will be ~~able~~successful in a registrational study to ~~commence the study on this timeline. Based on our current enrollment estimates, we expect to have top line results available from this study~~support commercial approval for use of RZ358 in ~~the first quarter of 2025.~~taHI by FDA or other regulatory authorities worldwide.

RZ402 for DME

In December 2022, we initiated a Phase 2 U.S. multi-center, randomized, double-masked, placebo-controlled, parallel-arm study to evaluate the safety, efficacy, and pharmacokinetics of RZ402 administered as a monotherapy over a 12-week treatment period in participants with DME who are naïve to, or have received limited anti-VEGF injections. The study population ~~will include~~is comprised of DME patients with mild to moderate non-proliferative diabetic retinopathy. Eligible participants ~~will be~~were randomized equally, to one of three RZ402 active treatment arms at doses of 50, 200, and 400 mg, or a placebo control arm, ~~and will~~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~~We have completed enrollment of 94 participants in the ~~United States.~~study, and the study remains ongoing. The principal endpoints of the trial include (i) ~~changes~~change in study eye macular central subfield thickness, ~~of the macula,~~ as measured by Spectral Domain Ocular Coherence Tomography, (ii) ~~changes~~change in study eye 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. Since RZ402 is an oral therapy and achieves systemic exposure to the retinal blood vessels in both eyes, key endpoints will also incorporate the non-study eye. We ~~expect to complete enrollment in 2023 and~~are on track to announce topline results ~~from the study~~ in ~~the first~~second quarter of 2024.

Recent Developments

~~Investment in Marketable Debt Securities~~Appointment of Chief Financial Officer

InOn January ~~2023, our~~23, 2024, the Board of Directors approved the appointment of Daron Evans to serve as our Chief Financial Officer. In connection with the appointment, we extended Mr. Evans an employment offer letter (the “Offer Letter”). The Offer Letter provides for the following compensation: (i) an annual base salary of $275,000; (ii) eligibility to receive an annual performance bonus with a target of 50% of Mr. Evans’ base salary, on December 31st of each year; and (iii) an inducement grant pursuant to Nasdaq Listing Rule 5635(c)(4) in the form of stock options to purchase 275,000 shares (the “Inducement Grant”) of our common stock. The stock options issued as the Inducement Grant will vest and become exercisable as to 25% of the underlying shares on the first anniversary of the grant date, and will vest and become exercisable as to the remaining 75% of the underlying shares in 36 equal monthly installments from the first anniversary of the grant date, subject to his continued employment on such vesting dates. If we are acquired during his employment, all remaining options will automatically vest. In connection with the appointment of Daron Evans to serve as our Chief Financial Officer, our board of directors determined that ~~it was in the best interest~~Mr. Elam will remain both our principal executive and principal financial officer for purposes of the ~~Company and its shareholders~~certifications filed with this Quarterly Report on Form 10-Q as required pursuant to ~~diversify its cash position and use a portion~~18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the ~~Company’s cash to invest an aggregate~~Sarbanes-Oxley Act of ~~$115.0 million of cash held in demand deposit accounts in marketable debt securities and an overnight money market mutual fund with the objective of achieving higher returns on investment.~~ 2002.

~~Headquarters Lease~~Jefferies Open Market Sales Agreement

~~In April 2022,~~On November 14, 2023, we entered into ~~a lease agreement for a new corporate headquarters facility in Redwood City, California. The space consists of approximately 9,300 square feet and~~an Open Market Sale Agreement^SM (the “Sales Agreement”) with Jefferies LLC (the “Agent) that provides for ~~total base rent payments~~an “at the market” offering for the sale of ~~approximately $2.9~~up to $50.0 million in shares of our common stock (the “Placement Shares”) through the ~~expected~~Agent. The Agent is acting as sales agent and is required to use commercially reasonable efforts to sell all of the Placement Shares requested to be sold by us, consistent with the Agent’s normal trading and sales practices, on mutually agreed terms between the us and the Agent. The Sales Agreement will terminate when all of the Placement Shares have been sold, or earlier upon the election of either us or the Agent.

We have no obligation to sell any of the Placement Shares under the Sales Agreement. We intend to use the net proceeds, if any, from amounts sold under the Sales Agreement for general corporate purposes, including working capital. Under the terms of the Sales Agreement, we agreed to pay the Agent a commission equal to 3.0% of the gross sales price of the Placement Shares plus certain expenses incurred by the Agent in connection with the offering. No shares were sold under the Sales Agreement as of December 31, 2023.

Class B Prefunded Warrant Exercise

On October 4, 2023, an investor from our May 2022 registered direct offering provided notice of cashless exercise of their Class B PFWs. We issued 2,797,704 shares of our common stock on October 6, 2023, and we did not receive any cash proceeds from the exercise.

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~~expiration of the lease in November 2027. The lease provides for a six-month rent abatement period that began upon commencement of the lease term which occurred in October 2022.~~

~~Financing Activities~~

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

~~Termination of Loan Agreement~~

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

~~Please refer to our discussion under the caption~~ ~~Liquidity and Capital Resources~~ ~~for further discussion of our recent financing activities.~~

Factors Impacting our Results of Operations

We have not generated any meaningful revenues since our inception in March 2010. Over the last several years, we have conducted private placements and public offerings to raise additional capital, adopted a licensing model to pursue development of product candidates, conducted pre-clinical and clinical trials, and conducted other research and development activities on our pipeline of product candidates.

Due to the time required to conduct clinical trials and obtain regulatory approval for our product candidates, we 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 current operating plans over the next several years. We cannot assure you that we will secure such financing or that it will 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 agree to covenants or other provisions that will favor new investors over our existing shareholders.

Key Components of Consolidated Statements of Operations and Comprehensive Loss

Research and development expenses. Research and development (“R&D”) expenses consist primarily of compensation and benefits for our personnel engaged in R&D activities, clinical trial costs, licensing costs, and consulting and outside services. Our R&D compensation costs include an allocable portion of our cash and share-based compensation, employee benefits, and consulting costs related to personnel engaged in the 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 a public company.

Interest and other income. Interest and other income consist primarily of interest income earned on ~~investments~~marketable debt securities and temporary cash ~~investments.~~investments, amortization of investment premiums and accretion of investment discounts.

Loss from change in fair value of derivative ~~liabilities.~~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 each reporting period until the contracts are settled, expire, or otherwise meet the conditions for equity classification. Changes in fair value are reflected as a gain or loss in our unaudited condensed consolidated statements of operations and of comprehensive loss.

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

~~Interest expense.~~ The components of interest expense include the amount of interest payable in cash at the stated interest rate, and accretion of debt discounts and issuance costs (“DDIC”) using the effective interest method. DDIC arises from the issuance of debt instruments and other related contracts or agreements which possess certain terms and conditions resulting in additional financing costs arising from origination, exit and final fees, and other incremental and direct costs incurred to consummate the financing.

Critical Accounting Policies and Significant Judgments and Estimates

Overview

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. The preparation of these unaudited condensed consolidated financial statements requires 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, as well as the reported revenue and expenses during the reporting periods. These items are monitored and analyzed for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the 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.

With respect to our significant accounting policies that are described in Note 1 to our consolidated financial statements included in Item 8 of our ~~2022~~2023 Form 10-K, we believe that the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

~~Accounting for Complex Financings~~

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

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

~~Share-Based Compensation Expense~~

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

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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 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.

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 grants of stock options 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 ~~March~~December 31, 2023 and 2022

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

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


					Increase
	2023		2022			Amount	Percent

Total R&D expenses	$	12,039	$	10,945	$	1,094	10	%

The increase in R&D expenses of $1.1 million for the three months ended December 31, 2023 was attributable to a net increase of in RZ358 related program costs of approximately $1.1 million. The increased expense consisted of increases in clinical trial expense of $0.9 million, manufacturing costs of $0.1 million and preclinical costs of $0.5 million. RZ358 costs increased due to Phase 3 clinical readiness activities. These increases were partially offset by a decrease in RZ358 related clinical development activities of $0.4 million since clinical feasibility studies were completed in the prior year in preparation for the Phase 3 study.

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


					Increase
	2023		2022			Amount	Percent

Total G&A expenses	$	3,155	$	3,447	$	(292)	(8)	%

The decrease in G&A expenses of $0.3 million for the three months ended December 31, 2023 was primarily attributable to decrease in cash-based compensation expense related to reduced performance bonuses.

Interest and Other Income. Interest and other income amounted to $1.3 million for the three months ended December 31, 2023, compared to $0.8 million for the three months ended December 31, 2022. This increase of $0.5 million was primarily 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 earned interest at a weighted average effective rate of approximately 5.0%, whereas our temporary cash investments for the three months ended December 31, 2022 provided for earnings that were less than 3.0%. The impact of higher interest rates for the three months ended December 31, 2023 was partially offset by a reduction in the average funds that were invested. Investments in marketable debt securities are our primary source of liquidity to fund clinical expenditures and other operating expenses.

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

Six months ended December 31, 2023 and 2022

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

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


					Increase
	2023		2022			Amount	Percent

Total R&D expenses	$	24,253	$	18,649	$	5,604	30	%

Increase


2023

2022


Amount

Percent

Total R&D expenses

$
14,231

$
8,686

$
5,545

64
%

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The increase in R&D expenses of ~~$5.5~~$5.6 million for the ~~three~~six months ended ~~March~~December 31, 2023 was primarily attributable to an increase of RZ358 related program costs of approximately ~~$2.8~~$4.1 million. The increased expense consisted of an increase in manufacturing and preclinical costs of ~~$1.8~~$2.7 million and clinical trial expense of ~~$0.4 million, and other RZ358 program costs of $0.6~~$1.8 million. RZ358 costs increased due to Phase 3 clinical readiness ~~activities. Compensation~~activities, which was initiated in December 2023. These increases were partially offset by a decrease of $0.4 million RZ358 related clinical development activities, as clinical feasibility studies were completed in the prior year in preparation for the Phase 3 study.

Costs related to RZ402 and other R&D costs increased by approximately $0.5 million for the six months ended December 31, 2023, which was primarily attributable to an increase in clinical costs related to the ongoing Phase 2 study, which completed enrollment in December 2022. The RZ402 Phase 2 study is ongoing with topline results expected to be available in the second quarter of calendar 2024.

Additionally, compensation and benefits for our R&D workforce increased by approximately ~~$1.1~~$1.0 million. Cash-based compensation and benefits increased by approximately ~~$0.6~~$0.9 million that was primarily attributable to an increase in the average number of R&D employees from 26an average of 34 employees for the ~~three~~six months ended ~~March~~December 31, 2022 to 36an average of 43 employees for the ~~three~~six months ended ~~March~~December 31, 2023. Share-based compensation and benefits increased by approximately $0.5 million attributable to an increase in share-based compensation related to stock options granted in June 2022 where expense is recognized over the respective vesting periods. RZ402 program costs increased by approximately $0.4 million, primarily due to Phase 2 clinical trial costs which dosed its first patients in February 2023. Milestone related costs increased by $1.0 million for the three months ended March 31, 2023 due to the $3.0 million milestone due to ActiveSite upon dosing of the first patient in a Phase 2 study. Milestone costs for the quarter ended March 31, 2022 related to the payment of $2.0 million to XOMA upon last patient dosing in the Phase 2b study.

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


					Increase								Increase
	2023		2022			Amount	Percent		2023		2022			Amount	Percent

Total G&A expenses	$	2,911	$	2,068	$	843	41	%	$	6,855	$	5,961	$	894	15	%

~~Table of Contents~~

~~The increase in~~ G&A expenses ~~of $0.8~~increased by approximately $0.9 million for the ~~three~~six months ended ~~March~~December 31, ~~2023~~2023. This increase was attributable to ~~increases in (i) share-based compensation expense~~$0.4 million of ~~$0.5 million~~increased professional fee due to ~~stock options granted in June 2022 where expense is recognized over the respective vesting periods,~~higher market research costs, $0.3 million of increased information technology and ~~(ii) cash-based~~other costs to support our growing organization. Additionally, compensation ~~expense of~~and benefits for our G&A workforce increased by approximately $0.2 million due to an increase in ~~the~~ average number of G&A employees from 912 for the ~~three~~six months ended ~~March~~December 31, 2022 to 12an average of 14 employees for the ~~three~~six months ended ~~March~~December 31, 2023.

Interest and Other Income. Interest and other income amounted to ~~$1.5~~$2.7 million for the ~~three~~six months ended ~~March~~December 31, 2023, compared to ~~none~~$1.3 million for the ~~three~~six months ended ~~March~~December 31, 2022. This increase of $1.4 million was primarily 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 ~~three~~six months ended ~~March~~December 31, 2022 provided for earnings that were less than ~~1.0%~~3.0%. The ~~large increase in funds available for investment was attributable to the completion~~impact of ~~equity financings between May 2022 and July 2022.~~

~~Interest Expense.~~ ~~We did not incur any~~higher interest ~~expense~~rates for the ~~three~~six months ended ~~March~~December 31, 2023 ~~whereas we incurred $0.4 million~~was partially offset by a reduction in the average funds that were invested. Investments in marketable debt securities are our primary source of ~~interest expense for the three months ended March 31, 2022. Interest expense for the three months ended March 31, 2022 was solely attributable~~liquidity to ~~the Loan Agreement~~fund clinical expenditures and consisted of (i) interest expense of $0.3 million based on the weighted average contractual rate of 9.0%, and (ii) accretion of discount of $0.1 million. The Loan Agreement was repaid on June 30, 2022.other operating expenses.

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

~~Nine months ended March 31, 2023 and 2022~~

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

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

Increase


2023

2022


Amount

Percent

Total R&D expenses

$
32,880

$
23,912

$
8,968

38
%

The increase in R&D expenses of $9.0 million for the nine months ended March 31, 2023 was partially attributable to compensation and benefits for our R&D workforce that increased by approximately $3.7 million. Cash-based compensation and benefits increased by approximately $2.3 million which was primarily attributable to an increase in the average number of R&D employees from 24 for the nine months ended March 31, 2022 to 35 for the nine months ended March 31, 2023. In addition, approximately $1.4 million of this increase was attributable to an increase in share-based compensation related to stock options granted in June 2022 where expense is recognized over the respective vesting periods. In addition to the increases in compensation and benefits, an increase of $1.5 million was due to higher spending for RZ358 Phase 3 readiness manufacturing costs and $1.0 million for RZ402 Phase 2 clinical trial costs.

Milestone related costs under licensing agreements increased by $1.0 million for the nine months ended March 31, 2023 as a result of the $3.0 million milestone payment due to ActiveSite upon dosing of the first patient in a Phase 2 study. Milestone costs for the nine months ended March 31, 2022 related to the payment of $2.0 million to XOMA (as defined below) upon last patient dosing in the Phase 2b study.

Other R&D related costs increased by approximately $1.8 million for the nine months ended March 31, 2023 due an increase of $0.9 million related to R&D facilities costs driven by increased travel, rent and other facilities costs. Other pipeline development costs increased by $0.6 million.

~~Table of Contents~~

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

Increase


2023

2022


Amount

Percent

Total G&A expenses

$
8,872

$
6,632

$
2,240

34
%

The increase in G&A expenses of $2.2 million for the nine months ended March 31, 2023 was primarily attributable to increases in (i) share-based compensation expense of $1.3 million due to stock options granted in June 2022 where expense is recognized over the respective vesting periods and (ii) cash-based compensation expense of $0.9 million that was primarily attributable to an increase in the average number of G&A employees from 8 for the nine months ended March 31, 2022 to 12 for the nine months ended March 31, 2023.

~~Interest and Other Income~~. Interest and other income amounted to $2.7 million for the nine months ended March 31, 2023, compared to $13,000 of interest income for the nine months ended March 31, 2022. The increase in interest income for the nine months ended March 31, 2023 was primarily due to our decision in January 2023 to invest an aggregate of approximately $115.0 million in marketable debt securities and overnight money market mutual fund that bear interest at a weighted average effective rate of approximately 5.0%, whereas our temporary cash investments for the nine months ended March 31, 2022 provided for earnings that were less than 1.0%. The large increase in funds available for investment was attributable to the completion of equity financings between May 2022 and July 2022.

~~Employee Retention Credit.~~ We did not generate any employee retention credit income for the nine months ended March 31, 2023, compared to $0.2 million for the nine months ended March 31, 2022. The income in the prior year was a result of CARES Act benefits. For the nine months ended March 31, 2023, governmental assistance was not available under the CARES Act.

~~Interest Expense.~~ We did not incur any interest expense for the nine months ended March 31, 2023 due to the repayment of the Loan Agreement on June 30, 2022, whereas we incurred $1.3 million of interest expense for the nine months ended March 31, 2022. Interest expense for the nine months ended March 31, 2022 was solely attributable to the Loan Agreement and consisted of (i) interest expense of $1.0 million based on the weighted average contractual rate of 9.0%, and (ii) accretion of discount of $0.3 million.

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

Liquidity and Capital Resources

Short-term Liquidity Requirements

As of ~~March~~December 31, 2023, we had cash and cash equivalents of ~~$33.7~~$12.5 million, short-term marketable debt securities of ~~$69.3~~$80.1 million and working capital was approximately ~~$101.1~~$88.1 million. We have incurred cumulative net losses of ~~$248.3~~$289.4 million since our inception and as a clinical stage company we have not generated any meaningful revenue to date.

Our primary source of liquidity has historically been from the completion of private placements and public offerings of our equity securities, as well as proceeds from the issuance of debt securities. For the nine months ended March 31, 2023, as discussed above under the caption ~~Recent Developments,~~ we issued common stock in the 2022 Private Placement that resulted in net proceeds of $11.6 million. For the fiscal year ended June 30, 2022, we received net proceeds from the issuance of equity securities of $165.2 million. The completion of these equity financings is the primary factor that resulted in our cash and cash equivalents balance of $33.7 million and marketable debt securities investment balance of $95.5 million as of March 31, 2023. For further information about the key terms and results of our debt and equity financing activities, please refer to the discussion below under the captions ~~2022 Registered Direct Offering~~, ~~2021 Underwritten Public Offering~~ ~~and~~ ~~2021 Registered Direct Offering~~.

Our most significant contractual obligations consist of milestone payments pursuant to licensing agreements with XOMA Corporation (“XOMA”) and ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) discussed below. ~~Based on~~

Our primary source of liquidity has historically been from the completion of private and public offerings of our ~~expectations for~~debt and equity securities. For the ~~dates when certain~~six months ended December 31, 2023, we did not receive any proceeds from our financing activities. For the fiscal year ended

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June 30, 2023, we received net proceeds from the issuance of equity securities of $11.6 million. During the fiscal year ended June 30, 2022, we completed several equity financings that generated aggregate net proceeds of approximately $149.0 million after repayment of our Loan Agreement. These equity financings have been our primary source of liquidity to enable our funding of ongoing clinical expenditures and ~~regulatory milestones will be achieved,~~other operating expenses.

In April 2022 we ~~anticipate that~~entered into a lease agreement for a new corporate headquarters facility in Redwood City, California. This lease, which commenced in October 2022, provides for total base rent payments of approximately $2.9 million through the expected expiration of the lease in July 2027. Additionally, in October 2023 we extended the lease agreement for our office facility in Bend, Oregon. This lease extension provides for additional base rent payment of approximately $0.4 million through the expiration date of the lease in February 2027.

Remaining cash payments related to existing contractual obligations for the 12-months ending December 31, 2024 include approximately (i) $0.7 million under all of our operating lease agreements, (ii) a milestone payment to XOMA of $5.0 million ~~will be payable~~due upon dosing of the first patient in our planned Phase 3 clinical trial for RZ358 and (iii) and an additional payment to XOMA ~~within~~of $5.0 million due upon dosing of the ~~next twelve months.~~ last patient in our planned Phase 3 clinical trial for RZ358. Due to uncertainties in the timing associated with clinical trial activities, it is possible that the milestone payment due upon dosing of the last patient could be delayed beyond December 31, 2024.

Based on our cash and cash equivalents balance of ~~$33.7~~$12.5 million and investments in short-term ~~investment~~marketable debt securities balance of ~~$69.3~~$80.1 million as of ~~March~~December 31, 2023, we believe we have adequate capital resources to meet all of our contractual obligations and conduct all planned activities to advance our clinical trials at least through the ~~fiscal quarter ending March 31, 2024.~~next 12 months.

Long-term Liquidity Requirements

Our most significant long-term contractual obligations consist of ~~remaining~~additional clinical and regulatory milestone payments up to $35.0 million payable to XOMA and ~~$32.5~~additional milestone payments up to $25.0 million ~~in remaining clinical and regulatory milestones payments~~payable to ~~ActiveSite, for a total of $67.5 million. As discussed above,~~ActiveSite. Of these amounts, we expect that ~~$5.0~~$10.0 million will be payable to XOMA ~~within~~during the ~~next twelve months. Accordingly,~~12-month period ending December 31, 2024 as discussed above under the ~~remainder~~caption Short-term Liquidity Requirements. Up to $50.0 million of ~~$62.5 million is~~the remaining milestone payments that may become payable are considered a long-term liquidity requirement. Due to uncertainties in the timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the ~~additional~~timing of future clinical and regulatory milestone payments to XOMA and ActiveSite ~~during~~that may extend beyond the next 12 months.

In addition to the clinical and regulatory milestone payments discussed above, upon the future commercialization of RZ358 and RZ402 we will be obligated to pay additional milestone payments and royalties based on the net sales of the related products and alternative indication regulatory approvals to XOMA and ActiveSite for an aggregate up to $202.5 million. These future milestones include $185.0 million in potential payments to XOMA and $17.5 million to ActiveSite for various sales-based milestones and alternative indication regulatory approvals. No assurance can be provided that commercialization will ever be achieved for 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 $0.2 million to $0.8 million for each of the fiscal ~~year~~years ending June 30, ~~2024~~2025 through 2027. Based on our current forecast, we expect that our existing cash, cash equivalents and ~~thereafter.~~

~~Our~~investments in marketable debt securities will be sufficient to fund our long-term contractual obligations ~~also include (i) operating lease payments up~~and conduct all planned activities to ~~approximately $0.7 million per year~~advance our clinical trials at least through the third quarter of calendar year 2027, and (ii) an exit fee of $0.6 million if we enter into certain transactions (defined as “Exit Events”) prior to April 13, 2031. Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of control transactions, and issuances of common stock that result in new investors owning more than 35% of our common stock. 2025.

As discussed above under the caption Recent Developments,, in November 2023 we entered into the Sales Agreement that provides for an “at-the-market” offering for the sale of up to $50.0 million in shares of our common stock. The net proceeds under the Sales Agreement, if any, will be used to fund a portion of our long-term liquidity requirements including payments for general corporate purposes and to meet our working capital requirements. To date, we have not elected to sell any shares of our common stock pursuant to the Sales Agreement. Even if we elect to sell the entire $50.0 million of shares under the Sales Agreement, we will need to obtain additional equity or debt financing in order to fund all of our long-term liquidity requirements. Accordingly, no assurance can be provided that we will be able to obtain sufficient sources of equity and debt financing on ~~June 30, 2022 we terminated the Loan Agreement with SLR. However, we remain contingently obligated~~terms that are acceptable to ~~pay the $0.6 million exit fee.~~our Board of Directors and stockholders.

~~The following discussion provides~~26

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Presented below is an additional ~~information~~discussion about the ongoing requirements pursuant to our license agreements with XOMA and ActiveSite, along with additional information about our ~~recent~~ongoing financing activities that impacted our liquidity and capital resources through ~~March~~December 31, 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.

~~The XOMA License Agreement requires various~~Upon the achievement of certain clinical and regulatory ~~milestone payments~~events, we will be required to make up to $37.0 million in ~~aggregate.~~aggregate milestone payments to XOMA. The first such milestone payment of $2.0 million was triggered upon ~~dosing~~enrollment of the last patient in our ~~Phase~~ongoing phase 2 clinical study in January 2022. The next milestone ~~payment~~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 ~~first~~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 the net sales of the related products, and milestone payments up to an additional $185.0 million if future annual sales related to RZ358 exceed targets ranging from $100.0 million to $1.0 billion. Through ~~March~~December 31, 2023, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

ActiveSite License Agreement

In August 2017, we entered into a Development and License Agreement with ActiveSite (“ActiveSite License Agreement”) pursuant to which we acquired the rights to ActiveSite’s ~~plasma kallikrein inhibitor portfolio (the “PKI Program”).~~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 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 ~~the~~ preclinical work and submission of an IND to the FDA for RZ402. The second milestone payment for $3.0 million became due upon dosing of the first patient in a Phase 2 study in February 2023. 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 ~~March~~December 31, 2023, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

~~Table of Contents~~

~~2022 Registered Direct Offering~~

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

~~2021 Underwritten Public Offering and Registered Direct Offering~~

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

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

~~EDA and LPC Financings~~

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

~~Loan Agreement~~

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

~~Table of Contents~~

Cash Flows Summary

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


	2023		2022		Change		2023		2022		Change
Net cash provided by (used in):
Operating activities	$	(33,131)	$	(27,506)	$	(5,625)	$	(23,605)	$	(15,082)	$	(8,523)
Investing activities		(95,107)		—		(95,107)		20,366		(153)		20,519
Financing activities		11,571		54,875		(43,304)		(293)		11,571		(11,864)

Cash Used in Operating Activities

For the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, cash used in operating activities amounted to ~~$33.1~~$23.6 million and ~~$27.5~~$15.1 million, respectively. The key components in the calculation of our cash used in operating activities are as follows (in thousands):

2023

2022

Change

Net loss

$
(39,059)

$
(31,637)

$
(7,422)
Non-cash expenses

5,759

3,259

2,500
Non-cash gains, net

(708)

—

(708)
Changes in operating assets and liabilities, net

877

872

5
Total

$
(33,131)

$
(27,506)

$
(5,625)


2023	2022	Change

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Net loss	$	(28,433)	$	(23,387)	$	(5,046)
Non-cash expenses		4,009		3,758		251
Accretion of discounts and amortization of premiums on marketable debt securities, net		(1,181)		—		(1,181)
Changes in operating assets and liabilities, net		2,000		4,547		(2,547)
Total	$	(23,605)	$	(15,082)	$	(8,523)

For the ~~nine~~six months ended ~~March~~December 31, 2023, our net loss was ~~$39.1~~$28.4 million compared to ~~$31.6~~$23.4 million for the ~~nine~~six months ended ~~March~~December 31, 2022. For further discussion about changes in our operating results for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, please refer to Results of Operations above.

For the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, our non-cash expenses of ~~$5.8~~$4.0 million and ~~$3.3~~$3.8 million, respectively, were primarily attributable to share-based compensation ~~expense, non-cash lease expense, and accretion of debt discount and issuance costs.~~expense. For the ~~nine~~six months ended ~~March~~December 31, 2023, ~~net non-cash gains of $0.7 million were attributable to~~ accretion of discounts ~~net of~~and amortization of premiums ~~related~~on marketable debt securities amounted to $1.2 million and were due to our ~~investments~~decision in January 2023 to generate higher interest income by investing in marketable debt securities. For the ~~nine~~six months ended ~~March~~December 31, 2023, net changes in operating assets and liabilities increased operating cash flow by ~~$0.9~~$2.0 million, primarily driven by an increase of ~~$1.7~~$2.5 million in accounts payable and other accrued ~~liabilities primarily.~~liabilities. This amount was partially offset by ~~reduced~~ cash ~~flows~~outflows resulting from an increase in prepaid expenses and other assets of ~~$0.8~~$0.5 million. For the nine months ended March 31, 2022, net changes in operating assets and liabilities increased operating cash flow by $0.9 million, primarily driven by an increase in accounts payable and other accrued liabilities.

Cash Provided by Investing Activities

For the ~~nine~~six months ended ~~March~~December 31, 2023, our net cash provided by investing activities amounted to $20.4 million, primarily related to the maturity of marketable debt securities of $60.5 million partially offset by cash outflows of $40.2 million to reinvest in marketable debt securities.

For the six months ended December 31, 2022, our net cash utilized in investing activities amounted to ~~$95.1 million, primarily related to the purchase of $95.0 million of marketable debt securities. Additionally, $0.1 million of cash utilized in investing activities~~$153,000, related to the purchase of furniture and equipment primarily for use in our new office location in Redwood City, California. ~~We did not have any cash flows from investing activities for the nine months ended March 31, 2022.~~

Cash Provided by or Used in Financing Activities

For the six months ended December 31, 2023, our net cash utilized in financing activities was $0.3 million and was solely attributable to deferred offering costs to put the Sales Agreement in place and register the underlying shares of common stock that may be issued.

Net cash provided by financing activities for the ~~nine~~six months ended ~~March~~December 31, ~~2023~~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.

~~Table of Contents~~

Net cash provided by financing activities for the nine months ended March 31, 2022 amounted to $54.9 million. This amount consisted of proceeds of (i) $50.7 million from the Underwritten Offering, (ii) $5.0 million from the Registered Direct Offering, (iii) $1.5 million from the EDA, and (iv) $1.2 million from the Purchase Agreement. The total proceeds from equity financing activities of $58.4 million were partially offset by payments of $3.4 million for underwriting discounts and other costs related to equity offerings, and $0.1 million of payments for debt issuance costs.

Recent Accounting Pronouncements

Please refer to Note 1 to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Report regarding the impact of recent accounting pronouncements.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet transactions for the periods covered by this Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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Item 4. 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 and 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”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. 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 determined that our internal control over financial reporting was ~~not~~ effective ~~due to a material weakness in the system~~as of internal control. A material weakness is a deficiency, or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely manner.

As previously reported on our Annual Report on Form 10-K for the year ended June 30, 2022 in connection with the our assessment of the effectiveness of its internal control over financial reporting at the end of its last fiscal year, the material weakness identified by management is primarily that due to our limited number of employees, we have not adequately segregated certain duties to prevent employees from overriding the internal control system. During the fiscal year ended June 30, 2022, we implemented a more robust accounting software that is expected to result in stronger controls. In October 2022, we hired additional personnel, which will enable us to better segregate many functions. While we believe these are important steps in our ongoing remediation efforts, we cannot provide assurance that these or other measures will eventually result in the elimination of the material weakness described above.December 31, 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 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

~~None~~None.

Item 1A. Risk Factors.

Our risk factors are set forth under “Item 1A. Risk Factors” in our ~~2022~~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 ~~factors~~factor set forth below.

WeOur failure to maintain compliance with Nasdaq’s continued listing requirements could ~~recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.~~

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

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

On November 21, 2023, we received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we are not in compliance with Nasdaq Listing Rule 5550(a)(2), which ~~could~~requires companies listed on The Nasdaq Stock Market to maintain a minimum bid price of $1 per share for continued listing. Nasdaq’s letter has no immediate impact on the listing of our common stock, which will continue to be listed and traded on Nasdaq, subject to our compliance with the other continued listing requirements. Nasdaq has granted us a period of 180 calendar days, or until May 20, 2024, to regain compliance with the rule. We may regain compliance at any time during this compliance period if the minimum bid price for our common stock is at least $1 for a minimum of ten consecutive business days.

Until Nasdaq has reached a final determination that we have anregained compliance with all of the applicable continued listing requirements, there can be no assurances regarding the continued listing of our common stock or warrants on Nasdaq. The delisting of our common stock and warrants from Nasdaq would have a material adverse effect on our ~~financial condition~~access to capital markets, and ~~results~~any limitation on market liquidity or reduction in the price of ~~operations.~~

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

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

~~Any delays in the commencement or completion, or termination or suspension, of our future clinical trials, if any, could result in increased costs to us, delay or limit~~delisting would adversely affect our ability to ~~generate revenue and adversely affect our commercial prospects.~~

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

~~Table of Contents~~

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

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

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

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

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~~changes to clinical trial protocol;~~

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

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

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

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

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~~lack of adequate funding to continue the clinical trial;~~

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~~patients experiencing severe or unexpected drug-related adverse effects;~~

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

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

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

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

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

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

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

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

~~Any delay in, or failure to receive or maintain, approval for any of our product candidates could prevent us from ever generating meaningful revenues or achieving profitability.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

~~Table of Contents~~

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

The following exhibits are incorporated by reference or filed as part of this Quarterly Report on Form 10-Q:


Exhibit Number		Description of Exhibits
10.1*10.1		~~Amended~~Open Market Sale Agreement by and ~~Restated Employment Agreement of Nevan Elam, dated January 8,~~between Rezolute, Inc. and Jefferies, LLC (included as Exhibit 1.2 to the Registration Statement on Form S-3 filed on November 11, 2023 and incorporated herein by reference).
10.2*10.2		~~Amended~~Offer Letter with Daron Evans (included as Exhibit 10.1 to the Current Report on Form 8-K filed on January 29, 2024 and ~~Restated Employment Agreement of Brian Roberts, dated January 8, 2023~~incorporated herein by reference).
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*		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
101.SC*		Inline XBRL Taxonomy Extension Schema
101.CA*		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		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 (included as Exhibit 101)

* Filed herewith.

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SIGNATURES

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


		REZOLUTE, INC.

Date: ~~May 11, 2023~~February 13, 2024	By:	/s/ Nevan Charles Elam
		Nevan Charles Elam
		Chief Executive Officer
		(Principal Executive and Financial Officer)

3732


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


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


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