On October 28, 2020, the Company entered into an assignment, assumption and amendment of lease agreement for ancillary office space in Bend, Oregon. The leased space consists of approximately 5,000 square feet and provides for average monthly rent of approximately $8,700 through the expiration date in February 2024. The lease provides one option to renew the lease for an additional three years at market rates. The Company determined it was not reasonably assured that this renewal option would be exercised whereby the resulting lease term was estimated at 40 months. Using a discount rate of 6.0%, the Company recognized an ROU asset and corresponding operating lease liability of approximately $0.3 million at inception of the lease.

As of September 30, 2020,March 31, 2021, the weighted average remaining lease term under operating leases was 1.42.1 years, and the weighted average discount rate for operating lease liabilities was 10.0%7.6%. For each of the threenine months ended September 30,March 31, 2021 and 2020, and 2019, cash paid for amounts included in the measurement of operating lease liabilities amounted to $69,000 and $68,000, respectively.was $0.2 million. These cash payments were included in the determination of net cash used in operating activities in the condensed consolidated statements of cash flows.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Future payments under all operating lease agreements as of September 30, 2020March 31, 2021 are as follows (in thousands):

Note 4 — License Agreements

Xoma License Agreement

In December 2017, the Company entered into a license agreement (“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 License Agreement was amended. with an updated payment schedule, as well as revising the amount the Company was required to expend on development of RZ358 and related licensed products, and revised provisions with respect to the Company’s diligence efforts in conducting clinical studies.

On March 31, 2020, the parties entered into Amendment No. 3 to the License Agreement to extend the payment schedule for the remaining balance of approximately $2.6 million. The revised payment schedule provided for seven quarterly payments to be paid from March 31, 2020 through September 30, 2021. For the three months ended September 30, 2020, presented below is a summary of activity related to the remaining payment obligations under the amended License Agreement (in thousands):

As discussed in Note 12,6, the Company completed a private placement of equity securities for gross proceeds of $41.0 million in October 2020, which resulted in acceleration of the entire obligation. On October 23, 2020, the Company paid the outstanding balance of $1.4 million. As of March 31, 2021, the Company does not have any remaining balance payable under Amendment No. 3 to the License Agreement. Upon the achievement of certain clinical and regulatory events, the Company will be required to make up to $37.0 million in aggregate milestone payments to Xoma.

In addition to the License Agreement entered between the Company and Xoma in December 2017, both parties also entered into a stock purchase agreement (“Stock Purchase Agreement”). As of September 30, 2020,March 31, 2021, Xoma owns approximately 162,000 shares of the Company’s Common Stock. The Stock Purchase Agreement providesprovided Xoma with the right and option to require the Company to use its best efforts to facilitate orderly sales of the shares to a third party or purchase the shares (the “Put Option”). Xoma was permitted to exercise the Put Option for up to a total of 50,000 shares of Common Stock for the calendar year ending December 31, 2020, and up to an additional 50,000 shares thereafter. On November 3, 2020, the Company’s shares of Common Stock were approved for listing on the Nasdaq Capital Market. Accordingly,Market and the Put Option terminated pursuant to the terms of the Stock Purchase Agreement.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

ActiveSite License Agreement

On August 4, 2017, the Company entered into a Development and 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 Development and License Agreement requires various milestone payments up to $46.5 million. The first milestone payment for $1.0 million iswas due after acceptance of an Initial Drug Application, or IND, filed with the U.S. Food and Drug Administration (“FDA”). The Company is also required to pay royalties equal to 2.0% of any sales of products that use the PKI Portfolio. Through September 30,

On October 28, 2020, the Company submitted an IND to the FDA. On December 3, 2020, the Company received FDA clearance for the IND application filed by the Company. This clearance resulted in the Company owing the first milestone payment of $1.0 million, which was paid in December 2020. There have been no events occurred that would result in any royalty payments owed under the requirementActiveSite Development and License Agreement to make milestone payments and no royalties have been incurred.date.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 5 — Employee termination benefits

In March 2021, the Company entered into a severance agreement with an officer of the Company that provides for an aggregate of $0.2 million paid in monthly installments from March 2021 through September 2021. The severance agreement also resulted in the modification of certain stock options that were permitted to continue vesting through September 2021, whereby an aggregate of 46,250 stock options exercisable at a weighted average price of $18.17 will now expire in December 2021. Absent the modification, stock options for an aggregate of 38,750 vested shares would have expired in June 2021 and stock options for 7,500 never would have vested. The Company accounted for the modification of the original awards, whereby compensation cost was remeasured on the date of the modification that resulted in an increase in fair value of the modified awards for $0.1 million. Accordingly, an aggregate charge of $0.3 million related to severance costs and the modification of stock options is included in compensation expense under general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2021.

For the three and nine months ended March 31, 2021, activity affecting the accrued liability for severance benefits is summarized as follows (in thousands):

The liability for accrued severance costs is included in accrued compensation and benefits in the accompanying unaudited condensed consolidated balance sheet as of March 31, 2021.

Note 6 — STOCKHOLDERS’ EQUITY

For changes in stockholders’ equity for the nine months ended March 31, 2021 and 2020, please refer to the unaudited condensed consolidated statements of stockholders’ equity on page 3. The following table presents changes in stockholders’ equity for the three months ended March 31, 2021 and 2020:

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Derivative Liability for Authorized Share Deficiency

As discussed in Note 1, the Company filed the Charter Revision on February 17, 2021 to change the number of authorized shares of Common Stock from 500,000,000 shares to 10,000,000 shares. Upon filing the Charter Revision, the Company had approximately 8,352,000 shares of Common Stock issued and outstanding, plus approximately 2,428,000 shares were required to be reserved for issuance pursuant to the Company’s stock option plans and outstanding warrant agreements. Since the Charter Revision reduced authorized shares to 10,000,000 shares, a deficiency of approximately 780,000 shares existed as of February 17, 2021. As a result of this deficiency, it was not possible to issue up to an aggregate of 780,000 shares of Common Stock under outstanding stock options and warrants as of February 17, 2021. Accordingly, the Company could be required to settle in cash for the fair value of the 780,000 shares subject to this deficiency, which requires liability classification for these instruments beginning on February 17, 2021.

As discussed in Note 1, the Company made an accounting policy election to select the stock options and warrant agreements with the earliest issuance dates to compute the estimated fair value of the financial instruments associated with the authorized share deficiency. These stock options and warrants were generally those with the highest exercise prices that were least likely to be exercised. The fair value of such stock options and warrants is accounted for as a derivative liability that amounted to $3.6 million as of February 17, 2021. As a result of the expiration of stock options for approximately 40,000 shares in March 2021, the authorized share deficiency was reduced to approximately 740,000 as of March 31, 2021. Primarily due to the reduction in the market price of the Company’s Common Stock, the fair value of stock options and warrants for an aggregate of 740,000 shares amounted to $1.8 million as of March 31, 2021. Presented below is a summary of the derivative liability associated with stock options and warrants as of February 17, 2021 and March 31, 2021 (in thousands, expect per share amounts):

Due to the reduction in fair value of the derivative liability from February 17, 2021 to March 31, 2021, the Company recognized a non-cash gain of approximately $1.8 million in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2021. In order to determine the fair value of the stock options and warrants set forth above, the Company used the BSM option-pricing model with the following weighted-average assumptions for the valuations performed as of February 17, 2021 and March 31, 2021:

Equity Distribution Agreement

On December 18, 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 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, on mutually agreed terms between the Agent and the Company. The EDA will terminate when all of the Placement Shares have been sold, or earlier upon the election of either the Company or the Agent.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company has no obligation to sell any of the Placement Shares under the EDA. The Company intends to use the net proceeds, if any, from amounts sold under the EDA for general corporate purposes, including working capital. 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. Through March 31, 2021, no shares were sold pursuant to the EDA and no commissions were incurred. As of March 31, 2021, total expenses incurred by the Agent and the Company amounted to an aggregate of $0.1 million and are included in deferred offering costs in the Company’s unaudited condensed consolidated balance sheet.

Reverse Stock Split

As discussed in Note 1, the Company effected Reverse Stock Split on October 9, 2020. All references in the accompanying consolidated financial statements to the number of shares of Common Stock and per share amounts have been retroactively adjusted to give effect to the Reverse Stock Split.

Fiscal 2021 Equity Financing

On September 15, 2020, the Company entered into financial advisory agreements to undertake a private placement of equity or equity equivalent securities (the “Fiscal 2021 Equity Financing”). Pursuant to the financial advisory agreements, the Company agreed to pay transaction fees to the financial advisors for an aggregate of 6.0% of the gross proceeds plus out-of-pocket expenses. In addition, for any financing completed within 60 days of the closing of the Fiscal 2021 Equity Financing, the financial advisors were entitled to additional transaction fees equal to 6.0% of the gross proceeds. As of March 31, 2021, the advisory agreements were no longer active.

On October 9, 2020, the Company completed the Fiscal 2021 Equity Financing through the sale of units (the “Units”) consisting of (i) approximately 2.5 million shares of Common stock, and (ii) warrants entitling the holders to purchase approximately 0.8 million shares of Common Stock (the “Warrants”). The Warrants are exercisable at $19.50 per share for a period of seven years and may be exercised on a cash or cashless basis at the election of the holders.

The Units were issued for a purchase price of $16.50 per Unit, resulting in gross proceeds of $41.0 million. Pursuant to the financial advisory agreements, the Company paid transaction fees of $2.5 million, and costs for professional fees and other offering costs amounted to approximately $1.1 million. After deducting the financial advisory fees and other offering costs, the estimated net proceeds amounted to approximately $37.5 million. Pursuant to the terms of the Fiscal 2021 Equity Financing, the Company executed the Reverse Stock Split of fifty shares into one share as discussed in Note 1 and agreed to enable trading of its Common Stock on the Nasdaq Capital Market, whereby the Company’s listing application was approved by Nasdaq on November 3, 2020. The Company also entered into a registration rights agreement (“RRA”), pursuant to which the Company agreed to use commercially reasonable efforts to register (i) the shares of Common Stock included in the Units, and (ii) the shares of Common Stock issuable upon exercise of the warrants. The Company successfully registered the units on November 27, 2020.

Fiscal 2020 Private Placement

In connection with a Series AA Preferred Stock financing in January 2019, the Company granted call options to Handok, Inc. and Genexine, Inc. (collectively, “H&G”) whereby upon the earlier of (i) December 31, 2020 and (ii) such date that the Company requested H&G to provide additional financing, each investor was entitled to purchase up to $10.0 million of Common Stock at a purchase price equal to the greater of (i) $14.50 per share or (ii) 75% of the volume weighted average closing price (“VWAP”) of the Company’s Common Stock during the thirty consecutive trading days prior to the date of the notice.

On June 19, 2019, the Company entered into a financial advisory agreement to undertake a private placement (the “Fiscal 2020 Private Placement”) of (i) the shares of Common Stock issuable under the H&G call options for a total of $20.0 million, plus (ii) up to $10.0 million of equity or equity equivalent securities to be issued to other investors. On July 23, 2019, the Company entered into purchase agreements whereby H&G exercised their call options to purchase an aggregate of approximately 1.4 million shares of Common Stock for gross cash proceeds of $20.0 million at a purchase price of $14.50 per share. In addition, during July and August 2019 other investors purchased an aggregate of approximately 279,000 shares of Common Stock at a purchase price of $14.50 per share for gross cash proceeds of $4.1 million. Pursuant to the financial advisory agreement, the Company paid a fee of 6.0% of the gross proceeds received from the Fiscal 2020 Private Placement. The total advisory fees and other offering costs amounted to approximately $1.5 million, resulting in net proceeds of $22.6 million for the threenine months ended September 30, 2019.March 31, 2020.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Restricted Cash

One of the investors in the Fiscal 2020 Private Placement purchased approximately 262,000 shares of Common Stock for gross proceeds of $3.8 million. The Company agreed to spend the proceeds for certain research and development activities and for a planned uplisting of the Company’s Common Stock to the Nasdaq Capital Market. For the three and nine months ended September 30, 2019,March 31, 2020, the Company made qualified expenditures of $0.7$1.6 million leaving aand $2.3 million, respectively. As of March 31, 2020, the entire $3.8 million had been spent on qualified activities and there was no restricted cash balance of $3.1 million. The Company expended the remainder of the restricted cash proceeds on qualified activities by March 31, 2020,remaining, whereby there were no restrictions on cash balances after that date.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 67 — STOCK-BASED COMPENSATION AND WARRANTS

Stock Option Plans

The Company currently has two active stock option plans consisting of the 2016 Non-Qualified Stock Option Plan, as amended (the “2016 Plan”), and the 2019 Non Qualified Stock Option Plan (the “2019 Plan”). On July 31, 2019, the 2019 Plan was adopted by the Board of Directors and provides authority to grant non-qualified stock options for up to 300,000 shares of the Company’s Common Stock. The Company also has stock options outstanding to purchase up to approximately 44,000 shares of Common Stock under the 2014 Stock and Incentive Plan (the “2014 Plan”) that terminated on March 21, 2019 and approximately 88,000 shares of Common Stock under the 2015 Stock and Incentive Plan (the “2015 Plan”) that terminated on February 23, 2020. Stock options outstanding under the 2014 Plan and the 2015 Plan expire pursuant to their contractual provisions on various dates through 2029. Presented below is a summary as of September 30, 2020 of the number of shares authorized, outstanding, and available for future grants under each of the Company’s stock option plans as of March 31, 2021 (in thousands):

On March 31, 2021, the Company’s Board of Directors adopted, subject to stockholder approval, the Rezolute, Inc. 2021 Stock Incentive Plan (the “2021 Equity Plan”). The 2021 Equity Plan, if approved by stockholders, would provide authority to issue up to 1,200,000 shares of Common Stock with a plan termination date in ten years. Currently outstanding stock options under each of the stock option plans shown in the table above for an aggregated of approximately 874,000 shares will be governed by their own respective equity plans. The currently authorized shares available for grants under the 2016 Plan will no longer be available for future grants if stockholders approve the 2021 Equity Plan.

Stock Options Outstanding

The following table sets forth a summary of the stock option activity for options with time-based vesting and hybrid vesting granted under all of the Company’s stock option plans for the threenine months ended September 30, 2020March 31, 2021 (shares in thousands):

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-based compensation expense for the three and nine months ended September 30,March 31, 2021 and 2020 and 2019 is included in compensation and benefits under the following captions in the unaudited condensed consolidated statements of operations (in thousands):

Unrecognized stock-based compensation expense related to stock options that provide solely for time-based vesting is approximately $2.6$1.5 million as of September 30, 2020.March 31, 2021. This amount is expected to be recognized over a remaining weighted average period of 1.71.6 years.

In July 2019, the Company granted employee stock options for approximately 0.2 million shares that commence vesting upon the achievement of market, performance and service conditions (‘(“Hybrid Options”). Total unrecognized compensation cost, net of forfeitures, for the Hybrid Options amounted to approximately $1.9 million as of November 2, 2020. The Hybrid Options will vest ratably over a period of 36 months beginning on the date thatbecome exercisable when all of the following have occurred: (i) the option recipient has been employed by the Company for at least one year, (ii) the Company’s shares of Common Stock have been listed for trading on a national stock exchange, and (iii) such date no later than July 31, 2023, when the Company’s closing stock price exceeds $29.00 per share for 20 trading days in any consecutive 30 day30-day period. The Company has not recognized any expense related to these stock options through September 30, On November 3, 2020, since it was not probable that the performance condition to obtain a listing on a national stock exchange would be achieved. On November 3, 2020,was achieved, when the Company achieved this performance condition whereby itsCompany’s shares of Common Stock were approved for listingbegan trading on the Nasdaq Capital Market. Accordingly, unrecognizedPrior to this date, no compensation cost net of estimated forfeitures,had been recognized for the Hybrid Options as it was not considered probable that the performance condition would be achieved. Upon achievement of approximately $1.9 million will bethe performance condition, the Company recognized beginning in November 2020 whenthe cumulative effect of compensation cost of approximately $0.5 million will be recorded for the three months ending December 31, 2020, andperiod from the grant date through November 3, 2020. The remainder of the unrecognized compensation related to the Hybrid Options of approximately $1.4 million, will beis being recognized on a straight-line basisratably through July 2024 when the Hybrid optionsOptions are expected to be fully vested.

Rezolute, Inc.

Notes As of March 31, 2021, total unrecognized compensation cost, net of forfeitures, for the Hybrid Options amounted to Unaudited Condensed Consolidated Financial Statementsapproximately $1.2 million which is expected to be recognized over a weighted average term of 3.3 years.

Warrants

The Company has issued warrants in conjunction with various debt and equity financings and for services. AsThe following table sets forth a summary of September 30, 2020, the Company had warrants outstandingwarrant activity for approximately 0.6 million shares with a weighted average exercise price of $57.46. The weighted average remaining contractual term until the warrants expire is approximately 2.0 years. For the threenine months ended September 30, 2020, no warrants were granted, expired or exercised.March 31, 2021 (shares in thousands):

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 78 — COMMITMENTS AND CONTINGENCIES

Commitments

Please refer to Note 4 for further discussion of commitments to make milestone payments and to pay royalties under license agreements with Xoma and ActiveSite.

COVID-19

In December 2019, COVID-19 was reported to have surfaced in Wuhan, China, and by March 2020 the spread of the virus had resulted in a world-wide pandemic. The U.S. economy has been largely shut downadversely affected by mass quarantines and government mandated stay-in-place orders to halt the spread of the virus. While these orders are being lifted gradually, a full recovery of the U.S. economy may not occur until 2021 or later. Federal and state governments in the U.S. have approved funding for many programs that may provide financial assistance to individuals and businesses. The Company intends to pursue all material types of government assistance that it may be entitled to. However, no assurance can be provided that the Company will qualify and realize any material benefits from such assistance.

COVID-19 has resulted in an economic environment that is unfavorable for many businesses to pursue new equity financings. Accordingly, the current economic environment is expected to present greater challenges for the Company to obtain additional funding for its clinical programs on terms that are acceptable to the Company’s Board of Directors.

In February 2020, Rezolute announced the initiation of its Phase 2b trial in Congenital Hyperinsulinism (“CHI”).congenital hyperinsulinism. New site initiation and enrollment is on hold,resumed during the fiscal quarter ended December 31, 2020. However, similar to many other clinical studies conducted by other companies throughout the world.world, effects of the pandemic remain uncertain, and no guarantees can be made that hold in future site initiation or enrollment will not be encountered again. There are no mitigation strategies we can employ to help avoid potential timeline delays should there be an extended enrollment pause due to COVID-19. The long-term effects of COVID-19 are expected to require additional safeguards to protect patients and staff engaged in clinical activities, and extended periods of time required to complete clinical trials, both of which are expected to result in higher overall costs. While the current business disruption is expected to be temporary, the long-term financial impact and the duration cannot be reasonably estimated at this time.

Legal Matters

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of September 30, 2020,March 31, 2021, 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 or not 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 89 — RELATED PARTY TRANSACTIONS

Related Party Licensing Agreement

On September 15, 2020, the Company entered into an exclusive license agreement with Handok, Inc. (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 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.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Equity Issuances

As discussed in Note 5, onOn July 23, 2019, H&G agreed to purchase an aggregate of approximately 1.4 million shares of Common Stock at an issuance price of $14.50 per share for gross proceeds of $20.0 million. This purchase was made pursuant to the terms of call options that waswere issued in connection with an equity offeringthe Fiscal 2020 Private Placement discussed in January 2019 that resulted in gross proceedsNote 6.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

On June 26, 2020, Handok entered into a 10b5-1 purchasing plan (the “10b5-1 Plan”) with JMP Securities. Subject to the terms of $25.0 million. As of September 30, 2020, H&G ownthe 10b5-1 Plan, Handok purchased on the open market an aggregate of approximately 65%189,000 shares of Common Stock through October 2020. As of March 31, 2021, Handok, Inc. owns approximately 24% and Genexine, Inc. owns approximately 22% of the Company’s outstanding shares of Common Stock.

Master Services Agreement

Effective July 1, 2019, the Company entered into a Master Services Agreement (“MSA”) with H&G whereby the Company agreed to assist H&G in an evaluation of their long actinglong-acting growth hormone program referred to as GX-H9. For the threenine months ended September 30, 2019,March 31, 2020, the Company chargedbilled H&G for employee services of $103,000approximately $0.1 million and reimbursable expenses incurred with unrelated parties of $144,000, for a total of approximately $247,000.$0.1 million. Amounts chargedbilled under the MSA for employee services are reflected as a reduction of research and development compensation costs in the accompanying unaudited condensed consolidated statement of operations for the nine months ended March 31, 2020. No amounts were billed under the MSA for the three months ended September 30, 2019.March 31, 2020 and for the three and nine months ended March 31, 2021.

Note 910 — INCOME TAXES

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date operating results, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The computation of the annual estimated effective tax rate at 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 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 months ended September 30,March 31, 2021 and 2020, and 2019, the Company did not record any income tax benefit due to a full valuation allowance on its deferred 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 months ended September 30, 2020March 31, 2021 and 2019. 2020.

Note 1011 — EARNINGS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. For the three and nine months ended September 30,March 31, 2021 and 2020, and 2019, basic and diluted net loss per share were the same since all common stock equivalents were anti-dilutive. As of September 30,March 31, 2021 and 2020, and 2019, 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):

Note 1112 — 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:

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

Due to the relatively short maturity of the respective instruments, the fair value of cash and cash equivalents, accounts payable and accrued liabilities approximated their carrying values as of September 30, 2020March 31, 2021 and June 30, 2020. The derivative liability discussed in Note 6 was required to be measured at fair value on a recurring basis beginning on February 17, 2021. Please refer to Note 6 for the key Level 3 inputs used for the valuation of this derivative liability as of February 17, 2021 and March 31, 2021. The Company did not have any assets andor other liabilities measured at fair value on a recurring basis as of September 30, 2020March 31, 2021 and June 30, 2020. 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 three and nine months ended September 30,March 31, 2021 and 2020, and 2019, 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. The Company maintains its cash and cash equivalents at high-quality financial institutions. For the threenine months ended September 30, 2020,March 31, 2021, cash deposits have exceeded the amount of federal insurance provided on such deposits. As of September 30, 2020March 31, 2021 and June 30, 2020, the Company had cash and cash equivalents with a single financial institution with an aggregate balance of $6.4$32.0 million and $10.0 million, respectively. The Company has never experienced any losses related to its investments in cash and cash equivalents.

Note 1213 — Subsequent EventsSUBSEQUENT EVENTS

Fiscal 2021 FinancingLoan Agreement

On September 15, 2020,April 14, 2021, the Company entered into financial advisory agreementsa $30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp. and certain other lenders (the “Lenders”). The Lenders agreed to undertakeloan up to $30.0 million in three tranches consisting of (i) a private placement$15.0 million term A loan that was funded on April 14, 2021, (ii) a $7.5 million term B loan to be funded upon request by the Company no later than January 25, 2022, and (iii) a $7.5 million term C loan to be funded upon request by the Company no later than September 25, 2022. Funding of the term B loan is subject to the Company’s ability to obtain at least $35 million of equity or equity equivalent securities (the “Fiscal 2021 Financing”). Pursuantsubordinated debt financing by January 2022 and the achievement of certain clinical milestones related to RZ358 and RZ402. Funding of the term C loan is subject to the financial advisory agreements,Company’s ability to meet the conditions for funding the term B loan, plus obtaining an additional $35 million of equity or subordinated debt financing by September 2022 and the achievement of certain additional clinical milestones related to RZ358 and RZ402. Each term loan has a maturity date of April 1, 2026 (the “Maturity Date”). In addition, the Company’s cash and cash equivalents became subject to a blocked account control agreement (“BACA”) in favor of the Lenders whereby a cash balance of at least $5.0 million must be maintained beginning on the earlier of (i) December 31, 2021, and (ii) the date the term B loan is funded. In the event of a default under the Loan Agreement, the BACA would enable the Lenders to prevent the release of funds from the Company’s cash accounts.

Outstanding borrowings bear 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. (“IEBA”) for a term of one month and (ii) 0.12% per annum. As of April 14, 2021, the IEBA rate for a term of one month was approximately 0.12% per annum. Therefore, the contractual rate at inception was 8.87%. The Company is permitted to make interest-only payments on each term loan through May 1, 2023. At the Company’s request, the interest-only period can be extended until May 1, 2024, if the Company agreedobtains at least $70.0 million of equity or subordinated debt financing by September 2022 and no event of default shall have occurred. The Company will be required to make monthly payments of principal and interest commencing at the end of the interest-only period of the term loans.

The Company is obligated to pay transaction feesthe Lenders (i) a non-refundable facility fee in the amount of 1.00% of each term loan that is funded (the “Facility Fee”), and (ii) a final fee equal to 4.75% of the financial advisorsaggregate amount of the term loans funded (the “Final Fee”). At the closing on April 14, 2021, the Company incurred debt discounts for an aggregate of 6.0%$1.4 million that consisted of $0.5 million for financial advisory and legal fees, and $0.9 million for the Facility Fee and Final Fee related to the term A loan. Final Fees are payable upon the earliest to occur of (i) the maturity date, (ii) the acceleration of the gross proceeds plus out-of-pocket expenses. In addition, for any financing completed within 60 daysterm loans, and (iii) the prepayment of the closingterm loans. The total debt discount of $1.4 million related to the Fiscal 2021 Financing,term A loan will be accreted to interest expense using the financial advisors are entitled to additional transaction fees equal to 6.0% of the gross proceeds.effective interest method.

On October 9, 2020, the Company completed the Fiscal 2021 Financing through the sale of units (the “Units”) consisting of (i) approximately 2.5 million shares of Common stock, and (ii) warrants entitling the holders to purchase approximately 0.8 million shares of Common Stock (the “Warrants”). The Warrants are exercisable at $19.50 per share for a period of seven years and may be exercised on a cash or cashless basis at the election of the holders.

The Units were issued for a purchase price of $16.50 per Unit, resulting in gross proceeds of $41.0 million. Pursuant to the financial advisory agreements, the Company paid transaction fees of $2.5 million, and costs for professional fees and other offering costs are estimated at approximately $1.0 million. After deducting the financial advisory fees and other offering costs, the estimated net proceeds amounted to approximately $37.5 million. Pursuant to the terms of the Fiscal 2021 Financing, the Company executed the Reverse Stock Split of one share for 50 shares as discussed in Note 1, and agreed to enable trading of its Common Stock on the Nasdaq Capital Market, whereby the Company’s listing application was approved by Nasdaq on November 3, 2020. The Company also entered into a registration rights agreement (“RRA”), pursuant to which the Company agreed to use commercially reasonable efforts to register (i) the shares of Common Stock included in the Units, and (ii) the shares of Common Stock issuable upon exercise of the warrants. If the Company fails to register the shares pursuant to the terms of the RRA, liquidated damages up to a maximum of 6.0% of the gross proceeds of the Fiscal 2021 Financing may be assessed.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Early Payments to Xoma

Upon completion of a qualified financing of $20.0 million or more,Concurrently with the Company was obligated to repay the remaining outstanding balance due to Xoma within 15 days as discussed in Note 4. The completionexecution of the Fiscal 2021 Financing resulted in acceleration of the remaining balance due to Xoma and the Company paid the outstanding balance of $1.4 million on October 23, 2020.

Reverse Stock Split

As discussed in Note 1, the Company effected a one share for 50 shares Reverse Stock Split on October 9, 2020. All references in the accompanying consolidated financial statements to the number of shares of Common Stock and per share amounts have been retroactively adjusted to give effect to the Reverse Stock Split.

Bonuses for Certain Officers and Employees

In October 2020, the Company’s Board of Directors approved bonus payments for an aggregate of approximately $0.4 million to certain officers and employees upon completion of the Fiscal 2021 Financing discussed above. Accordingly, the Company paid these bonuses in October 2020 and will recognize the related bonus expense for the fiscal quarter ending December 31, 2020.

ActiveSite Milestone Payment

Pursuant to the license agreement with ActiveSite discussed in Note 4, the first milestone payment for $1.0 million is due upon effectiveness of an IND. On October 28, 2020, the Company submitted an IND to the FDA that is expected to trigger the first milestone payment upon completion of review and acceptance by the FDA.

Operating Lease

On October 28, 2020,Loan Agreement, the Company entered into an assignment, assumption and amendment of leaseexit fee agreement for ancillary office space in Bend, Oregon. The lease space consists of approximately 5,000 square feet and(the “Exit Fee Agreement”) that provides for average monthly renta fee of approximately $8,700 through4.00% of the expiration datefunded principal balance of each term loan in February 2024. The lease provides one optionthe event certain transactions (defined as “Exit Events”) occur prior to renewApril 13, 2031. Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of control transactions, and issuances of Common Stock that result in new investors owning more than 35% of the leaseCompany’s shares. If the Company determines that it is probable that an Exit Event will occur over the ten-year term of the Exit Fee Agreement, a liability will be recognized, and the corresponding fee will be accounted for as an additional three years at market rates. debt discount.

The Company has the option to prepay all, but not yet determined the amountless than all, of the ROU assetoutstanding principal balance of the term loans. In the event of a voluntary or mandatory prepayment prior to the Maturity Date, the Company will incur a prepayment fee ranging from 1.00% to 3.00% of the outstanding principal balance.

The Company’s obligations under the Loan Agreement are secured by a first-priority security interest in substantially all the Company’s assets, including its intellectual property. The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, and a default upon the occurrence of a material adverse change affecting the Company. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% per annum may be applied to the outstanding loan balance, and the related operating lease liabilities that will be recognized at inception of this lease.

Lenders may declare all outstanding obligations immediately due and payable and exercise all their rights and remedies as set forth in the Loan Agreement.

Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Unaudited Pro Forma Disclosure

Presented below is an unaudited pro forma balance sheet that gives effect to the Fiscal 2021 Financing and the Early Payments to Xoma, as if these events had occurred on September 30, 2020 (in thousands, except per share amount):