UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM 10-Q~~

☒

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

For the quarterly period ended September 30, ~~2020~~2021
OR
¨☐		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: ~~000-54495~~001-39683

REZOLUTE, INC.

(Exact Name of Registrant as Specified in its Charter)

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

201 Redwood Shores Parkway, Suite 315, Redwood City, California		94065
(Address of Principal Executive Offices)		(Zip Code)

~~(650)~~ (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~~	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. x☒ 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.). x☒ 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 x☒	Smaller reporting company x☒

	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 x☒ No

The registrant had ~~8,351,911~~15,440,250 shares of its $0.001 par value common stock outstanding as of November ~~9, 2020.~~10, 2021.

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	Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

U~~naudited~~Unaudited Condensed Consolidated Balance Sheets – September 30, ~~2020~~2021 and June 30, ~~2020~~2021	1 5

Unaudited Condensed Consolidated Statements of Operations – Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020	2 6

Unaudited Condensed Consolidated Statements of ~~Stockholders’~~Shareholders’ Equity – Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020	3 7

Unaudited Condensed Consolidated Statements of Cash Flows – Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020	4 8

Notes to Unaudited Condensed Consolidated Financial Statements	5 9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	24 28
Item 4. Controls and Procedures	24 28

PART II – OTHER INFORMATION	29

Item 1. Legal Proceedings	25 29
Item 1A. Risk Factors	25 29
Item 2. Unregistered Sales of Equity Securities and Use Ofof Proceeds	26 29
Item 3. Defaults Upon Senior Securities	26 29
Item 4. Mine Safety ~~Disclosure~~sDisclosures	26 29
Item 5. Other Information	26 29
Item 6. Exhibits	29

26Signatures	30

~~Signatures~~

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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:

●

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

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

	·
	●	our expectation that the disruptive impact of the COVID-19 pandemic ~~(“COVID-19”~~(“COVID-19”) on our ~~business and ability to obtain additional financing will be temporary;~~business;

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

	·
	●	our ability to obtain regulatory 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 or unknown risks, uncertainties and other factors including, but not limited to, the risks described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on ~~October 13, 2020.~~

September 15, 2021 and as amended on September 27, 2021.

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.

Special Note About COVID-19

We have been actively monitoring the COVID-19 situation and its impact. Our primary objectives have remained the same throughout the pandemic: to support the safety of our team members and their families and continue to support our preclinical studies and clinical ~~trials~~. trials. Currently, with respect to the operation of our facilities, we are closely adhering to applicable guidelines and orders. Essential operations in research and maintenance that occur within our facilities are continuing in accordance with the permissions granted under government ordinances. Across all our locations, we have instituted a temporary work from home policy for all office personnel who do not need to work on site to maintain productivity. We have recently allowed these employees to voluntarily return to work on site with appropriate health and safety measures.

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While our financial results for the ~~three months~~fiscal quarter ended September 30, ~~2020~~2021 and the fiscal year ended June 30, ~~2020~~2021 were not significantly impacted by COVID-19, we cannot predict the impact of the progression of the COVID-19 pandemic on future results due to a variety of factors, including the ongoing challenges associated with the pandemic, including the emergence of new variants of the coronavirus, such as the Delta variant, resurgences in number of rates of infections, the continued good health of our employees, the ability of us to maintain operations, access to healthcare facilities and patient willingness to participate in our clinical trials, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic. The ultimate impact of the COVID-19 pandemic on our business operations, our ability to raise capital, as well as our preclinical studies and clinical ~~trials~~trial timeliness remains uncertain and subject to change and will depend on future developments, which cannot be accurately predicted. Any prolonged material disruption of our employees, suppliers, or manufacturing may negatively impact our consolidated financial position, results of operations and cash flows. We will continue to monitor the situation closely.

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PART I - FINANCIAL INFORMATION

~~ITEM~~

ITEM 1. FINANCIAL STATEMENTS.

Rezolute, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

September 30, June 30,
2020 2020
Assets
Current assets:
Cash and cash equivalents $ 6,404 $ 9,955
Prepaid expenses and other 491 563
Total current assets 6,895 10,518
Long-term assets:
Right-of-use assets, net 325 383
Deferred offering costs 129 -
Property and equipment, net 30 33
Lease security deposits 31 31
Total assets $ 7,410 $ 10,965
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 797 $ 893
Accrued liabilities:
Compensation and benefits 79 120
Insurance premiums 94 188
Other 300 180
Current portion of license fees payable to Xoma 1,409 1,600
Current portion of operating lease liabilities 245 245
Total current liabilities 2,924 3,226
Long-term liabilities:
Operating lease liabilities, net of current portion 104 165
License fees payable to Xoma, net of current portion - 209
Total liabilities 3,028 3,600
Commitments and contingencies (Notes 4, 7 and 12)
Stockholders' equity:
Preferred Stock, $0.001 par value, 20,000 shares authorized; no shares issued and outstanding - -
Common Stock, $0.001 par value, 500,000 shares authorized; 5,867 shares issued and outstanding 6 6
Additional paid-in capital 155,232 154,595
Accumulated deficit (150,856 ) (147,236 )
Total stockholders' equity 4,382 7,365
Total liabilities and stockholders' equity $ 7,410 $ 10,965


	September 30,		June 30,
	2021		2021
Assets

Current assets:
Cash and cash equivalents	$	37,292	$	41,047
Prepaid expenses and other		1,053		946
Total current assets		38,345		41,993

Long-term assets:
Right-of-use assets, net		317		396
Deferred offering costs and other		72		191
Property and equipment, net		26		29
Total assets	$	38,760	$	42,609

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	1,592	$	1,035
Accrued liabilities:
Compensation and benefits		—		77
Insurance premiums		121		242
Other		679		349
Current portion of operating lease liabilities		206		265
Total current liabilities		2,598		1,968

Long-term liabilities:
Long term debt, net of discount		14,071		13,968
Embedded derivative liabilities		371		387
Operating lease liabilities, net of current portion		161		187
Total liabilities		17,201		16,510

Commitments and contingencies (Notes 4 and 8)

Shareholders' equity:
Preferred Stock, $0.001 par value; 400 shares shares authorized as of September 30, 2021 and June 30, 2021; 0 shares issued and outstanding		—		—
Common Stock, $0.001 par value, 40,000 shares authorized as of September 30, 2021 and June 30, 2021; 8,640 and 8,352 shares issued and outstanding as of September 30, 2021 and June 30, 2021, respectively		9		8
Additional paid-in capital		197,524		194,229
Accumulated deficit		(175,974)		(168,138)
Total shareholders' equity		21,559		26,099
Total liabilities and shareholders' equity	$	38,760	$	42,609

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

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Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended
September 30,
2020 2019
Operating expenses:
Research and development:
Compensation and benefits, net of related party reimbursements $ 1,212 $ 1,418
Clinical trial costs 758 991
Consultants and outside services 142 486
Material manufacturing costs 174 187
Facilities and other 58 152
Total research and development 2,344 3,234
General and administrative:
Compensation and benefits 705 1,336
Professional fees 370 360
Facilities and other 204 249
Total general and administrative 1,279 1,945
Total operating expenses 3,623 5,179
Operating loss (3,623 ) (5,179 )
Non-operating income - interest and other 3 99
Net loss $ (3,620 ) $ (5,080 )
Net loss per common share - basic and diluted $ (0.62 ) $ (0.94 )
Weighted average number of common shares outstanding - basic and diluted 5,867 5,409


	Three Months Ended
	September 30,
	2021		2020
Operating expenses:
Research and development	$	5,774	$	2,344
General and administrative		1,866		1,279
Total operating expenses		7,640		3,623
Operating loss		(7,640)		(3,623)
Non-operating income (expense):
Employee retention credit		231		—
Gain on change in fair value of embedded derivative liability		16		—
Interest expense, net		(443)		3
Total non-operating income (expense), net		(196)		3
Net loss	$	(7,836)	$	(3,620)

Net loss per common share - basic and diluted	$	(0.92)	$	(0.62)
Weighted average number of common shares outstanding - basic and diluted		8,513		5,867

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

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Rezolute, Inc.

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

(in thousands, except per share amounts)

Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity

Three Months Ended September 30, 2020:
Balances as of June 30, 2020 5,867 $ 6 $ 154,595 $ (147,236 ) $ 7,365
Stock-based compensation - - 634 - 634
Fair value of warrants issued to consultants for services - - 3 - 3
Net loss - - - (3,620 ) (3,620 )
Balances as of September 30, 2020 5,867 $ 6 $ 155,232 $ (150,856 ) $ 4,382

Three Months Ended September 30, 2019:
Balances as of June 30, 2019 4,208 4 $ 128,651 $ (126,903 ) $ 1,752
Stock-based compensation - - 1,394 - 1,394
Fair value of warrants issued to consultants for services - - 2 - 2
Issuance of common stock for cash:
Related parties at $14.50 per share 1,380 2 19,998 - 20,000
Other investors at $14.50 per share 279 - 4,050 - 4,050
Advisory fees and other offering costs - - (1,500 ) - (1,500 )
Net loss - - - (5,080 ) (5,080 )
Balances as of September 30, 2019 5,867 $ 6 $ 152,595 $ (131,983 ) $ 20,618


				Additional				Total
	Common Stock			Paid-in		Accumulated		Shareholders'
	Shares	Amount		Capital		Deficit		Equity
Three Months Ended September 30, 2021:
Balances as of June 30, 2021	8,352	$	8	$	194,229	$	(168,138)	$	26,099
Share-based compensation	—		—		842		—		842
Issuance of common stock for cash	254		1		2,689		—		2,690
Advisory fees and other offering costs	—		—		(686)		—		(686)
Issuance of commitment shares	34		—		450		—		450
Net loss	—		—		—		(7,836)		(7,836)
Balances as of September 30, 2021	8,640	$	9	$	197,524	$	(175,974)	$	21,559

Three Months Ended September 30, 2020:
Balances as of June 30, 2020	5,867	$	6	$	154,595	$	(147,236)	$	7,365
Share-based compensation	—		—		634		—		634
Fair value of warrants issued to consultants for services	—		—		3		—		3
Net loss	—		—		—		(3,620)		(3,620)
Balances as of September 30, 2020	5,867	$	6	$	155,232	$	(150,856)	$	4,382

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

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Rezolute, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended
	September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(7,836)	$	(3,620)
Share-based compensation expense		842		634
Accretion of debt discount and issuance costs		104		0
Non-cash lease expense		78		59
Depreciation and amortization expense		4		3
Fair value of warrants issued for services		—		3
Change in fair value of derivative liability		(16)		0
Changes in operating assets and liabilities:
(Increase) Decrease in prepaid expenses and other assets		(96)		72
Increase (decrease) in accounts payable		555		(107)
Increase (decrease) in other accrued liabilities		24		(195)
Decrease in license fees payable to Xoma		—		(400)
Net Cash Used In Operating Activities		(6,341)		(3,551)

CASH FLOWS FROM INVESTING ACTIVITIES		—		0

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		2,690		0
Cash payments for debt discount and issuance costs		(104)		0
Net Cash Provided by Financing Activities		2,586		0
Net decrease in cash, cash equivalents and restricted cash		(3,755)		(3,551)
Cash, cash equivalents and restricted cash at beginning of period		41,047		9,955
Cash, cash equivalents and restricted cash at end of period	$	37,292	$	6,404

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest	$	340	$	0
Cash paid for income taxes		—		0
Cash paid for amounts included in the measurement of operating lease liabilities		92		70

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of commitment shares for deferred offering costs subsequently charged to equity	$	450	$	0
Increase in payables for deferred offering costs		24		0

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

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Rezolute, Inc.

~~Unaudited Condensed Consolidated Statements of Cash Flows~~

~~(in thousands)~~

Three Months Ended
September 30,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,620 ) $ (5,080 )
Stock-based compensation expense 634 1,394
Depreciation and amortization expense 3 5
Non-cash lease expense 59 53
Fair value of warrants issued for services 3 2
Changes in operating assets and liabilities:
Decrease in prepaid expenses and other assets 72 117
Increase in receivables from related parties - (247 )
Increase (decrease) in accounts payable (107 ) 736
Decrease in other accrued liabilities (195 ) (1,018 )
Decrease in license fees payable to Xoma (400 ) (4,891 )
Net Cash Used In Operating Activities (3,551 ) (8,929 )

CASH FLOWS FROM INVESTING ACTIVITIES - -

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock:
Related parties - 20,000
Others - 4,050
Payment of commissions and other deferred offering costs - (1,479 )
Net Cash Provided by Financing Activities - 22,571

Net increase (decrease) in cash, cash equivalents and restricted cash (3,551 ) 13,642
Cash, cash equivalents and restricted cash at beginning of period 9,955 11,573
Cash, cash equivalents and restricted cash at end of period $ 6,404 $ 25,215

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, end of period $ 6,404 $ 22,104
Restricted cash, end of period - 3,111

Total cash, cash equivalents and restricted cash, end of period $ 6,404 $ 25,215

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid for interest $ - $ -
Cash paid for income taxes - -

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Right-of-use assets acquired in exchange for operating lease liabilities upon adoption of new accounting standard effective July 1, 2019 $ - $ 605
Payables for deferred offering costs 129 21

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

~~Rezolute, Inc.~~

Notes to Unaudited Condensed Consolidated Financial Statements

~~Note~~NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF ~~SIGNFICANT~~SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Rezolute, Inc. (the “Company”) is a clinical stage biopharmaceutical company ~~incorporated~~developing transformative therapies for metabolic diseases related to chronic glucose imbalance.

Change in ~~Delaware in 2010.~~Domicile

~~Reverse Stock Split~~

In ~~August 2019,~~June 2021, the Company merged with and into its wholly owned subsidiary, Rezolute Nevada Merger Corporation, a Nevada corporation (“Merger Sub”), pursuant to an Agreement and Plan of Merger, dated as of June 18, 2021 (the “Reincorporation Merger Agreement”), between the Company and Merger Sub, with Merger Sub as the surviving corporation (the “Reincorporation Merger”). At the effective time of the Reincorporation Merger (the “Effective Time”), the Merger Sub was renamed “Rezolute, Inc.” and succeeded to the assets, continued its business and assumed its rights and obligations by operation of law. The Reincorporation Merger Agreement was approved by the Company’s ~~Board~~shareholders at the 2021 annual meeting of ~~Directors approved a reverse stock split that was subject to stockholder approval at a special meeting that was concluded~~its shareholders held on October 28, 2019. Stockholders approved the proposal whereby the Board of Directors had the ability at any time on or before October 23, 2020 to execute a reverse stock split and set an exchange ratio between 20 and 100 shares of the Company’s outstanding Common Stock, $0.001 par value per share, into one issued and outstanding share of Common Stock, without any change in the par value per share or the number of shares of Common Stock authorized. On October 7, 2020, the Board of Directors approved a one share for 50 shares reverse stock split of the Company’s $0.001 par value Common Stock (the “Reverse Stock Split”), resulting in the filing with the Delaware Secretary of State of a Certificate of Amendment (the “Amendment”) to the Company’s Articles of Incorporation. The Amendment was effective on October 9, 2020.May 26, 2021.

In connection with the Reverse Stock Split, proportionate adjustments were made to increase the per share exercise prices and decrease the number of shares of Common Stock issuable upon exercise of stock options and warrants whereby approximately the same aggregate price is required to be paid for such securities upon exercise as had been payable immediately preceding the Reverse Stock Split. In addition, any fractional shares that would otherwise be issued as a result of the Reverse Stock Split were rounded up to the nearest whole share. All references in the accompanying unaudited condensed 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.

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

The condensed consolidated balance sheet as of June 30, ~~2020,~~2021, 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 ~~2020~~2021 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, ~~2020.~~

2021.

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 the 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) ~~have been made which~~that are necessary for a fair financial statement ~~presentation.~~presentation have been made. The interim results for the three months ended September 30, ~~2020~~2021 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, ~~2021.~~2022.

~~Reclassifications~~

Certain amounts in the previously issued comparative interim financial statements for the three months ended September 30, 2019 have been reclassified to conform to the current interim financial statement presentation. These reclassifications had no effect on the previously reported net loss, working capital, cash flows and stockholders’ equity.

Consolidation

The Company has ~~three~~2 wholly owned subsidiaries consisting of ~~AntriaBio Delaware, Inc.,~~ Rezolute (Bio) Ireland Limited, and Rezolute Bio UK, Ltd. The accompanying ~~unaudited condensed~~ consolidated financial statements include the accounts of the Company and its ~~three~~ wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 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, fair value of the embedded derivatives, fair value of share-based payments, ~~and warrants,~~ management’s assessment of going concern, and clinical trial accrued ~~liabilities, estimates of the probability and potential magnitude of contingent liabilities, and the valuation allowance for deferred tax assets due to continuing and expected future operating losses.~~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 and other risks associated with a clinical stage company, including the potential risk of business failure as discussed further in Note 2, and the future impact of COVID-19 as discussed in Note 7.8.

Significant Accounting Policies

~~During~~The Company’s significant accounting policies are described in Item 8 of the 2021 Form 10-K. For the three months ended September 30, ~~2020~~2021,~~there have been no changes in our significant~~ the Company did not adopt any new accounting ~~policies as described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.~~policies.

Recent Accounting Pronouncements

Standards Required to be Adopted in Future Years. The following accounting standards are 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.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2019, 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. The Company does not expect ~~the adoption of this accounting guidance~~ASU 2016-13 will have a material impact on its consolidated financial ~~statements.~~

statements as credit losses are not expected to be significant.

In August 2020, the FASB issued 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 and is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. ~~Management has not completed its evaluation to determine the impact that adoption of this standard will have on the Company’s consolidated financial statements.~~

~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

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.

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~~Note 2~~ — ~~Liquidity~~Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 2 — LIQUIDITY

The Company is in the clinical stage and has not yet generated any revenues. For the ~~fiscal year~~three months ended ~~June~~September 30, ~~2020,~~2021, the Company incurred a net loss of ~~$20.3~~$7.8 million and net cash used in operating activities amounted to ~~$24.2~~$6.3 million. For the ~~three months~~fiscal year ended ~~September~~June 30, ~~2020,~~2021, the Company incurred a net loss of ~~$3.6~~$20.9 million and net cash used in operating activities amounted to ~~$3.6~~$20.4 million. As of September 30, ~~2020,~~2021, the Company had an accumulated deficit of ~~$150.9~~$176.0 million, cash and cash equivalents of ~~$6.4~~$37.3 million and total current liabilities of ~~$3.0~~$2.6 million.

As discussed in Note ~~12, on~~13, in October ~~9, 2020~~2021 the Company ~~received aggregate gross~~completed an underwritten public offering for net proceeds ~~from investors~~of $46.7 million and a registered direct offering for net proceeds of $5.0 million, resulting in ~~a private placement of $41.0 million from the issuance of units that consisted~~total net proceeds of approximately ~~2.5~~$51.7 million. If additional capital resources are required in the future, the Company has the ability to raise (i) additional debt financing proceeds up to $15.0 million ~~shares of Common Stock~~if certain conditions are satisfied as discussed in Note 5, and ~~warrants for~~additional equity financing proceeds as discussed in Note 6 under the ~~purchase of approximately 0.8 million shares of Common Stock.~~ captions Equity Distribution Agreement and LPC Purchase Agreement.

Management believes the Company’s existing cash and cash equivalents balance ~~plus~~of $37.3 million, combined with the net offering proceeds ~~from the private placement~~ of ~~approximately $37.5~~$51.7 million received in October 2021 will be adequate to carry out currently planned activities ~~until the second half of the fiscal year ending June 30,~~into November 2022.

As discussed in Note 7, COVID-19 has resulted in an economic environment that is unfavorable for many businesses to conduct operations and pursue new debt and equity financings. The U.S. economy has been largely shut down by mass quarantines and government mandated stay-in-place orders to halt the spread of the virus. While these orders are being lifted gradually, there is considerable uncertainty surrounding the recovery period for the U.S. economy. The long-term effects on the Company are expected to result in higher costs in order to comply with safeguards to protect patients and staff engaged in clinical activities, and extended periods of time may be required to complete clinical trials. The current economic environment and financial market volatility is expected to make it more challenging for the Company to obtain funding for its clinical programs in the future. Even if an economic recovery occurs faster and more robustly than currently expected, there are no assurances that the Company will be able to obtain equity and debt financings that will be necessary to fund ongoing operations after the fiscal year ending June 30, 2022. In addition, even if these financing sources are available, they may be on terms that are not acceptable to the Company’s Board of Directors and stockholders.

~~Note~~NOTE 3 — OPERATING LEASES

The carrying value of ~~ROU~~right-of-use (“ROU”) assets and operating lease liabilities are as follows (in thousands):

	September 30,		June 30,
	2020		2020

					September 30,		June 30,
					2021		2021
Right-of-Use Assets, net	$	325	$	383	$	317	$	396


Operating Lease Liabilities:
Current	$	245	$	245	$	206	$	265
Long-term		104		165		161		187
Total	$	349	$	410	$	367	$	452

For the three months ended September 30, 2021 and 2020, operating lease expense was as follows (in thousands):


	Three Months Ended
	September 30,
	2021		2020
Research and development	$	79	$	49
General and administrative		23		24

Total	$	102	$	73

As of September 30, ~~2020,~~2021, the weighted average remaining lease term under operating leases was ~~1.4~~1.8 years, and the weighted average discount rate for operating lease liabilities was ~~10.0%~~7.1%. For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, cash paid for amounts included in the measurement of operating lease liabilities ~~amounted to $69,000 and $68,000, respectively.~~was $0.1 million. These cash payments were included in the determination of net cash used in operating activities in the condensed consolidated statements of cash flows.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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


Fiscal year ending June 30,
Remainder of fiscal year 2021	$	202
2022		170
Remainder of fiscal year 2022				$	192
2023					117
2024					79
Total lease payments		372			388
Less imputed interest		(23	)		(21)

Present value of operating lease liabilities	$	349		$	367

~~Note~~

NOTE 4 — ~~License Agreements~~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,~~Upon the ~~parties entered into Amendment No. 3~~achievement of certain clinical and regulatory events, the Company will be required to ~~the License Agreement~~make up to ~~extend the payment schedule for the remaining balance of approximately $2.6 million. The revised payment schedule provided for seven quarterly~~$37.0 million in aggregate milestone 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):Xoma.

Balance Payments Balance
June 30, During September 30,
Scheduled Payment Date 2020 Period 2020
September 30, 2020 $ 400 $ (400 ) $ -
December 31, 2020 400 - 400
March 31, 2021 400 - 400
June 30, 2021 400 - 400
September 30, 2021 209 - 209
Total 1,809 $ (400 ) 1,409
Less long-term portion of payable (209 ) -
Current portion of payable $ 1,600 $ 1,409

As discussed in Note 12, 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.

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, Xoma owns approximately 162,000 shares of the Company’s Common Stock. The Stock Purchase Agreement provides 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, 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 ~~is due~~was paid in December 2020 after ~~acceptance of~~clearance was received for 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, 2020,~~There have been no events ~~occurred~~ that would result in any royalty payments owed under the ~~requirement~~ActiveSite Development and License Agreement to ~~make milestone payments and no royalties have been incurred.~~date.

NOTE 5 — LOAN AND SECRUITY AGREEMENT

~~Note 5~~ — ~~STOCKHOLDERS’ EQUITY~~

~~Fiscal 2020 Private Placement~~

~~In connection with a Series AA Preferred Stock financing in January 2019,~~On April 14, 2021, the Company ~~granted call options~~entered into a $30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp. and certain other lenders (the “Lenders”). The Lenders agreed to ~~Handok,~~loan up to $30.0 million in three tranches consisting of (i) a $15.0 million term A loan that was funded on April 14, 2021, (ii) 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 $35.0 million of equity or subordinated 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 Company’s ability to (i) meet the conditions for funding the term B loan, and (ii) obtaining an additional $35.0 million of equity or subordinated debt financing, and the achievement of certain additional clinical milestones related to RZ358 and RZ402 by September 2022. Each term loan has a maturity date of April 1, 2026 (the “Maturity Date”). As discussed in Note 13, in October 2021 the Company completed an underwritten public offering for net proceeds of $46.7 million and a registered direct offering for net proceeds of $5.0 million, resulting in total net proceeds of approximately $51.7 million. As a result of the completion of these offerings, as well as equity issuances under the EDA and LPC Purchase Agreement during the three months ended September 30, 2021, we have met the financing threshold to qualify for the term B loan but will need to raise an additional $12.3 million to qualify for the term C loan. To date we have not achieved the clinical milestones to qualify for the term B and term C loans.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In addition, the Company’s cash and ~~Genexine, Inc. (collectively, “H&G”~~cash equivalents became subject to a blocked account control agreement (“BACA”) in favor of the Lenders whereby ~~upon~~a cash balance of at least $5.0 million must be maintained beginning on the earlier of (i) December 31, ~~2020~~2021, and (ii) ~~such~~the date ~~that~~ the ~~Company requested H&G~~term B loan is funded. In the event of a default under the Loan Agreement, the BACA would enable the Lenders to ~~provide additional financing, each investor was entitled to purchase up to $10.0 million~~prevent the release of ~~Common Stock~~funds from the Company’s cash accounts.

Outstanding borrowings bear interest at a ~~purchase price~~floating rate equal to (a) 8.75% per annum plus (b) the greater of (i) ~~$14.50~~the rate per ~~share~~annum published by the Intercontinental Exchange Benchmark Administration Ltd. (“IEBA”) for a term of one month and (ii) 0.12% per annum. For the period from April 14, 2021 through September 30, 2021, the IEBA rate for a term of one month was approximately 0.12% per annum. Therefore, the contractual rate was 8.87% as of September 30, 2021 and June 30, 2021. 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 obtains at least $70.0 million of equity or ~~(ii) 75%~~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 ~~volume weighted average closing price (“VWAP”~~interest-only period.

The Company is obligated to pay the 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 ~~Company’s Common Stock during~~aggregate amount of the ~~thirty consecutive trading days prior~~term loans funded (the “Final Fee”). As of September 30, 2021, the Company incurred debt discounts for an aggregate of $1.7 million that consisted of $0.5 million for financial advisory and legal fees, an aggregate of $0.8 million for the Facility Fee and the Final Fee, and an aggregate of $0.4 million as an exit fee as discussed below. The Final Fee is payable upon the earliest to occur of (i) the Maturity Date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. The total debt discount of $1.7 million related to the ~~date~~term A loan is being accreted to interest expense using the effective interest method which results in an overall current effective interest rate of 12.6% as of September 30, 2021 and June 30, 2021.

Concurrently with the execution of the ~~notice.~~

~~On June 19, 2019,~~Loan Agreement, the Company entered into ~~a financial advisory~~an exit fee agreement ~~to undertake a private placement~~ (the ~~“Fiscal 2020 Private Placement”~~“Exit Fee Agreement”) ~~of (i) the shares of Common Stock issuable under the H&G call options~~that provides 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%~~4.00% 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~~funded principal balance of ~~$22.6 million for the three months ended September 30, 2019.~~

~~Restricted Cash~~

~~One of the investors~~each term loan in the ~~Fiscal 2020 Private Placement purchased approximately 262,000 shares~~event certain transactions (defined as “Exit Events”) occur prior to April 13, 2031. Exit Events include, but are not limited to, sales of ~~Common Stock for gross proceeds~~substantially all assets, certain mergers, change of ~~$3.8 million. The Company agreed to spend the proceeds for certain research~~control transactions, and ~~development activities and for a planned uplisting~~issuances of common stock that result in new investors owning more than 35% of the Company’s ~~Common Stock~~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 this embedded derivative for approximately $354,000. Fair value was determined based on the Company’s strategic corporate development plans and management has performed a detailed evaluation of the different types of Exit Events that could occur and using a discounted rate equivalent to the ~~Nasdaq Capital Market. For~~effective rate for the ~~three months ended September 30, 2019,~~term A loan. Fair value of this embedded derivative is assessed at the end of each reporting period with changes in fair value recognized as a nonoperating gain or loss.

The Company has the option to prepay all, but not less than all, of the outstanding principal balance of the term loans. In the event of a voluntary or mandatory prepayment prior to the Maturity Date, the Company ~~made qualified expenditures of $0.7 million leaving~~will incur a ~~restricted cash balance of $3.1 million. The Company expended the remainder~~prepayment fee ranging from 1.00% to 3.00% of the ~~restricted cash proceeds on qualified activities~~outstanding principal balance.

The Company’s obligations under the Loan Agreement are secured by ~~March 31, 2020, whereby there were no restrictions on cash balances after~~a first-priority security interest in substantially all the Company’s assets, including its intellectual property. This security interest will not be released until all obligations are repaid, including the requirement to pay an Exit Fee of $0.6 million for certain fundamental transactions that ~~date.~~may occur through April 13, 2031. 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 Lenders may declare all outstanding obligations immediately due and payable and exercise all their rights and remedies as set forth in the Loan Agreement.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~Note 6~~ — ~~STOCK-BASED COMPENSATION AND WARRANTS~~

~~Stock Option Plans~~
~~The~~As of September 30, 2021, the Company ~~currently has two active stock option plans~~had outstanding contractual obligations under the Loan Agreement consisting of the ~~2016 Non-Qualified Stock Option Plan, as amended (the “2016 Plan”),~~principal balance of $15.0 million and the ~~2019 Non Qualified Stock Option Plan~~Final Fee of $0.7 million for a total of $15.7 million. After deducting the unaccreted discount of $1.6 million, the net carrying value was $14.1 million as of September 30, 2021. Future minimum principal payments and the net carrying value of the term A loan are as follows as of September 30, 2021 (in thousands):

Fiscal year ending June 30,

2022

$
0
2023

833
2024

5,000
2025

5,000
2026

4,880
Total contractual payments

15,713
Less unaccreted debt discount

(1,642)
Net carrying value

$
14,071

NOTE 6 — SHAREHOLDERS’ EQUITY
Equity Distribution Agreement
On December 18, 2020, the Company and Oppenheimer & Co. Inc. (the ~~“2019 Plan”~~“Agent”)~~. On July 31, 2019,~~ entered into an Equity Distribution Agreement (the “EDA”) that provides for an “at the ~~2019 Plan was adopted by~~market offering” for the ~~Board~~sale of ~~Directors and provides authority to grant non-qualified stock options for~~ up to ~~300,000~~$50.0 million in shares of the Company’s ~~Common Stock.~~ 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.
The Company ~~also~~ 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 September 30, 2021, the Company sold 138,388 shares of its common stock ~~options outstanding~~pursuant to the EDA for net proceeds of approximately $1.5 million. Accordingly, the maximum amount remaining for sale under the EDA amounts to approximately $48.5 million as of September 30, 2021.
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 of 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 can sell to LPC under the Purchase Agreement may not exceed 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 our common stock under the Purchase Agreement. Subject to the terms of the Purchase Agreement, the Company has the right, in its sole discretion, to present LPC with a purchase notice (a “Regular Purchase Notice”), directing LPC to purchase up to ~~approximately 44,000~~25,000 Purchase Shares (a “Regular Purchase”), which amounts may be increased under certain circumstances. LPC’s committed obligation under any single Regular Purchase generally will not exceed $2.0 million. The Purchase Agreement provides for a purchase price per Purchase Shares 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

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

In addition, on any date on which the Company submits a Regular Purchase Notice for the maximum amount allowed for such a Regular Purchase to LPC, the Company also has the right, in its sole discretion, to present LPC with an accelerated purchase notice (an “Accelerated Purchase Notice”), directing LPC to purchase an amount of Purchase Shares (an “Accelerated Purchase”), which number of Purchase Shares will not exceed the lesser of (i) 300% of the number of shares purchased pursuant to such Regular Purchase Notice and (ii) 30% of the total volume of shares of ~~Common Stock~~the common stock traded on the NCM during the Accelerated Purchase period. The Purchase Price per Purchase Share for each such Accelerated Purchase will be equal to the lesser of 97% of (i) the volume-weighted average price of the common stock on the NCM during the applicable Accelerated Purchase period on the applicable Accelerated Purchase date; and (ii) the closing sale price of the common stock on the NCM on the applicable Accelerated Purchase date.

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. Accordingly, LPC is obligated to purchase up to a maximum of $18.8 million under the ~~2014 Stock~~Purchase Agreement as of September 30, 2021.

Pursuant to the RRA, the Company agreed to use its reasonable best efforts to maintain effectiveness of the registration statement and ~~Incentive Plan (the “2014 Plan”) that terminated~~the related prospectus supplement within prescribed deadlines set forth in the RRA. In addition, the Company is required to use its reasonable best efforts to secure and maintain its listing of the Purchase Shares on ~~March 21, 2019 and approximately 88,000~~the NCM. LPC has no obligation to purchase shares ~~of Common Stock~~ under the ~~2015~~ Purchase Agreement unless the Company complies with the terms of the RRA.

NOTE 7 — SHARE-BASED COMPENSATION AND WARRANTS
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. Option Plans
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 September 30, 2021 (in thousands):

Termination

Number of Shares
Description

Date

Authorized

Outstanding

Available
2015 Plan

February 2020

50

50

—
2016 Plan

October 2021

313

313

—
2019 Plan

July 2029

200

200

—
2021 Plan

March 2030

1,200

766

434
Total



1,763

1,329

434

Termination Number of Shares
Description Date Authorized Outstanding Available
2014 Plan March 2019 43 43 -
2015 Plan February 2020 88 88 -
2016 Plan October 2021 560 513 47
2019 Plan July 2029 300 300 -
Total 991 944 47
June 2021 Grants
On June 14, 2021, the Board of Directors granted stock options for an aggregate of approximately 0.7 million shares of common stock to certain officers, employees and independent directors at an exercise price of $12.28 per share (the “June 2021 Grants”). Stock options for an aggregate of approximately 0.5 million shares were granted to the Company’s chief executive officer, independent directors and employees with less than one year of service that provide for vesting of 1/36th of the total award each month commencing on July 1, 2021, and stock options for approximately 0.2 million shares granted to employees with more than one year of service that provided for vesting of 25% of the award on grant date with the remainder of the award vesting for approximately 2.1% the total award each month until full vesting occurs. The aggregate fair value of the June 2021 Grants was $7.3 million, of which $0.6 million was recognized in June 2021, $0.6 million was recognized for the three months ended September 30, 2021, and the remaining $6.1 million will be recognized over the future vesting periods.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 three months ended September 30, ~~2020~~2021 (shares in thousands):

Shares Price ⁽¹⁾ Term ⁽²⁾
Outstanding, July 1, 2020 963 $ 33.06 8.1
Stock options forfeited:
Awards with time-based vesting (14 ) 14.50
Awards with hybrid vesting conditions (5 ) 14.50
Outstanding, September 30, 2020 944 33.43 7.8

Vested, September 30, 2020 477 50.36 6.8


	Shares	Price ⁽¹⁾		Term ⁽²⁾
Outstanding, June 30, 2021	1,285	$	16.35	8.7
Granted	75		8.96
Forfeited	(31)		22.67
Outstanding, September 30, 2021	1,329		15.78	8.5
Vested, September 30, 2021	507		21.07	7.2

⁽¹⁾

Represents the weighted average exercise price.

⁽²⁾

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

For the three months ended September 30, 2021, the aggregate fair value of stock options granted for approximately 0.1 million shares of common stock that provide solely for time-based vesting, amounted to $0.5 million or approximately $6.73 per share as of the grant dates. There were 0 stock options granted in the three months ended September 30, 2020. Fair value was computed using the 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 three months ended September 30, 2021, the fair value of stock options that provide for time-based vesting was estimated on the date of grant using the BSM option-pricing model, with the following weighted-average assumptions:

~~Stock-based~~


Market price of common stock on grant date	$	8.96
Expected volatility		92	%
Risk free interest rate		0.97	%
Expected term (years)		6.0
Dividend yield		0	%

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

	2020		2019

					2021		2020
Research and development	$	321	$	574	$	309	$	321
General and administrative		313		820		533		313
Total	$	634	$	1,394	$	842	$	634

Unrecognized ~~stock-based~~share-based compensation expense ~~related to stock options that provide solely for time-based vesting~~ is approximately ~~$2.6~~$8.6 million as of September 30, ~~2020.~~2021. This amount is expected to be recognized over a remaining weighted average period of ~~1.7~~2.5 years.

Warrants

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”). The Hybrid Options will vest ratably over a period of 36 months beginning on the date that 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 day period. The Company has not recognized any expense related to these stock options through September 30, 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, the Company achieved this performance condition whereby its shares of Common Stock were approved for listing on the Nasdaq Capital Market. Accordingly, unrecognized compensation cost, net of estimated forfeitures, for the Hybrid Options of approximately $1.9 million will be recognized beginning in November 2020 when compensation cost of approximately $0.5 million will be recorded for the three months ending December 31, 2020, and the remainder of approximately $1.4 million will be recognized on a straight-line basis through July 2024 when the Hybrid options are expected to be fully vested.

~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~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 outstanding~~warrant 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 three months ended September 30, ~~2020, no warrants were granted, expired or exercised.~~2021 (shares in thousands):


	Shares	Price⁽¹⁾		Term⁽²⁾
Outstanding, June 30, 2021	1,252	$	28.91	4.8
Warrants expired	(28)		82.50
Outstanding, September 30, 2021	1,224		27.66	4.6

(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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~~Note 7~~ Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 8 — 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

~~COVID-19~~

~~In December 2019,~~The current COVID-19 ~~was reported~~pandemic, which is impacting worldwide economic activity, poses risks that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to ~~have surfaced~~shutdowns that may be requested or mandated by governmental authorities. The extent to which COVID-19 impacts the Company’s business, including its clinical trials and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in ~~Wuhan, China,~~the United States and ~~by March 2020~~other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. As COVID-19 continues to spread around the globe, including the spread of more contagious and virulent variants, we could experience disruptions, including delays or difficulties in enrolling patients in our clinical trials, delays or difficulties in clinical site initiation, interruption of key clinical trial activities, delays in clinical sites receiving the ~~virus had resulted~~supplies and materials needed to conduct our clinical trials and delays in necessary interactions with local regulatory authorities. COVID-19 may also impact the Company’s ability to raise additional capital on a ~~world-wide pandemic.~~timely basis or at all, which could negatively impact short-term and long-term liquidity.

Registration Rights Agreement

In connection with the Purchase Agreement further discussed in Note 6, the Company entered into a Registration Rights Agreement whereby it agreed to register all the shares issuable under the facility. The ~~U.S. economy has been largely shut down by mass quarantines~~Company filed a prospectus supplement to meet this obligation in August 2021 and ~~government mandated stay-in-place orders~~is required to ~~halt~~maintain the ~~spread~~effectiveness of the ~~virus. While these orders are being lifted gradually,~~prospectus supplement on 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.reasonable best-efforts basis.

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”). New site initiation and enrollment is on hold, similar to many other clinical studies conducted by other companies throughout the world. 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,~~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 8~~ NOTE 9 — 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, no0 milestone payments have been earned by the Company.

~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~Equity Issuances~~

As discussed in Note 5, on 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 was issued in connection with an equity offering in January 2019 that resulted in gross proceeds of $25.0 million. As of September 30, 2020, H&G own an aggregate of approximately 65% 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 acting growth hormone program referred to as GX-H9. For the three months ended September 30, 2019, the Company charged H&G for employee services of $103,000 and reimbursable expenses incurred with unrelated parties of $144,000, for a total of approximately $247,000. Amounts charged 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 three months ended September 30, 2019.

~~Note~~9 NOTE 10 — 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

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 months ended September 30, ~~2020~~2021 and ~~2019,~~2020, 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 months ended September 30, ~~2020~~2021 and ~~2019.~~ 2020.

~~Note 10~~ NOTE 11 — ~~EARNINGS~~NET LOSS PER SHARE

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


	2021	2020
Stock options	1,329	944
Warrants	1,224	618
Total	2,553	1,562

2020 2019
Stock options 944 928
Warrants 618 911

Total 1,562 1,839

~~Note 11~~ NOTE 12 — 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.

The embedded derivative liabilities discussed in Note 5 were classified under Level 3 and were required to be measured and recorded at fair value on a recurring basis beginning on April 14, 2021. Fair value was determined based on management’s assessment of the probability and timing of occurrence for the events that give rise to embedded derivatives using a discounted rate equal to the effective interest rate for the term A loan.

The following tables set forth a summary of changes in the fair value of the Company’s embedded derivative liability for which fair value was determined by Level 3 inputs (in thousands):

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements


	Embedded
	Derivatives
Balance, June 30, 2021	$	387
Changes in fair value of embedded derivative liabilities		(16)
Balance, September 30, 2021	$	371

Except for the embedded derivative liability, the Company did not have any other assets or liabilities measured at fair value on a recurring basis as of September 30, 2021 and June 30, 2021.

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, ~~2020~~2021 and June 30, ~~2020. The Company did not have any assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and June 30, 2020.~~2021. 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 months ended September 30, ~~2020~~2021 and ~~2019,~~2010, 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 three months ended September 30, ~~2020,~~2021, cash deposits have exceeded the amount of federal insurance provided on such deposits. As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, the Company had cash and cash equivalents with a single financial institution with an aggregate balance of ~~$6.4~~$37.3 million and ~~$10.0~~$41.0 million, respectively. The Company has never experienced any losses related to its investments in cash and cash equivalents.

NOTE 13 — SUBSEQUENT EVENTS

~~Note 12~~ — ~~Subsequent Events~~

~~Fiscal 2021 Financing~~

Underwritten Public Offering

On ~~September 15, 2020,~~October 12, 2021, the Company entered into ~~financial advisory agreements to undertake a private placement~~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 ~~or equity equivalent~~ securities in an underwritten public offering (the ~~“Fiscal 2021 Financing”~~“Underwritten Offering”). ~~Pursuant~~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 $6.49 per the ~~financial advisory agreements,~~Pre-Funded Warrants for gross proceeds of $10.8 million. The aggregate gross proceeds from the ~~Company agreed~~Underwritten Offering amounted to ~~pay transaction fees to the financial advisors~~$50.0 million before deductions for ~~an aggregate~~underwriting discounts and commissions 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 Financing, the financial advisors are entitled to additional transaction fees equal to 6.0% of the gross proceeds.

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~~of approximately ~~$1.0~~$0.3 million. After deducting ~~the financial advisory fees and other~~total offering costs of $3.3 million, the ~~estimated~~ net proceeds of the Underwritten Offering amounted to approximately ~~$37.5~~$46.7 million. ~~Pursuant~~

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 ~~terms~~Underwritten Offering at a public offering price of $6.50 per share, less underwriting discounts and commissions (the “Underwriters’ Option”).

In connection with the Underwritten Offering, certain of the ~~Fiscal 2021 Financing,~~Company’s officers and directors agreed not to sell or otherwise dispose of any common stock held by them through January 10, 2022 (the “Lock-Up Period”). In addition, the Company ~~executed~~is prohibited from selling any shares of its common stock under the ~~Reverse Stock Split of one share for 50 shares as~~LPC Purchase Agreement or the EDA discussed in Note 1,6.

The Pre-Funded Warrants have an exercise price of $0.01 per share, which is subject to adjustment in the event of certain stock dividends and ~~agreed~~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 ~~enable trading~~time after issuance. In the event of ~~its~~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.

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Rezolute, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 Common Stock onare entitled.

Registered Direct Offering

Concurrently with the ~~Nasdaq Capital Market, whereby the Company’s listing application was approved by Nasdaq on November 3, 2020. The Company also~~Underwritten Offering, a large shareholder (the “Purchaser”) entered into a ~~registration rights~~subscription agreement ~~(“RRA”),~~for a registered direct offering, pursuant to which the Company agreed to ~~use commercially reasonable efforts~~sell to ~~register (i)~~ the Purchaser an aggregate of 769,231 shares of ~~Common Stock included in~~ the ~~Units, and (ii)~~Company’s common stock at a purchase price of $6.50 per share. The closing for the ~~shares of Common Stock issuable upon exercise of the warrants. If~~registered direct offering occurred on October 27, 2021 whereby 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~~received gross proceeds of ~~the Fiscal 2021 Financing may be assessed.~~$5.0 million.

~~Rezolute, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~Early Payments to Xoma~~

~~Upon completion~~Table of a qualified financing of $20.0 million or more, the Company was obligated to repay the remaining outstanding balance due to Xoma within 15 days as discussed in Note 4. The completion 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.~~Contents

~~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, the Company entered into an assignment, assumption and amendment of lease agreement for ancillary office space in Bend, Oregon. The lease 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 has not yet determined the amount of the ROU asset and the related operating lease liabilities that will be recognized at inception of this lease.

~~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):

Equity Financing Xoma
Gross Offering Early
Historical Proceeds ⁽¹⁾ Costs ⁽²⁾ Payments ⁽³⁾ Pro Forma

Assets
Current assets:
Cash and cash equivalents $ 6,404 $ 41,000 $ (3,491 ) $ (1,409 ) $ 42,504
Prepaid expenses and other 491 - - - 491
Total current assets 6,895 41,000 (3,491 ) (1,409 ) 42,995

Long-term assets:
Right-of-use assets, net 325 - - - 325
Deferred offering costs 129 - (129 ) - -
Other 61 - - - 61
Total assets $ 7,410 $ 41,000 $ (3,620 ) $ (1,409 ) $ 43,381

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable $ 797 $ - $ - $ - $ 797
Accrued liabilities 473 - (129 ) - 344
Current portion of license fees payable to Xoma 1,409 - - (1,409 ) -
Current portion of operating lease liabilities 245 - - - 245
Total current liabilities 2,924 - (129 ) (1,409 ) 1,386

Long-term liabilities:
Operating lease liabilities, net of current portion 104 - - - 104
Total liabilities 3,028 - (129 ) (1,409 ) 1,490

Stockholders' equity:
Common Stock, $0.001 par value, 500,000 shares authorized; see below for issued and outstanding 6 2 - - 8
Additional paid-in capital 155,232 40,998 (3,491 ) - 192,739
Accumulated deficit (150,856 ) - - - (150,856 )
Total stockholders' equity 4,382 41,000 (3,491 ) - 41,891
Total liabilities and stockholders' equity $ 7,410 $ 41,000 $ (3,620 ) $ (1,409 ) $ 43,381

Number of shares of Common Stock issued and outstanding 5,867 2,485 - - 8,352

⁽¹⁾

Gives effect to the receipt of gross proceeds of $41.0 million on October 9, 2020, as a result of the private placement of units at an issuance price of $16.50 per unit. The units consisted of an aggregate of approximately 2.5 million shares of Common Stock and warrants for the purchase of an additional 0.8 million shares of Common Stock.

⁽²⁾

Gives effect to the financial advisory fees of 6.0% of the gross proceeds and other estimated offering costs of approximately $1.0 million related to the Fiscal 2021 Financing, of which $0.1 million was incurred but unpaid as of September 30, 2020.

⁽³⁾

~~Gives effect to the requirement discussed in Note 4 to repay the remaining obligations due to Xoma, since the Fiscal 2021 Financing met the definition of a qualified financing.~~

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.

Recent Developments

Lincoln Park Capital

In August 2021, we entered into the Purchase Agreement with LPC, which provides that we may sell to LPC up to $20.0 million of Purchase Shares. The aggregate number of shares that we can sell to LPC under the Purchase Agreement may not exceed 1,669,620 shares of our common stock, subject to certain exceptions set forth in the Purchase Agreement. Through September 30, 2021, we have issued an aggregate of 149,507 shares under the Purchase Agreement and have received gross proceeds of approximately $1.2 million.

Equity Offerings

On October ~~9, 2020,~~12, 2021, we ~~completed a private placement~~entered into the Underwriting Agreement with the Underwriters for the planned issuance and sale of equity securities ~~that resulted~~ in ~~net proceeds~~the Underwritten Offering. On October 15, 2021, closing occurred for the Underwritten Offering resulting in the issuance of ~~approximately $37.5 million.~~ The completion of this private placement triggered our obligations to Xoma with a remaining balance due of $1.4 million as of September 30, 2020. Effective October 9, 2020, we implemented a one share for 50 shares Reverse Stock Split of our $0.001 par value Common Stock. On November 3, 2020, we obtained approval from Nasdaq to have our(i) 6,030,847 shares of common stock ~~listed~~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 $6.49 per the Pre-Funded Warrants for gross proceeds of $10.8 million. The aggregate gross proceeds from the Underwritten Offering amounted to $50.0 million. We paid underwriting discounts and commissions of 6.0% of the gross proceeds or a total of approximately $3.0 million and other offering costs amount to $0.3 million. After deduction of all offering costs, the net proceeds of the Underwritten Offering amounted to approximately $46.7 million.

Concurrently with the Underwritten Offering, a large shareholder (the “Purchaser”) entered into a subscription agreement for a registered direct offering, pursuant to which we agreed to sell to the Purchaser an aggregate of 769,231 shares of our common stock at a purchase price of $6.50 per share. The closing for the registered direct offering occurred on ~~the Nasdaq Capital Market.~~October 27, 2021 whereby we received gross proceeds of $5.0 million.

Please refer to our discussion under Liquidity and Capital Resources below and in Notes ~~1, 4~~6 and 1213 to our unaudited condensed consolidated financial statements for further discussion of the ~~private placement, Early Payments due to Xoma,~~LPC Purchase Agreement and the ~~Reverse Stock Split.~~Underwritten Offering.

Special Note About COVID-19

While our financial results for the three months ended September 30, ~~2020~~2021 and the fiscal year ended June 30, ~~2020~~2021 were not significantly impacted by COVID-19, we cannot predict the impact of the progression of the COVID-19 pandemic on future results due to a variety of factors, including the ongoing challenges associated with the pandemic, including the emergence of new variants of the coronavirus, such as the Delta variant, resurgences in number of rates of infections, the continued good health of our employees, the ability of us to maintain operations, access to healthcare facilities and patient willingness to participate in our clinical trials, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic. The ultimate impact of the COVID-19 pandemic on our business operations, our ability to raise capital, as well as our preclinical studies and clinical ~~trials~~trial timeliness remains uncertain and subject to change and will depend on future developments, which cannot be accurately predicted. Any prolonged material

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disruption of our employees, suppliers, or manufacturing may negatively impact our consolidated financial position, results of operations and cash flows. We will continue to monitor the situation closely.

Summary of Clinical Assets

Our lead clinical asset, RZ358, is an antibody therapy in Phase 2b development as a potential treatment for congenital hyperinsulinism (“~~CHI”~~HI”), an ultra-rare pediatric genetic disorder. In February 2020, we announced the initiation of the RZ358-606 Phase 2b study (“~~RIZE”~~RIZE”) globally at multiple study centers. Prior to COVID-19, we had planned to complete the RIZE study by the middle of calendar year 2021. In March 2020, we paused the RIZE study as a result of the COVID-19 pandemic. As the COVID-19 pandemic ~~abates~~began to abate in different regions, we ~~are resuming~~resumed clinical activities including trial site ~~initiations. We believe that~~initiations and patient ~~enrollment will recommence by~~enrollment. Subject to COVID-19 conditions, we are expecting to report top-line results in the ~~end~~first quarter of calendar year ~~2020. Further, if we can begin enrolling patients on this timeframe, we believe we will be able to complete the RIZE study in the second half of calendar year 2021.~~2022.

In addition, in the first half of calendar year 2020, we had positive interactions with the U.S. Food and Drug Administration (“~~FDA”~~FDA”). In June 2020, we announced that FDA granted us Rare Pediatric Disease (“~~RPD”~~RPD”) designation for RZ358, which qualifies us to receive a priority review voucher (“PRV”) upon marketing approval of the drug in ~~CHI.~~congenital HI. Such a voucher could be redeemed to receive a priority review of a subsequent marketing application for any drug candidate in any disease indication. Further, we submitted the RIZE protocol to FDA which allows us to expand the study to clinical sites in the United States. ~~We believe that patient enrollment may commence~~

Our second clinical asset, RZ402, is a selective and potent plasma kallikrein inhibitor (“PKI”) being developed as a potential oral therapy for the chronic treatment of diabetic macular edema (“DME”). RZ402 is currently in Phase 1 development. In January 2021, we dosed the first subject in the ~~United States~~Phase 1a study, and in May 2021, we announced positive topline results whereby single dose oral administration of RZ402 resulted in plasma concentrations that substantially exceeded target pharmacologically-active drug levels, demonstrating the potential for once daily dosing. RZ402 was generally safe and well-tolerated at all doses tested, without dose-limiting toxicities. In August 2021, we announced the initiation in the Phase 1b multiple-ascending dose (“MAD”) study and planned to be completed by the first quarter of calendar year ~~2021.~~

~~Our next program, RZ402, is an oral therapy, targeting diabetic macular edema (“DME”). On October 28, 2020,~~2022. If favorable results are also obtained in the Phase 1b study, we ~~submitted an IND~~expect to the FDA that will require us to make the first milestone payment of $1.0 million within 15 days after acceptance of the IND by the FDA. Assuming the FDA accepts our IND filing by November 2020, we anticipate initiation ofadvance developmental activities toward a Phase ~~1 clinical trial for RZ402 prior to~~2a proof-of-concept study during the ~~end of the first quarter~~second half of calendar year ~~2021.~~

2022.

RZ358

~~CHI~~Congenital HI is an ultra-rare pediatric genetic disorder characterized by excessive production of insulin by the pancreas. ~~CHI is caused by mutations in about a dozen known genes associated with pancreatic beta cells and their secretion of insulin.~~ If untreated, itthe elevated insulin levels in these patients can ~~lead to dangerously low~~induce extreme hypoglycemia (low blood ~~sugar levels. Rezolute’s~~sugar) events, increasing the risk of neurological and developmental complications, including persistent feeding problems, learning disabilities, recurrent seizures, brain damage or even death. There are no FDA approved therapies for congenital HI and the current standard of care treatments are suboptimal. In some cases, pancreatic surgery is a treatment option, but this approach is invasive and may require repeat surgeries.

Our lead candidate, ~~RZ358, is an antibody in Phase 2b development that is designed to prevent severe, persistent low blood sugar in patients with CHI.~~

RZ358, is an intravenously administered human monoclonal antibody that binds to a unique site (allosteric) on the insulin receptor ~~found across effector cells~~ throughout the body, such as in the liver, fat, and muscle. ~~This action allows RZ358~~The antibody modifies insulin's binding and signaling to ~~counteract~~maintain glucose levels in a normal range which counteracts the effects of elevated insulin in the body. Its unique allosteric mechanism of action is reversible, depends on both insulin levels and blood sugar levels in a dose-dependent manner, and enables patients to achieve normal levels of insulin and glucose. Therefore, we believe that RZ358 is ideally suited as a potential therapy for conditions characterized by excessive insulin ~~production~~levels, and it is being developed to treat ~~hyperinsulinemia~~the hyperinsulinism and ~~prevent~~ low blood sugar ~~for~~characteristic of diseases such as ~~CHI.~~congenital HI. As RZ358 acts downstream from the beta cells, ~~across effector cells in~~it has the ~~liver, fat, and muscle, it may~~potential to be universally effective at treating ~~CHI~~congenital HI caused by any of the underlying genetic defects.

RZ358 received Pediatric Rare Disease Designation in the U.S. as well as Orphan Drug Designation in the U.S. and European Union. RZ358 is currently in Phase 2b development (the RIZE study, RZ358-606). The RIZE study is a multi-center, open-label, repeat-dose Phase 2b study of RZ358 in four sequential dosing cohorts of patients with ~~CHI~~congenital HI who are at least two years old and have residual low blood sugar (<70 mg/dL) that is inadequately controlled on existing therapies. In addition to safety and pharmacokinetic evaluations, continuous glucose monitoring (“~~CGM”~~CGM”) and self-monitored blood glucose will be utilized to evaluate several glycemic efficacy endpoints. The primary endpoint is the time within a glucose target range of 70-180 mg/dL by CGM ~~during weeks 4 and~~after week 8 of treatment compared to baseline.

RZ402

DME is a ~~severe~~vascular complication of diabetes ~~marked by progressive vision loss~~ and ~~blindness. Consistently~~a leading cause of blindness in the U.S. and elsewhere. Chronic exposure to high blood sugar levels can ~~cause diabetic retinopathy, a complication characterized by~~lead to inflammation, cell damage, and the breakdown of blood vessel walls. Specifically, in DME, blood vessels behind

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the back of the eye become porous and permeable leading to the ~~blood vessels in~~unwanted infiltration of fluid into the ~~eye and~~macula. This fluid leakage ~~into the light-sensitive tissue known as the retina. The accumulation of fluid may lead to DME, or swelling of the macula, the part of the retina responsible for sharp, straight-ahead vision.~~ creates distorted vision and left untreated, blindness.

Currently available treatments for DME involve frequent burdensome anti-vascular growth factor (anti-VEGF) injections into the eye or invasive laser surgery.

~~Rezolute is developing RZ402, a small molecule plasma kallikrein inhibitor (“PKI”) for use in DME. As a once-daily oral investigational therapy,~~ RZ402 is designed to ~~improve compliance~~be a once daily oral therapy for the treatment of DME. Unlike the anti-VEGF therapies, RZ402 targets the Kallikrein–Kinin System in order to address inflammation and ~~treatment outcomes for patients with DME. Elevated plasma levels~~vascular leakage. We believe that systemic exposure through oral delivery is critical to target the microvasculature behind the back of the enzyme kallikrein have been associated with increased inflammation, vessel leakage and excess blood vessel growth in the eyes of patients with DME. Genetic and pharmacologic knockout of plasma kallikrein have been shown to protect against vascular endothelial growth factor (“VEGF”) induced retinal blood vessel leakage in murine models without damaging long-term effects.

eye. Further, as an oral therapy, RZ402 ~~is a bioavailable small molecule inhibitor of plasma kallikrein that~~ has ~~shown~~ the potential to ~~prevent~~substantially change the ~~onset of~~therapeutic paradigm for patients suffering with DME by providing a convenient, self-administered treatment option to encourage patients to initiate therapy sooner, adhere to prescribed treatment guidelines, and reverse vascular leakage in a dose-dependent manner in multiple rodent models of whole body and retinal vascular leakage. Target plasma concentrations were exceeded for 24 hours following oral dosing of RZ402 in monkeys and dogs, supporting the potential for once daily dosing in humans. We have completed toxicology studies and we filed an IND with the FDA on October 28, 2020.

improve overall outcomes.

Factors Impacting our Results of Operations

We have not generated any revenues since our inception in March 2010. Since inception, we have engaged in organizational activities, conducted private placements to raise additional capital, built out a manufacturing suite and produced material for our lead product candidate under good laboratory practices (“~~GLP”~~GLP”), conducted studies using the GLP material, subsequently changed our strategy to a licensing model that resulted in disposal of our manufacturing assets, 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 any of our product candidates, we anticipate it will be some time before we generate substantial revenues, if ever. We expect to generate operating losses for the foreseeable future; therefore, we expect to continue efforts to raise additional capital to maintain our current operating plans beyond the next year. 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 ~~stockholders.~~

In December 2019, we received top-line results in our Phase 1 clinical study related to AB101 where we determined that additional formulation adjustments are required before further clinical studies can be undertaken. ~~As a portfolio management decision, we have decided not to take the program further in development and expect that future expenditures related to the program will be insignificant.~~

shareholders.

Key Components of Consolidated Statements of Operations

Research and development expenses. Research and development (“R&D”) expenses ~~(“R&D”)~~ consist primarily of compensation and benefits for our personnel engaged in R&D activities, clinical trial costs, licensing costs, and consultants and outside services. Our ~~research and development~~R&D compensation ~~and consulting~~ costs include ~~(i)~~ an allocable portion of our cash and ~~stock-based~~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 ~~(“G&A”)~~ consist primarily of (i) an allocable portion of our cash and ~~stock-based~~share-based compensation and employee benefits ~~and consulting costs~~ 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.

Gain on changes in fair value of derivative liability. We recognized liabilities for embedded derivatives in our debt agreements. Derivative liabilities are adjusted to fair value at the end of each reporting period until the derivative liability contracts are settled, expire, or 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. Any gains or losses reflected prior to the deficiency was cured will not be reversed.

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 (“~~Interest~~DDIC”) using the effective interest method. DDIC arises from the issuance of debt instruments and other ~~income.~~ ~~Interest~~related contracts or agreements which possess certain terms and conditions resulting in additional financing costs arising from origination, exit and final fees, and other ~~income consist primarily~~incremental and direct costs incurred to consummate the financing.

Table of ~~interest income earned on temporary cash investments.~~Contents

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 ~~2020~~2021 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.

Change in Fair Value of Derivative Liability

~~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 useWe recognize liabilities for embedded derivatives 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~~our debt agreements. The determination of the ~~percentage of work completed over the life~~fair value of the ~~individual study~~embedded derivatives includes subjective assumptions that can materially affect the fair value estimates. Derivative liabilities are adjusted to fair value at the end of each reporting period with changes 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 providersfair value reflected as ~~to the progress~~a gain or ~~stage~~loss in our unaudited condensed consolidated statements of ~~completion of trials or services and the agreed-upon fee to be paid for such services.~~operations.

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.

~~Stock-Based~~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 ~~Black-Scholes-Merton (“BSM”)~~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 granted which 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 ~~stock-based~~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.

We have granted stock options with vesting that is dependent on achieving certain market, performance and service conditions (“Hybrid ~~Options”~~Options”). For purposes of recognizing compensation cost, we determine the requisite service period as the longest of the derived, implicit and explicit vesting periods for each of the market, performance and service conditions, respectively. ~~Compensation cost will be recognized beginning on such date that~~Due to achievement of the performance condition, ~~is considered probable~~we began recognizing compensation cost using the grant date fair value in November 2020 and continuing through the end of the requisite service period. Determination of the requisite service period of the Hybrid Options ~~will be~~was based on the date that the performance condition is considered probable. Unrecognized compensation cost for the Hybrid Options, calculated using the BSM pricing model, will be recognized beginning on the date that the performance condition is considered probable using the grant date fair value.was achieved. If the Hybrid Options do not ultimately become exercisable ~~as a result of~~due to the option holders’ failure to achieve the requisite service period, any previously recognized compensation cost will be reversed. However, if the Hybrid Options do not ultimately become exercisable due to the failure to achieve the market condition, previously recognized compensation cost will not be reversed.

Research and Development

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Clinical Trial Accruals

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

Results of Operations

Three months ended September 30, ~~2020~~2021 and ~~2019~~2020

Results of operations for the three months ended September 30, 2020 and 2019 reflect net losses of approximately $3.6 million and $5.1 million, respectively. Our unaudited condensed consolidated statements of operations for the three months ended September 30, 2020 and 2019, along with the changes between periods, are presented below (dollars in thousands):

Changes
2020 2019 Amount Percent
Operating expenses:
Research and development:
Compensation and benefits, net of related party reimbursements $ 1,212 $ 1,418 $ (206 ) -15 %
Clinical trial costs 758 991 (233 ) -24 %
Consultants and outside services 142 486 (344 ) -71 %
Material manufacturing costs 174 187 (13 ) -7 %
Facilities and other 58 152 (94 ) -62 %
Total research and development 2,344 3,234 (890 ) -28 %

General and administrative:
Compensation and benefits 705 1,336 (631 ) -47 %
Professional fees 370 360 10 3 %
Facilities and other 204 249 (45 ) -18 %
Total general and administrative 1,279 1,945 (666 ) -34 %

Total operating expenses 3,623 5,179 (1,556 ) -30 %

Operating loss (3,623 ) (5,179 ) 1,556 -30 %

Non-operating income - interest and other 3 99 (96 ) -97 %

Net loss $ (3,620 ) $ (5,080 ) $ 1,460 -29 %

~~Presented below is a discussion of the key factors that resulted in changes in our results of operations for these periods.~~

Revenue.As a clinical stage company, we did not generate any revenue for the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020. We are at an early stage of development as a proprietary product specialty pharmaceutical company, and we 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 market any of our product candidates for several years.

Research and development expenses. R&D expenses ~~decreased from approximately $3.2~~for each of the three months ended September 30, 2021 and 2020 were as follows (in thousands, except percentages):


	Three Months Ended
	September 30,
	2021			2020
Research and development expenses	$	5,774		$	2,344
Dollar increase	$	3,430
Precentage increase		146	%

The increase in research and development expenses of $3.4 million for the three months ended September 30, ~~2019~~2021 was primarily attributable to ~~$2.3~~an increase in clinical trial costs associated with RZ402 of approximately $1.3 million ~~for the three months ended September 30, 2020, a decrease~~and RZ358 of approximately $0.9 million. ~~As a result~~The $1.3 million of costs for RZ402 was primarily attributable to the ~~COVID-19 pandemic, we~~MAD study that was initiated in August 2021, as discussed above under the caption Summary of Clinical Assets. No clinical trial costs related to RZ402 were ~~forced to curtail many of our R&D activities~~incurred for the three months ended September 30, 2020. ~~Each category of our R&D expense decreased for the three months ended September 30, 2020, as discussed below.~~

~~For the three months ended September 30, 2020,~~Aside from clinical trial costs, we had ~~a decrease~~an increase of ~~$0.2~~approximately $0.6 million in compensation and benefits for our R&D workforce ~~which~~that was primarily attributable to ~~a decrease~~increased headcount.

General and administrative expenses. G&A expenses for each of $0.3 million in stock-based compensation expense and $0.1 million related to the benefit from the CARES Act employee retention credit that was received in September 2020. These decreases amount to $0.4 million and were partially offset by higher costs for the three months ended September 30, 2021 and 2020 ~~since we did not receive any reimbursements from Handok~~were as follows (in thousands, except percentages):


	Three Months Ended
	September 30,
	2021			2020
General and Administrative expenses	$	1,866		$	1,279
Dollar increase	$	587
Precentage increase		46	%

The increase in general and Genexine (collectively referred to as “H&G) under the Master Services Agreement entered into in July 2019. For the three months ended September 30, 2019, we charged H&G $0.2 million for employee services that were reflected as a reduction of R&D compensation expense. We anticipate that our stock-based compensation will increase for the second quarter of fiscal 2021 due to achievement of the performance condition related to the Hybrid Options.

For the three months ended September 30, 2020, we incurred $0.8 million for clinical trial costs primarily related to RZ358. For the three months ended September 30, 2019, we incurred $1.0 million for clinical trial costs that consistedadministrative expenses of $0.6 million related to RZ358 and $0.4 million for AB101. In December 2019, we received top-line results in our Phase 1 clinical study related to AB101 where we determined that additional formulation adjustments are required before further clinical studies can be undertaken. As a portfolio management decision, we have decided not to take the program further in development and expect that future expenditures related to the program will be insignificant.

~~Consulting and outside services decreased from approximately $0.5~~ million for the three months ended September 30, 2019 to $0.1 million for the three months ended September 30, 2020. For the three months ended September 30, 2019, we incurred higher consulting spending of $0.1 million related to RZ358, $0.1 million for RZ402, and $0.2 million for patent maintenance costs. For the three months ended September 30, 2020, consulting and outside services of $0.1 million2021 was primarily ~~for~~attributable to an increase in professional fees associated with corporate development activities, consulting services, and strategic financial advisory services. In addition, there was an increase in share-based compensation expense primarily due to a ~~combination~~grant of ~~RZ358, RZ402~~stock options to G&A employees and ~~patent maintenance costs.~~directors in June 2021.

~~Costs allocable to R&D activities for facilities and other costs decreased from~~Employee Retention Credit. Employee retention credit income was $0.2 million for the three months ended September 30, ~~2019 to $0.1~~2021. This income is a result of of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act benefits we qualified for during the fiscal quarter. We did not qualify for any employee retention credits in the same period in 2020

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Interest Expense. Interest expense was approximately $0.4 million for the three months ended September 30, ~~2020. The decrease was primarily attributable to reduced spending for travel and generally lower overall levels of R&D activity~~2021, whereas we did not incur any interest expense for the ~~three months ended September 30,~~same period in 2020.

~~As discussed below under the caption~~ ~~Liquidity and Capital Resources~~, we intend to use the proceeds from our recently completed financing to advance our clinical programs and fulfill our development obligations under the amended License Agreement with Xoma, and our milestone payments under the ActiveSite License Agreement entered into in August 2017.

~~General and administrative expenses.~~ G&A expenses decreased from approximately $1.9 million for the three months ended September 30, 2019 to $1.3 million for the three months ended September 30, 2020, a decrease of $0.6 million. This decrease was primarily attributable to decreases in compensation and benefits for our administrative and executive workforce of $0.6 million.

~~The decrease of $0.6 million in compensation and benefits was primarily attributable to a decrease in stock-based compensation expense of $0.5 million and cash-based compensation of $0.1 million.~~ Stock-based compensation decreased by $0.5 million primarily due to certain stock options that were immediately vested on the grant date in July 2019, whereby the expense was immediately recognized for the vested shares. Expense recognition after July 2019 is being recognized ratably over the remaining vesting period which resulted in lower Interest expense for the three months ended September 30, 2020. Cash-based compensation decreased by $0.1 million for the three months ended September 30, 2020 due to a reduction in severance costs, and receipt of the CARES Act employee retention credit in September 2020. We anticipate that our stock-based compensation will increase for the second quarter of fiscal 2021 ~~due to achievement of the performance condition related~~was solely attributable to the ~~Hybrid Options.~~Loan Agreement entered into in April 2021 and consisted of (i) interest expense of $0.3 million based on the contractual rate of 8.87%, and (ii) accretion of discount of $0.1 million.

Income Taxes

Our facilities and other costs decreased by approximately $45,000 for the three months ended September 30, 2020, primarily due to reduced travel and office-related expenses due to COVID-19 restrictions.

~~Income Taxes.~~ For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, we did not recognize any income tax benefit due to our net losses and our determination that a full valuation allowance was required for our deferred tax assets.

Liquidity and Capital Resources

As of September 30, ~~2020,~~2021, we had cash and cash equivalents totaling approximately ~~$6.4~~$37.3 million and working capital was approximately ~~$4.0~~$35.7 million. We have incurred cumulative net losses of ~~$150.9~~$176.0 million since our inception, and as a clinical stage company we have not generated any revenue to date.

As discussed ~~below~~above under ~~Fiscal~~the caption Recent Developments, in August 2021 ~~Financing,~~we entered into the Purchase Agreement with LPC that provides for issuances of common stock up to an aggregate of $20.0 million. The aggregate number of shares that we can sell to LPC under the Purchase Agreement may not exceed 1,669,620 shares of our common stock, subject to certain exceptions set forth in ~~October~~the Purchase Agreement. Through September 30, 2021, we have issued an aggregate of 149,507 shares under the Purchase Agreement and have received gross proceeds of approximately $1.2 million.

In December 2020, we ~~received~~entered into the EDA with Oppenheimer & Co. Inc. as sales agent that provides for an “at the market offering” for the sale of up to $50.0 million in Placement Shares. For the period from July 1, 2021 through September 30, 2021, we sold 138,388 shares of our common stock for which aggregate net proceeds ~~from investors in a private placement~~ of approximately ~~$37.5~~$1.5 million ~~from~~were received. Accordingly, we may sell up to an additional $48.5 million under the ~~issuance~~EDA.

In April 2021, we entered into a $30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp. and certain other lenders (the “Lenders”). The Lenders agreed to loan up to $30.0 million in three tranches consisting of ~~units~~(i) a $15.0 million term A loan that ~~consisted~~was funded on April 14, 2021, (ii) a $7.5 million term B loan to be funded upon our request no later than January 25, 2022, and (iii) a $7.5 million term C loan to be funded upon our request no later than September 25, 2022. Funding of ~~approximately 2.5~~the term B loan was subject to our ability to obtain at least $35 million ~~shares~~ of ~~Common Stock~~equity or subordinated debt financing by January 2022 and ~~warrants~~the achievement of certain clinical milestones related to RZ358 and RZ402. Funding of the term C loan is subject to our 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”). We are permitted to make interest-only payments on each term loan at least through May 1, 2023.

As a result of the completion of the Underwritten Offering and the registered direct offering in October 2021 for gross proceeds of $55.0 million, as well as equity issuances under the EDA and LPC Purchase Agreement during the three months ended September 30, 2021, we have met the financing threshold to qualify for the ~~purchase~~term B loan but will need to raise an additional $12.3 million to qualify for the term C loan. To date we have not achieved the clinical milestones to qualify for the term B and term C loans. No assurance can be provided that we will meet the requirements to qualify for the term B and term C loans and, even if we do qualify for this funding, no assurance can be provided that we would elect to request it.

As a condition of ~~approximately 0.8~~the Loan Agreement, our 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 ~~shares~~must be maintained beginning on the earlier of ~~Common Stock.~~ (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 our cash accounts until the default is cure or waived. For additional information about the Loan Agreement, please refer to Note 5 to the financial statements included in Part I, Item 1 of this Report.

We believe our existing cash and cash equivalents balance ~~plus~~of $37.3 million as of September 30, 2021, combined with the public offering and registered direct offering net proceeds ~~from the private placement~~ of ~~$37.5~~$51.7 million received in October 2021 will be adequate to carry out currently planned activities ~~until the second half~~into November 2022.

Table of ~~the fiscal year ending June 30, 2022. We also have flexibility to delay future clinical programs to conserve our capital resources.~~Contents

Beginning in March 2020, COVID-19 has resulted in an economic environment that is unfavorable for many businesses to conduct operations. The U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders to halt the spread of the virus. While these orders have been relaxed, a full recovery of the U.S. economy may not occur until after 2021. The long-term effects on us are expected to result in higher costs in order to comply with safeguards to protect patients and staff engaged in clinical activities, and extended periods of time may be required to complete clinical trials. The current economic environment and financial market volatility may make it more challenging for us to continue to obtain funding in the future for our clinical programs.

~~Presented below is further discussion of recent developments that impacted our liquidity and capital resources.~~

~~Fiscal 2021 Financing~~

On October 9, 2020, we completed a private placement 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 7 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 a financial advisory agreement, we agreed to pay the advisors a fee of 6.0% of the gross proceeds, and costs for professional fees and other offering costs are estimated at approximately 2.0% of the gross proceeds. 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 private placement, we executed the Reverse Stock Split, which was previously approved by the stockholders at our annual meeting on October 23, 2019 and that was effective on October 9, 2020. In addition, we are required to use commercially reasonable efforts to (i) list our shares of Common Stock for trading on the Nasdaq Capital Market which was approved by Nasdaq on November 3, 2020, (ii) register the shares of Common Stock included in the Units, and (iii) register the shares of Common Stock issuable upon exercise of the warrants. If we fail 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.

~~Xoma License Agreement~~

In December 2017, we entered into a license agreement (“License Agreement”) with XOMA Corporation (“Xoma”) pursuant to which Xoma granted us an exclusive global license to develop and commercialize RZ358 for all indications. In January 2019, the License Agreement was amended. with an updated payment schedule, as well as revising 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.

On March 31, 2020, we entered into Amendment No. 3 to the License Agreement to extend the previous payment schedule for the remaining balance of approximately $2.6 million. The revised payment schedule provided for seven quarterly payments to be paid beginning on March 31, 2020, whereby the outstanding balance was reduced to $1.4 million as of September 30, 2020. Pursuant to Amendment No. 3, we were obligated to repay the remaining outstanding balance within 15 days following the closing of a financing for $20.0 million or more. Accordingly, the completion of the Fiscal 2021 Financing resulted in acceleration of the $1.4 million outstanding obligation, which was paid in full on October 23, 2020.

Upon the achievement of certain clinical and regulatory events, we will be required to make up to $37.0 million in aggregate milestone payments to Xoma. The first such milestone payment of $2.0 million will be triggered upon enrollment of the last patient in our ongoing phase 2 clinical study. As a result of COVID-19, this study has been temporarily paused. Assuming we are able to resume the phase 2b study by the end of calendar year 2020, we believe we will be able to complete this study by the second half of calendar year 2021. 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..

~~ActiveSite License Agreement~~

In August 2017, we entered into a Development and License Agreement with ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) pursuant to which we acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Program”). We are planning to use the PKI Program to develop, file, manufacture, market and sell products for diabetic macular edema and other human 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 is due after acceptance of an IND, which we filed with the FDA on October 28, 2020 and is currently under review. We will also be required to pay royalties equal to 2.0% of any sales of products that use the PKI Program.

Cash Flows Summary

Presented below is a summary of our operating, investing and financing cash flows for the three months ended September 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):


	2021		2020		Change
Net cash provided by (used in):
Operating activities	$	(6,341)	$	(3,551)	$	(2,790)
Investing activities		—		—		—
Financing activities		2,586		—		2,586

2020 2019 Change
Net cash provided by (used in):
Operating activities $ (3,551 ) $ (8,929 ) $ 5,378
Investing activities - - -
Financing activities - 22,571 (22,571 )

Cash Flows Used in Operating Activities

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, cash flows used in operating activities amounted to ~~$3.6~~$6.3 million and ~~$8.9~~$3.6 million, respectively. The key components in the calculation of our cash used in operating activities are as follows (in thousands):


	2021		2020		Change
Net loss	$	(7,836)	$	(3,620)	$	(4,216)
Non-cash expenses		1,028		699		329
Non-cash gains		(16)		—		(16)
Changes in operating assets and liabilities, net		483		(630)		1,113
Total	$	(6,341)	$	(3,551)	$	(2,790)

2020 2019 Change
Net loss $ (3,620 ) $ (5,080 ) $ 1,460
Non-cash expenses 699 1,454 (755 )
Changes in operating assets and liabilities, net (630 ) (5,303 ) 4,673

Total $ (3,551 ) $ (8,929 ) $ 5,378

For the three months ended September 30, ~~2020,~~2021, our net loss was ~~$3.6~~$7.8 million compared to ~~$5.1~~$3.6 million for the three months ended September 30, ~~2019.~~2020. For further discussion about changes in our operating results for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, please refer to Results of Operations above.

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, our non-cash expenses of ~~$0.7~~$1.0 million and ~~$1.5~~$0.7 million, respectively, were primarily attributable to ~~stock-based~~share-based compensation expense. For the three months ended September 30, 2021, net changes in operating assets and liabilities increased operating cash flow by $0.5 million, primarily driven by increased in accounts payable by $0.6 million, partially offset by an increase in prepaid expenses and other assets of $0.1 million. For the three months ended September 30, 2020, net changes in operating assets and liabilities decreased operating cash flow by $0.6 million, primarily driven by a reduction in accrued liabilities of $0.6 million. This reduction was comprised of a $0.4 million decrease in payables to Xoma under the amended License Agreement, and a $0.2 million decrease in other accrued liabilities. For the three months ended September 30, 2019, net changes in operating assets and liabilities decreased operating cash flow by $5.3 million, which was primarily due to a decrease in payables to Xoma of $4.9 million under the amended license agreement.

Cash Flows Provided by Investing Activities

We did not have any cash flows from investing activities for the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities for the three months ended September 30, 2021 amounted to $2.6 million. This amount included (i) $1.5 million of gross proceeds from the EDA and (ii) $1.2 million of gross proceeds from LPC purchase agreement. The total proceeds from equity financing activities amounted to $2.7 million and were partially offset by payments of $0.1 million related to financial advisory fees and other costs of equity financings.

We did not have any cash flows from financing activities for the three months ended September 30, 2020. Net cash provided by financing activities for the three months ended September 30, 2019 amounted to $22.6 million. This amount consisted of (i) $20.0 million received from the H&G in July 2019 for the purchase of approximately 1.4 million shares of Common Stock at a purchase price of $14.50 per share and (ii) $4.1 million received from other investors in July and August 2019 for the purchase of approximately 0.3 million shares of our Common Stock at a purchase price of $14.50 per share. The gross proceeds from these equity issuances totaled $24.1 million and was partially offset by fees of $1.5 million under a financial advisory agreement to result in net proceeds of $22.6 million.

Recent Accounting Pronouncements

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

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Off-Balance Sheet Arrangements

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

~~ITEM~~Item 3. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting companies.

~~ITEM~~Item 4. ~~CONTROLS AND PROCEDURES.~~

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive 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”). Based on that assessment under those criteria, our management has determined that, as of ~~September~~June 30, ~~2020,~~2021, our internal control over financial reporting was not effective due to atwo material ~~weakness~~weaknesses in the system of internal control. A material weakness is a deficiency, or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely manner.

The first material weakness identified by management is 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 our fiscal year ended June 30, ~~2020,~~2021, we hired a ~~Director~~VP of ~~Accounting~~Finance and we implemented additional procedures to improve our segregation of duties. However, without hiring additional personnel we have been unable to fully remediate this material weakness. We cannot provide assurance that these or other measures will eventually result in the elimination of the material weakness described above.

In March 2021, we identified a second material weakness that resulted from ineffective treasury controls over review of outstanding authorized shares and requirements for all securities and contracts to issue common shares to ensure adequate authorized shares exist. This material weakness occurred in February 2021 when we decided to file a Charter Revision that changed our authorized shares of capital stock in the same 50 shares for one share ratio that applied to our issued shares of common stock, stock options and warrants pursuant to a reverse stock split that was effected in October 2020. The impact of this adjustment caused an immediate reduction in our authorized shares of common stock from 500,000,000 shares to 10,000,000 shares. Accordingly, after the Charter Revision we did not have a sufficient number of authorized shares of common stock in the event that all of our outstanding stock options and warrants are subsequently exercised.

On May 26, 2021, our shareholders voted to approve motions to reincorporate from the state of Delaware to the state of Nevada and to increase our authorized shares of common stock from 10,000,000 shares to 40,000,000 shares. Accordingly, the authorized share deficiency that occurred in February 2021 was cured on May 26, 2021, such that we have an adequate number of shares of common stock whereby all outstanding stock options and warrants may be exercised in exchange for shares of common stock. In addition to the shareholder approvals to reincorporate and increase our authorized shares, we are implementing procedures to ensure that our Board of Directors provides explicit approval for all future charter amendments, and all future issuances of shares of our common stock and any warrants and stock options that are not subject to a plan approved by our shareholders. We cannot provide assurance that these or other measures will eventually result in the elimination of this material weakness.

Changes in internal controls over financial reporting

~~During the period covered by this Quarterly Report on Form 10-Q, there~~There were no changes in our internal control over financial reporting ~~(as defined in Rule 13(a)-15(f) or 15(d)-15(f)) that occurred~~ during the ~~period covered by this quarterly report~~fiscal quarter ended September 30, 2021 that ~~have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS.~~

Legal Proceedings.

None

~~ITEM~~Item 1A. ~~RISK FACTORS.~~

Risk Factors.

Certain factors exist which may affect the Company’s business and could cause actual results to differ materially from those expressed in any forward-looking statements. Factors that could cause our actual results to differ materially from those in this Report are any of the risks described in Item 1.A. Risk Factors of our ~~2020~~2021 Form 10-K, and the risk factor discussed below. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

~~COVID-19 could continue to adversely impact our business, including our clinical trials.~~

Beginning in March 2020, COVID-19 has resulted in an economic environment that is unfavorable for many businesses to conduct operations and to pursue new debt and equity financings. The U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders to halt the spread of the virus. While these orders have been relaxed, a full recovery of the U.S. economy may not occur until 2021 or later. The extent to which COVID-19 may continue to impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. As COVID-19 continues to spread around the globe, we will likely experience disruptions that could severely impact our business and clinical trials, including:

	•	~~delays or difficulties in enrolling patients or maintaining scheduled study visits in our clinical trials;~~

	•	~~delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;~~

	•	diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

	•	~~interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;~~

	•	limitations in employee resources that would otherwise be focused on the conduct of our business or our clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people or as a result of the governmental imposition of “shelter in place” or similar working restrictions;

	•	~~delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;~~

	•	~~delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;~~

	•	~~interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials;~~

	•	changes in local regulations as part of a response to the COVID-19 outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

	•	delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

	•	~~refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.~~

COVID-19 is currently impacting countries, communities and markets. We require ongoing access to the capital markets to fund our future capital requirements. To the extent that our access to the capital markets is adversely affected by COVID-19, we may need to consider alternative sources of funding for our operations and for working capital, any of which could increase our cost of capital.

Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain litigation that may be initiated by our stockholders, including claims under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. Notwithstanding the foregoing, the exclusive provision shall not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.”

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

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~

There were no reportable issuances of unregistered shares of the Company's equity securities for the period covered by this Report.

Item 3. Defaults Upon Senior Securities.

None.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES.~~

~~None.~~

Item 4. Mine Safety Disclosures.

~~ITEM 4. MINE SAFETY DISCLOSURES.~~

Not applicable.

Item 5. Other Information.

None.

~~ITEM 5. OTHER INFORMATION.~~

~~None.~~

Item 6. Exhibits.

~~ITEM 6. EXHIBITS.~~


Exhibit Number		Description of Exhibits
10.1		Purchase Agreement, dated as of August 2, 2021 by and between the Company and Lincoln Park Capital Fund, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filing on August 4, 2021)
~~31.1~~* 10.2		Registration Rights Agreement, dated as of August 2, 2021 by and between the Company and Lincoln Park Capital Fund, LLC (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filing on August 4, 2021)
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~~* 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 (Embedded within the Inline XBRL document and included in Exhibit)

* 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.~~
		REZOLUTE, INC.

Date: November 12, ~~2020~~2021	By:	/s/ Nevan Elam
		Nevan Elam
		Chief Executive Officer
		(Principal Executive and Financial Officer)