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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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For the transition period from              to

Commission file number: 001-39683

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REZOLUTE, INC.

(Exact Name of Registrant as Specified in its Charter)

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(650) 206-4507

(Registrant’s Telephone Number,telephone number, including Area Code)area code)

Not Applicable201 Redwood Shores Parkway, Suite 315, Redwood City, California 94065

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

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

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

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

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

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

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

The registrant had 15,440,25036,827,567 shares of its $0.001 par value common stock outstanding as of November 10, 2021.7, 2022.

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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:

Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known orand unknown risks, uncertainties and other factors including, but not limited to, the risks described in Part II, Item 1.A Risk factors, as well as “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 20212022 (the “2021“2022 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on September 15, 2021 and as amended on September 27, 2021.2022.

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. 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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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Rezolute, Inc.

Unaudited Condensed Consolidated Balance Sheets

(inIn thousands, except per share amounts)

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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

(inIn thousands, except per share amounts)

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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 Shareholders’ Equity

Three Months Ended September 30, 2022 and 2021

(in thousands, except per share amounts)In thousands)

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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

(inIn thousands)

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

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

Nature of Operations

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

Change in Domicile

In June 2021, the Company merged with and into its wholly owned subsidiary, Rezolute Nevada Merger Corporation, The Company’s primary clinical assets consist of (i) RZ358, which is a Nevada corporation (“Merger Sub”), pursuant topotential treatment for congenital hyperinsulinism, an Agreement and Planultra-rare pediatric genetic disorder characterized by excessive production 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 approvedinsulin by the Company’s shareholders atpancreas, and (ii) RZ402, which is an oral plasma kallikrein inhibitor (“PKI”) being developed as a potential therapy for the 2021 annual meetingchronic treatment of its shareholders held on May 26, 2021.diabetic macular edema.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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, 2021,2022, has been derived from the Company’s audited consolidated financial statements. The unaudited interim financial statements should be read in conjunction with the Company’s 20212022 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, 2021.2022.

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'smanagement’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) that are necessary for a fair financial statement presentation have been made. The interim results for the three months ended September 30, 20212022 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, 2022.2023.

Consolidation

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

Significant Accounting Policies

The Company’s significant accounting policies are described in Note 1 to the financial statements in Item 8 of the 20212022 Form 10-K. For

Recent Accounting Pronouncements

Recently Adopted Standard.  The following standard was adopted during the three months ended September 30, 20212022:

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. The Company adopted this standard using the full retrospective transition method effective July 1, 2022. The adoption did not adopthave any new accounting policies.

Recent Accounting Pronouncementsimpact on the Company’s financial statements.

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

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 ASU 2016-13 will have a material impact on its consolidated financial 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.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 3 — OPERATING LEASES

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

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For the three months ended September 30, 20212022 and 2020,2021, operating lease expense was as followsis included under the following captions in the accompanying condensed consolidated statements of operations (in thousands):

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As of September 30, 2021,2022, the weighted average remaining lease term under operating leases was 1.81.4 years, and the weighted average discount rate for operating lease liabilities was 7.1%6.0%. For the three months endedFuture payments under all operating lease agreements that had commenced as of September 30, 20212022 are as follows (in thousands):

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Headquarters Lease

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In April 2022, the Company entered into a lease agreement for a new corporate headquarters in Redwood City, California. The space consists of approximately 9,300 square feet and 2020,provides for total base rent payments of approximately $2.9 million through the expected expiration of the lease in November 2027. The landlord was required to make improvements to the facility before the Company could occupy the space, which were completed in October 2022, triggering the commencement of the lease. The lease provides for a six-month rent abatement period beginning upon commencement of the lease term which occurred on October 18, 2022. In addition, the lease provides an allowance of approximately $0.1 million that may be utilized by the Company for the purchase of furniture and equipment. The average base rent payable in cash paidover the 60-month lease term is approximately $48,000 per month. Upon commencement of the lease, the Company expects to recognize a right-of-use asset and a related operating lease liability for amounts included in the measurement of operating lease liabilities was $0.1approximately $2.3 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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FutureThe future payments under allthis operating lease agreements as of September 30, 2021agreement are as follows (in thousands):

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NOTE 4 — LICENSE AGREEMENTS

XomaXOMA License Agreement

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

In January 2022, the Company was required to make a milestone payment under the XOMA License Agreement of $2.0 million that became due upon the dosing of the last patient in the Company’s ongoing Phase 2b Clinical Trial for RZ358.  Upon the achievement of certain clinical and regulatory events under the XOMA License Agreement, the Company will be required to make up to $37.0 million in aggregateadditional milestone payments to Xoma.XOMA up to $35.0 million.  After the clinical and regulatory milestones, the Company will be required, upon the future commercialization of RZ358, to pay royalties to XOMA based on the net sales of the related products and additional milestone payments to XOMA up to $185.0 million related to annual net sales amounts. The next milestone payment of $5.0 million will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358.

ActiveSite License Agreement

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

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NOTE 5 — LOAN AND SECRUITY AGREEMENTEMBEDDED DERIVATIVE LIABILTY

On April 14, 2021, the Company entered into a $30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp. and certain other lenders (the “Lenders”). The Lenders agreed to loan up to $30.0 million in three tranches consisting of (i) a $15.0 million term A loan that was funded on April 14, 2021, (ii) 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. Fundingloans for an aggregate of the term B loan is$15.0 million, which were subject to the Company’s ability to obtain at least $35.0 millionprescribed amounts of equity or subordinated debt financing by January 2022 and the achievement of certain clinical milestones. The Company did not achieve the initial clinical milestones related to RZ358by January 2022 and, RZ402. Funding of the term C loan is subject to the Company’s ability to (i) meet the conditions for fundingaccordingly, the term B and term C loans were no longer a source of liquidity. The term A 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 hashad a maturity date of April 1, 2026 (the “Maturity Date”). As discussed, but was repaid 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 Septemberfull on June 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.2022.

In addition, the Company’s cash and cash equivalents became subject to a blocked account control agreement (“BACA”) in favor of the Lenders whereby a cash balance of at least $5.0 million must be maintained beginning on the earlier of (i) December 31, 2021, and (ii) the date the term B loan is funded. In the event of a default under the Loan Agreement, the BACA would enable the Lenders to prevent the release of funds from the Company’s cash accounts.

Outstanding borrowings bear interest at a floating rate equal to (a) 8.75% per annum plus (b) the greater of (i) the rate per annum published by the Intercontinental Exchange Benchmark Administration Ltd. (“IEBA”) for a term of one month and (ii) 0.12% per annum. 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 subordinated debt financing by September 2022 and no event of default shall have occurred. The Company will be required to make monthly payments of principal and interest commencing at the end of the interest-only period.

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 aggregate amount of the 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 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 Loan Agreement, the Company entered into an exit fee agreement (the “Exit Fee Agreement”) that provides for a fee of 4.00% of the funded principal balance of each term loan in the event certain transactions (defined as “Exit Events”) occur prior to April 13, 2031. Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of control transactions, and issuances of common stock that result in new investors owning more than 35% of the Company’s 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.derivatives. Fair value was determined primarily 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 effective rate for the term A loan. Fair value of this embedded derivativederivatives 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 will incur a prepayment fee ranging from 1.00% to 3.00% of the outstanding principal balance.

The Company’s obligations under the Loan Agreement are secured by a first-priority security interest in substantially all the Company’s assets, including its intellectual property. 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 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.