What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-09-15 compared with 2021-09-15 · 267 added, 586 removed, 47 unchanged (95% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion

and Analysis of Financial Condition and Results of Operations contain forward-looking statements which involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors,

including those set forth under “Risk Factors”

and elsewhere in this Annual Report.

We assume no obligation to update forward-looking

statements or the risk factors.

You should read the following discussion in conjunction with our consolidated financial statements and

related notes included in Item 8 of this Annual Report.

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

consolidated financial statements or in the associated text.

Certain other amounts that appear in this section may similarly not sum due

Recent Developments

Debt Facility

In April 2021, we entered into a $30.0 million

Loan Agreement with SLR and certain other 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 us

no later than January 25, 2022, and (iii) a $7.5 million term C loan to be funded upon request by us no later than September 25,

Funding of the term B loan is subject to our 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 our

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.

no assurance can be provided that any funding will be received pursuant to the term B and term C loans.

Each term loan has a maturity

date of April 1, 2026.

Change in Domicile

In June 2021, we merged with and into our Merger

Sub, pursuant to the Reincorporation Merger Agreement between us and Merger Sub, with the Reincorporation Merger which changes our state of domicile from Delaware to Nevada.

At the Effective Time,

the Merger Sub was renamed “Rezolute, Inc.”

and succeeded to the assets, continued our business and assumed our rights and

obligations by operation of law.

The Reincorporation Merger Agreement was approved by our shareholders at the 2021 annual meeting of our

shareholders held on May 26, 2021.

Russell Microcap

In June 2021, we announced that we had been added

to the Russell Microcap®

Index at the conclusion of the 2021 Russell indexes annual reconstitution, effective after the U.S.

opened on June 28, 2021.

Lincoln Park Capital

In August 2021, we entered into a purchase agreement (the

Purchase Agreement ”) and a registration rights agreement with Lincoln Park Capital Fund, LLC (“

LPC ”),

which provides that we may sell to LPC up to $20.0 million of shares (the “

Purchase Shares ”) of our common stock.

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.

Please refer to our discussion under Liquidity

below and in Notes 1, 5 and 15 to our consolidated financial statements included in Item 8 of this Annual Report for further discussion

of the change in domicile, the Loan Agreement with the Lenders, and the Purchase Agreement with LPC.

Special Note About COVID-19

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.

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.

our financial results for the fiscal year ended June 30, 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 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

We will continue to monitor the situation closely.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements which involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the Cautionary Statement Regarding Forward-Looking Statements on page ii, the “Risk Factors” set forth in Item 1A, and elsewhere in this Annual Report.

We assume no obligation to update forward-looking statements or the risk factors.

You should read the following discussion in conjunction with our consolidated financial statements and related notes included in Item 8 of this Annual Report.

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 consolidated financial statements or in the associated text.

Certain other amounts that appear in this section may similarly not sum due to rounding.

Executive Summary

Clinical Development

Our lead clinical asset, RZ358, is an antibody therapy that we are preparing for Phase 3 clinical development as a potential treatment for congenital HI, an ultra-rare pediatric genetic disorder.

We reported positive topline results from the RIZE study in March 2022.

These results were presented at the Pediatric Endocrine Society Meeting on May 1, 2022 and recently announced that results will also be presented at the European Society of Pediatric Endocrinology Meeting on September 16, 2022.

In the study it was demonstrated that administration of RZ358 resulted in a > 50% improvement in hypoglycemic events across all doses and approximately 75% improvement at the mid (6 mg/kg) and top (9 mg/kg) doses.

There were no adverse drug reactions, dose-limiting toxicities, or drug-related serious adverse events.

We believe that these positive results from the RIZE study are Phase 3 enabling and accordingly we have now initiated interactions with regulatory authorities in the US and Europe.

As the next critical step in the program, we are substantially dependent upon achieving successful interaction with regulatory authorities to enable Phase 3.

Among other matters, we need to obtain alignment with regulators on a number of critical criteria (the “Factors”) including but not limited to the following:

(i) overall study design parameters including the potential inclusion of a placebo control arm;

(ii) the total number of subjects in the study;

(iii) the doses we intend to study in Phase 3 and the permissible ages of children that we will be permitted to enroll in the study;

(iv) the total duration of dosing in the study;

and (v) the primary and secondary endpoints to be evaluated in the study.

Our objective is to complete the regulatory interactions prior to the end of the first quarter of calendar year 2023 which would facilitate initiation of a Phase 3 study in the first half of calendar year 2023.

To the extent that we are unable to achieve satisfactory alignment with regulators with regard to the Factors and other matters pertaining to a Phase 3 study, the success of the RZ358 development program could be significantly impaired and this would have a material and adverse impact on our prospects and results of operations.

Our second clinical asset, RZ402, is an oral PKI being developed as a potential therapy for DME.

In calendar year 2022 we completed Phase 1 clinical development for RZ402 including an MAD study that validated and supported the potential for once daily oral dosing.

The MAD study showed dose-dependent increases in systemic exposures, with repeat-dosing to steady-state resulting in the highest concentrations of RZ402 explored to date, exceeding 200 ng/mL and 50 ng/mL at peak and 24-hour trough, respectively.

The MAD study results showed that RZ402 was generally safe and well-tolerated, including at higher doses than previously tested in the SAD study.

There were no serious adverse events, adverse drug reactions or identified risks.

We are advancing developmental activities toward a Phase 2a proof-of-concept study, which we plan to initiate during the fourth quarter of calendar year 2022.

Financing Activities

Immediately following our announcement of the success of the RIZE study, we initiated financing activities which resulted in the receipt of gross proceeds of approximately $130.0 million between May and July of 2022.

Specifically, On May 1, 2022, we entered into (i) an underwriting agreement with Jefferies LLC, as representative of the underwriters listed therein, relating to the issuance and sale of equity securities in an underwritten registered direct offering (the “2022 RDO”), and (ii) a placement agency agreement with Jefferies LLC, that provides for a private placement of equity securities (the “Private Placement”).

The 2022 RDO resulted in the issuance of (i) approximately 18.0 million shares of our common stock at a public offering price of $3.80 per share, (ii) Class A pre-funded warrants (the “Class A PFWs”) to purchase up to 2.0 million shares of common stock at a public offering price of $3.799 per Class A PFW, and (iii) Class B pre-funded warrants (the “Class B PFWs”) to purchase up to 10.9 million shares of common stock at a public offering price of $3.799 per Class B PFW.

On May 4, 2022, the 2022 RDO closed resulting in net proceeds of approximately $110.1 million.

The gross amount of the 2022 RDO was $117.6 million, before deduction of an aggregate of $7.1 million for underwriting discounts and approximately $0.4 million for professional fees and other offering expenses payable by us.

In connection with the 2022 RDO, certain of our officers and directors agreed not to sell or otherwise dispose of any common stock held by them through July 30, 2022.

Upon closing of the 2022 RDO, we did not have a sufficient number of shares of common stock available to permit exercise of any of the Class B PFWs.

Therefore, the Class B PFWs were contingently exercisable upon the approval by our shareholders of an increase in the number of authorized shares of common stock (the “Shareholder Approval”).

16, 2022, the Shareholder Approval occurred which resulted in an increase in our authorized shares of common stock from 40.0 million shares to 100.0 million shares.

As a result of this contingency, the Class B PFWs were accounted for as a derivative liability in our consolidated financial statements until the Shareholder Approval was obtained.

The closing for the Private Placement occurred in July 2022 whereby we received gross proceeds of approximately $12.3 million in exchange for the issuance of approximately 3.2 million shares of common stock at a purchase price of $3.80 per share.

The net proceeds from the Private Placement amounted to approximately $11.6 million after deduction of $0.7 million for underwriting commissions.

The additional funding provides us with the wherewithal to fund a Phase 3 clinical program for RZ358 as well as a Phase 2 proof of concept study for RZ402.

Termination of EDA and Purchase Agreement

We entered an Equity Distribution Agreement (“EDA”) with Oppenheimer & Co.

(“Oppenheimer”) in December 2020 and a purchase agreement (“Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”) in August 2021.

In May 2022, we provided notices to Oppenheimer and LPC whereby the EDA and the Purchase Agreement were terminated.

As a result of these termination notices, no further equity securities are issuable under either agreement.

Termination of Loan Agreement

On April 14, 2021, we entered into a $30.0 million Loan and Security Agreement (the “Loan Agreement”) with Solar Investment Corp.

(“SLR”) as collateral agent, and the parties signing the Loan Agreement from time to time as lenders, including SLR in its capacity as a lender.

On June 30, 2022, we paid off the outstanding loan amount of $15.0 million in full and terminated the Loan Agreement in accordance with its terms.

In addition to the repayment of principal and accrued interest, we paid (i) a prepayment fee equal to 2.00% of the outstanding principal balance for a total of $300,000, and (ii) a final fee equal to 4.75% of the aggregate amount of the term loans funded for a total of $712,500.

The terminated Loan Agreement was secured by substantially all of our assets.

The security interests and liens granted in connection with the terminated Loan Agreement were released on June 30, 2022.

Headquarters Lease

In April 2022, we entered into a lease agreement for a new corporate headquarters facility in Redwood City, California.

The space consists of approximately 9,300 square feet and provides for total base rent payments of approximately $2.9 million through the expected expiration of the lease in July 2027.

The lease provides for a six-month rent abatement period beginning upon commencement of the lease term which is expected to occur in September 2022

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 ”),

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 our product candidates, we anticipate it will be some time before we generate substantial revenues,

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

Over the last several years, we have conducted private placements and public offerings to raise additional capital, adopted a licensing model to pursue development of product candidates, conducted pre-clinical and clinical trials, and conducted other research and development activities on our pipeline of product candidates.

Due to the time required to conduct clinical trials and obtain regulatory approval for our product candidates, we anticipate it will be 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 shareholders.

Key Components of Consolidated Statements of

therefore, we expect to continue efforts to raise additional capital to maintain our current operating plans over the next several years.

We cannot assure you that we will secure such financing or that it will be adequate for the long-term execution of our business strategy.

Even if we obtain additional financing, it may be costly and may require us to agree to covenants or other provisions that will favor new investors over our existing shareholders.

The COVID-19 pandemic and its adverse effects continue to affect the locations where we, our manufacturers, suppliers or third-party business partners conduct business.

Although we have continued our operations and clinical trials to date, we have experienced delays in clinical trials, and we could experience additional delays in our planned clinical trials, which could materially adversely impact our business, results of operations and overall financial performance in future periods.

In addition, we may experience an adverse impact from changes in how we and companies worldwide conduct business due to the COVID-19 pandemic, including but not limited to continued restrictions on travel and in-person meetings, delays in future site activations and future enrollment of clinical trials, prioritization of hospital resources toward the COVID-19 pandemic effort, delays in review by the FDA and comparable foreign regulatory agencies, and disruptions in our supply chain for our product candidates.

As of the filing date of this Annual Report, the extent to which COVID-19 may impact our financial condition, results of operations or guidance is uncertain.

The effect of the COVID-19 pandemic will not be fully reflected in our results of operations and overall financial performance until future periods.

See the section entitled “ Risk Factors ” under Item 1A of this Annual Report for further discussion of the possible impact of the COVID-19 pandemic on our business.

Key Components of Consolidated Statements of Operations

Research and development expenses.

and development (“

R&D ”) expenses consist primarily of compensation and benefits for our personnel engaged in R&D

activities, clinical trial costs, licensing costs, and consultants and outside services.

Our R&D costs include an allocable portion

of our cash and share-based compensation, employee benefits, and consulting costs related to personnel engaged in the design and development

of product candidates and other scientific research projects.

We also allocate a portion of our facilities and overhead costs based on

the personnel and other resources devoted to R&D activities.

Research and development (“R&D”) expenses consist primarily of clinical trial costs, compensation and benefits for our personnel engaged in R&D activities, licensing costs, and consultants and outside services.

Our R&D costs include an allocable portion of our cash and share-based compensation, employee benefits, and consulting costs related to personnel engaged in the design and development of product candidates and other scientific research projects.

We also allocate a portion of our facilities and overhead costs based on the personnel and other resources devoted to R&D activities.

General and administrative expenses.

and administrative (“

G&A ”) expenses consist primarily of (i) an allocable portion of our cash and share-based compensation

and employee benefits related to personnel engaged in our administrative, finance, accounting, and executive functions, and (ii) an allocable

portion of our facilities and overhead costs based on the personnel and other resources devoted to G&A activities.

also include travel, legal, auditing, investor relations and other costs primarily related to our status as a public company.

Change in fair value of derivative liabilities.

recognized a derivative liability related to a deficiency in our authorized shares.

Since there was a possibility that we could be required

to settle this share deficiency in cash, we recognized a derivative liability at fair value on the date that the deficiency occurred.

General and administrative (“G&A”) expenses consist primarily of (i) an allocable portion of our cash and share-based compensation and employee benefits related to personnel engaged in our administrative, finance, accounting, and executive functions, and (ii) an allocable portion of our facilities and overhead costs based on the personnel and other resources devoted to G&A activities.

G&A expenses also include travel, legal, auditing, investor relations and other costs primarily related to our status as a public company.

Gain from change in fair value of derivative liabilities, net.

We recognize derivative liabilities if we issue stock options and warrants but don’t have sufficient authorized shares of common stock to accommodate all potential exercise.

Under these circumstances, accounting as a derivative liability is required since the possibility exists that we could have been required to settle stock options and warrants in cash.

Such derivative liabilities are recorded at fair value on the date that the deficiency occurred and subsequently adjusted to fair value at the end of each reporting period through the date the deficiency is cured.

We also recognize 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 consolidated statements of operations.

Any gains or losses reflected prior

to the deficiency was cured will not be reversed.

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 gains and losses in our consolidated statements of operations.

Gains and losses reflected prior to the date a deficiency is cured are not subsequently reversed.

Employee retention credit.

to the COVID-19 pandemic, the United States government has designed programs to assist businesses in dealing with the financial hardships

caused by the pandemic.

We recognize the right to receive governmental assistance payments in the period in which the related conditions

on which they depend are substantially met.

Interest expense.

The components

of interest expense include the amount of interest payable in cash at the stated interest rate, and accretion of debt discounts and issuance

costs (“

DDIC ”) using the effective interest method.

DDIC arises from the issuance of debt instruments and other related

contracts or agreements which possess certain terms and conditions resulting in additional financing costs arising from origination, exit

and final fees, and other incremental and direct costs incurred to consummate the financing, among others.

In response to the COVID-19 pandemic, the United States government has designed programs to assist businesses in dealing with the financial hardships caused by the pandemic.

We recognize the right to receive governmental assistance payments in the period in which the related conditions on which they depend are substantially met.

Interest and other income.

and other income consist primarily of interest income earned on temporary cash investments.

Critical Accounting Policies and Significant

Judgments and Estimates

Our management’s discussion and analysis

of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States.

The preparation of the 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

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.

Interest and other income consist primarily of interest income earned on temporary cash investments.

Discount on issuance of derivative liability.

For derivative liabilities issued at a discount to the grant date fair value of the financial instrument, an expense is recognized on the issuance date for the amount of the discount.

Interest expense.

The components of interest expense include the amount of interest payable in cash at the stated interest rate, and accretion of debt discounts and issuance costs (“DDIC”) using the effective interest method.

DDIC arises from the issuance of debt instruments and other related contracts or agreements which possess certain terms and conditions

resulting in additional financing costs arising from origination, exit and final fees, and other incremental and direct costs incurred to consummate the financing, among others.

Loss on extinguishment of debt.

When we repay our debt arrangements prior to the maturity date, we evaluate the terms to determine if the repayment should be accounted for as a troubled debt restructuring, a modification or an extinguishment.

If we conclude that accounting as an extinguishment is required, the extinguishment charge includes the write-off of any unaccreted DDIC, prepayment premiums required under the debt agreement, and professional fees incurred to complete the transaction.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of the 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 this Annual Report, 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.

With respect to our significant accounting policies that are described in Note 1 to our consolidated financial statements included in Item 8 of this Annual Report, 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.

Gain from Change in Fair Value of Derivative Liabilities

We recognize derivative liabilities if we issue stock options and warrants but do not have sufficient authorized shares of common stock to accommodate all potential exercises.

Under these circumstances, accounting as a derivative liability is required since the possibility exists that we could have been required to settle these financial instruments in cash.

We recognized a derivative liability for a deficiency in our authorized shares of common stock that existed from February 17, 2021, until the deficiency was cured on May 26, 2021.

We made an accounting policy election to select the stock options and warrant agreements with the earliest issuance dates to compute the estimated fair value of the financial instruments associated with the authorized share deficiency.

These stock options and warrants were generally those with the highest exercise prices that were least likely to be exercised.

Fair value of the stock options and warrants associated with the deficiency were computed on the date the deficiency arose and at the end of each reporting period using the Black-Scholes-Merton (“BSM”) option-pricing model.

Key assumptions inherent in this valuation model include the historical volatility of our common stock, the remaining contractual term of the options and warrants, and the market price of our common stock on the respective valuation dates.

We also recognized a derivative liability for the Class B PFWs issued in connection with the 2022 RDO financing due to the restrictions on exercisability until the authorized share deficiency was cured on Jun 16, 2022, upon receipt of shareholder approval for an increase in our authorized shares.

Research and Development

Research and development costs are expensed as

Intangible assets related to in-licensing costs under license agreements with third parties are charged to expense unless we

are able to determine that the licensing rights have an alternative future use in other research and development projects or otherwise.

Research and development costs are expensed as incurred.

Intangible assets related to in-licensing costs under license agreements with third parties are charged to expense unless we are able to determine that the licensing rights have an alternative future use in other research and development projects or otherwise.

Clinical Trial Accruals

Clinical trial costs are a component of research

and development expenses.

We accrue and charge to expenses 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 research and development activities are deferred and recognized as expense in the period that

the related goods are delivered, or services are performed.

Change in Fair Value of Derivative Liabilities

We recognized a derivative liability for a deficiency

in our authorized shares of common stock that existed from February 17, 2021 until the deficiency was cured on May 26, 2021.

accounting policy election to select the stock options and warrant agreements with the earliest issuance dates to compute the estimated

fair value of the financial instruments associated with the authorized share deficiency.

These stock options and warrants were generally

those with the highest exercise prices that were least likely to be exercised.

Fair value of the stock options and warrants associated

with the deficiency were computed on the date the deficiency arose and at the end of each reporting period using the Black-Scholes-Merton

BSM ”) option-pricing model.

Key assumptions inherent in this valuation model include the historical volatility of

our common stock, the remaining contractual term of the options and warrants, and the market price of our common stock on the respective

valuation dates.

We also recognize liabilities for embedded derivatives in our debt agreements.

The determination of the fair value of

the embedded derivatives includes subjective assumptions that can materially affect the fair value

Derivative liabilities are adjusted to fair value at the end of each reporting period with changes in fair value reflected

as a gain or loss in our consolidated statements of operations.

Clinical trial costs are a component of research and development expenses.

We accrue and charge to expenses 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 research and development activities are deferred and recognized as expense in the period that the related goods are delivered, or services are performed.

Share-Based Compensation Expense

the fair value of services received in exchange for all stock options granted based on the fair market value of the award as of the grant

We compute the fair value of stock options with time-based vesting using the BSM option-pricing model and recognize the cost

of the equity awards over the period that services are provided to earn the award.

For awards 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 share-based compensation.

options that are voluntarily surrendered by employees, all unrecognized compensation is immediately recognized in the period the options

are cancelled.

In July 2019, we granted stock options with vesting

that is dependent on achieving certain market, performance and service conditions (“

Hybrid Options ”).

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.

Due to achievement of the performance condition, we

began recognizing compensation cost using the grant date fair value in November 2020 and continuing through the end of the requisite service

We measure the fair value of services received in exchange for all stock options granted based on the fair market value of the award as of the grant date.

We compute the fair value of stock options with time-based vesting using the BSM option-pricing model and recognize the cost of the equity awards over the period that services are provided to earn the award.

For awards 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 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.

In July 2019, we granted stock options with vesting that is dependent on achieving certain market, performance and service conditions (“Hybrid 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.

Due to achievement of the performance condition, 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 was based on the date that the performance condition was achieved.

If the Hybrid Options do not ultimately become exercisable due to the option holders’

failure to achieve the required 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.

If the Hybrid Options do not ultimately become exercisable due to the option holders’ failure to achieve the required 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.

Results of Operations

Results of operations for the fiscal years ended

June 30, 2021 and 2020 reflect net losses of approximately $20.9 million and $20.3 million, respectively.

Our consolidated statements

of operations for the fiscal years ended June 30, 2021 and 2020, along with the changes between periods, are presented below (in thousands,

except percentages):

Results of operations for the fiscal years ended June 30, 2022 and 2021 reflect net losses of approximately $41.1 million and $20.9 million, respectively.

Our consolidated statements of operations for the fiscal years ended June 30, 2022 and 2021, along with the changes between periods, are presented below (in thousands, except percentages):

Operating expenses:

Research and development:

Compensation and benefits

Clinical trial costs

Licensing costs

Consultants and outside services

Material manufacturing costs

Facilities and other

Total research and development

General and administrative:

Compensation and benefits

Professional fees

Facilities and other

Total general and administrative

Total operating expenses

1 unchanged sentence

Non-operating income (expense):

Change in fair value of derivative liabilities

Gain from change in fair value of derivative liabilities, net

Employee retention credit

Interest and other income

Underwriting discount on issuance of derivative

Interest expense

Loss on extinguishment of loan agreement

Total non-operating income (expense), net

Presented below is a discussion of the key factors

that resulted in changes in our results of operations for these periods.

As a clinical stage

company, we did not generate any revenue for the fiscal years ended June 30, 2021 and 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

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

As a clinical stage company, we did not generate any revenue for the fiscal years ended June 30, 2022 and 2021.

We are at an early stage of development and do not currently have any commercial products.

Our existing product candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenues.

We do not expect to be able to market any of our product candidates for several years.

Research and Development Expenses.

R&D costs increased from $14.5 million for the fiscal year ended June 30, 2020 to $15.0 million for the fiscal year ended June 30,

2021, an increase of approximately $0.5 million.

As discussed below, compensation and benefits, licensing costs and clinical trial costs

increased, partially offset by decreases in consultants and outside services and material manufacturing costs.

Compensation and benefits.

For the fiscal

year ended June 30, 2021, we had an increase of approximately $1.3 million in compensation and benefits for our R&D workforce, which

was attributable to an increase in cash-based compensation and benefits of $1.0 million and share-based compensation expense of $0.3 million.

The increase of $1.0 million in cash-based compensation and benefits was attributable to (i) a net increase in salaries and benefits cost

of approximately $0.7 million primarily due to increased headcount in fiscal 2021, and (ii) an increase in cash bonuses for our R&D

workforce of $0.3 million.

The increase in share-based compensation expense of $0.3 million was primarily due to our June 2021 stock option

grants with time-based vesting to our R&D workforce.

Clinical trial costs.

For the fiscal year

ended June 30, 2021, we incurred clinical trial costs of approximately $4.7 million compared to approximately $3.9 million for the fiscal

year ended June 30, 2020.

The increase in clinical trial costs of $0.8 million was primarily attributable to spending of $1.1 million

for RZ402 and an increase in spending for RZ358 of $0.2 million, partially offset by a decrease of $0.5 million due to the completion

of our AB101 Phase 1 study in December 2019.

For the fiscal year ended June 30, 2021, we incurred

$1.1 million of costs for RZ402 that was primarily attributable to a single ascending dose (“

SAD ”) study that was initiated

in January 2021.

No clinical trial costs related to RZ402 were incurred for the fiscal year ended June 30, 2020.

fiscal year ended June 30, 2020, our clinical trial costs included $3.2 million for RZ358 that was primarily related to the launch

of our Phase 2b RIZE study where we enrolled our first patient in February 2020.

Due to COVID-19, we were required to pause the RIZE

study between March 2020 and January 2021 when we recommenced patient enrollment.

Total clinical trial costs related to RZ358

amounted to $3.4 million for the fiscal year ended June 30, 2021.

Consultants and outside services.

and outside services decreased from $3.2 million for the fiscal year ended June 30, 2020 to $0.8 million for the fiscal year ended June

30, 2021, a decrease of approximately $2.4 million.

For the fiscal year ended June 30, 2021, consultants and outside services consisted

of chemistry, manufacturing and control (“

CMC ”) consulting and contract laboratory services of $0.3 million for RZ358

and RZ402, patent maintenance costs of $0.2 million primarily related to RZ358 and RZ402, quality and FDA filing expenses of $0.1 million,

and other consulting services of $0.2 million.

For the fiscal year ended June 30, 2020, consultants and outside services consisted of IND

enabling laboratory expense of $1.9 million primarily related to RZ402, patent maintenance costs of $0.5 million primarily related to

AB101, CMC consulting and contract laboratory services of $0.5 million primarily for RZ358, quality and FDA filing expenses of $0.2 million,

and other consulting services of $0.1 million.

Material manufacturing costs.

manufacturing costs decreased from $0.9 million for the fiscal year ended June 30, 2020 to $0.8 million for the fiscal year ended June

30, 2021, a decrease of approximately $0.1 million.

For the fiscal year ended June 30, 2021, the decrease in our material manufacturing

costs was primarily due to decreased spending in RZ358 for CMC drug product stability.

Licensing costs.

Licensing costs increased

by $1.0 million for the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020, which was attributable to the

$1.0 million milestone payment due to ActiveSite upon FDA clearance of our RZ402 IND application in December 2020.

R&D expenses for the fiscal years ended June 30, 2022 and 2021 were as follows (in thousands, except percentages):

Total R&D expenses

The increase of $17.5 million was primarily attributable to an increase of $13.6 million for our two clinical candidate programs, of which the RZ358 program had an increase in spending of $8.2 million and the RZ402 program had an increase in spending of $5.4 million.

The RZ358 program cost increase of $8.2 million consisted of an increase of $6.8 million for higher spending for drug substance and drug product manufacturing related activities and an increase of $0.6 million in clinical operations related activities.

Increased expenditures were incurred as we progressed in the ongoing Phase 2b study, reported topline data in May 2022, and began manufacturing activities for a Phase 3 study that is planned to be initiated during the fiscal year ending June 30, 2023.

The remaining increase of $0.8 million is attributable to ongoing toxicology and quality related spending to support the clinical development of the RZ358 program.

The RZ402 program cost increase of $5.4 million was primarily attributable to a $2.2 million increase in clinical operation costs for the three Phase 1 studies, a $1.4 million increase in manufacturing related activities for drug product and drug

substance activities to support the ongoing Phase 1 studies and planned Phase 2 study which is expected to be initiated in the fiscal year ending June 30, 2023.

The remaining $1.8 million increase in costs for the RZ402 program are attributable to ongoing toxicology and development costs to support the clinical progression of the program.

For the fiscal year ended June 30, 2021, we incurred clinical trial costs of approximately $4.7 million that was primarily attributable related to $3.3 million of costs for our RZ358 Phase 2b program and $1.1 million of costs for the RZ402 SAD study that was initiated in January 2021.

In addition to the increases in the RZ358 and RZ402 programs noted above in the fiscal year ended June 30, 2022, an increase of approximately $1.0 million was incurred related to licensing costs.

Licensing costs of $2.0 million were incurred in the fiscal year ended June 30, 2022 due to the last patient dosed in our RZ358 Phase 2b study, under our licensing agreement with XOMA.

In comparison, license costs of $1.0 million were incurred for fiscal year ended June 30, 2021 under our license agreement with ActiveSite, upon acceptance of our IND by the FDA in December 2020.

For the fiscal year ended June 30, 2022, compensation and benefits amounted to approximately $9.7 million, which included $8.3 million related to cash-based compensation and $1.4 million related to share-based compensation costs.

For the fiscal year ended June 30, 2022, compensation and benefits for our R&D workforce increased by approximately $2.5 million primarily attributable to an increase in the average number of R&D employees from 15 for the fiscal year ended June 30, 2021 to 26 for the fiscal year ended June 30, 2022.

For the fiscal year ended June 30, 2021, compensation and benefits amounted to approximately $7.2 million, which included $5.3 million related to cash-based compensation and $1.9 million related to share-based compensation costs.

The remaining increase in R&D costs incurred in the fiscal year ended June 30, 2022 of approximately $0.4 million is mainly attributable to facilities and employee related travel costs allocable to R&D due to the increased headcount as noted above.

General and Administrative Expenses.

G&A expenses increased from $6.1 million for the fiscal year ended June 30, 2020 to $7.9 million for the fiscal year ended June 30,

2021, an increase of approximately $1.8 million.

As discussed below, this increase was primarily attributable to compensation and benefits

for our administrative and executive workforce along with increased spending in professional services.

Compensation and benefits.

and benefits for our G&A workforce increased from $3.8 million for the fiscal year ended June 30, 2020 to $4.9 million for the fiscal

year ended June 30, 2021, an increase of approximately $1.1 million.

This increase was attributable to an increase in cash-based compensation

and benefits of $0.6 million, severance expense of $0.1 million, and share-based compensation expense of $0.4 million.

The increase in

cash-based compensation was primarily attributable to an increase in bonuses for our G&A workforce of $0.6 million.

The increase in

share-based compensation expense was primarily due to the voluntary cancellation of certain stock options held by officers in June 2021

that resulted in the acceleration of the previously unrecognized expense for $0.7 million, partially offset by the favorable impact of

stock options that became fully vested in our 2020 fiscal year, resulting in no further compensation expense thereafter.

Professional fees.

Professional fees increased

from approximately $1.2 million for the fiscal year ended June 30, 2020 to approximately $2.1 million for the fiscal year ended June 30,

2021, an increase of approximately $0.9 million.

This increase was primarily attributable to our Nasdaq uplisting, corporate development

activities, and strategic financial advisory services.

Facilities and other costs.

Costs allocable

to G&A activities for facilities and other costs decreased from $1.1 million for the fiscal year ended June 30, 2020 to $0.9 million

for the fiscal year ended June 30, 2021.

The decrease of $0.2 million was primarily due to reduced travel and office-related expenses

due to COVID-19 restrictions.

G&A expenses for the fiscal years ended June 30, 2022 and 2021 were as follows (in thousands, except percentages):

Total G&A expenses

The increase in G&A expenses of $1.5 million for the fiscal year ended June 30, 2022 was primarily attributable to an increase in professional fees associated with product candidate market research assessments, consulting services, and strategic advisory services related to ongoing financing efforts, totaling approximately $0.8 million.

The remaining increase in G&A costs of approximately $0.6 million is mainly attributable to facilities and employee related costs allocable to G&A.

With reductions in COVID related travel restrictions, employees were able to travel and support the financing activities that occurred during the current fiscal year.

Change in Fair Value of Derivative Liabilities.

For the fiscal year ended June 30, 2021, we recognized a gain of $1.8 million that was primarily due to reduction in our stock price resulting

to changes in fair value of the derivative liability related to our authorized share deficiency.

This deficiency existed from February

17, 2021 until May 26, 2021 when our shareholders approved an increase in our authorized shares of common stock.

Our stock price declined from $11.99 per share on February 17, 2021 to $7.69 per share on May 26, 2021 when the authorized share deficiency

We did not have any gains

or losses from changes in the fair value of derivatives for the fiscal year ended June 30, 2020.

For the fiscal year ended June 30, 2022, we recognized a gain of $6.6 million that was primarily due to a reduction of $0.60 per share in our stock price, resulting in changes in fair value of the derivative liability related to our authorized share deficiency that arose when we entered into an underwriting agreement for issuance of the Class B PFWs on May 4, 2022.

This authorized share deficiency existed to June 16, 2022 when our shareholders approved an increase in our authorized shares of common stock.

Our stock price decreased from $3.80 per share on May 4, 2022, to $3.20 per share on June 16, 2022 when the authorized share deficiency was cured.

For the fiscal year ended June 30, 2021, we recognized a gain of $1.8 million that was primarily due to a reduction of $4.30 per share in our stock price that drove a decrease in in fair value of the derivative liability related to an authorized

share deficiency that arose in February 2021.

This deficiency existed from February 17, 2021 until May 26, 2021 when our shareholders approved an increase in our authorized shares of common stock from 10.0 million shares to 40.0 million shares.

Our stock price declined from $11.99 per share on February 17, 2021 to $7.69 per share on May 26, 2021 when the authorized share deficiency was cured.

Employee Retention Credit.

retention credit income was $0.5 million for the fiscal year ended June 30, 2021.

This income is a result of CARES Act benefits we

qualified for during the fiscal year.

We did not qualify for any relief in the fiscal year ended June 30, 2020.

Interest and Other Income.

and other income decreased from $0.2 million for the fiscal year ended June 30, 2020 to $0.1 million for the fiscal year ended June 30,

2021, a decrease of $0.1 million.

Interest and other income of $0.1 million for the fiscal year ended June 30, 2021 was primarily due

to a favorable appeal of personal property tax expense.

Interest income for the fiscal year ended June 30, 2021 was insignificant to a

decline in interest rates applicable to our temporary cash investments.

Interest and other income for the fiscal year ended June 30, 2020

was solely attributable to interest income earned on temporary cash investments of $0.2 million.

Employee retention credit income was $0.2 million for the fiscal year ended June 30, 2022.

This income is a result of CARES Act benefits for the period of July 1, 2021 through September 30, 2021.

Employee retention credit income was $0.5 million for the fiscal year ended June 30, 2021.

This income was a result of CARES Act benefits we qualified for during the period of January 1, 2021 through June 30, 2021.

Underwriting discount on issuance of derivative liability.

For the fiscal year ended June 30, 2022, we recognized an expense of approximately $2.5 million related to an underwriting discount related to the issuance of the Class B PFWs.

The fair value of the Class B PFWs on the date of issuance amounted to $41.6 million and the Class B PFWs were sold to the underwriter for a discounted price of $39.1 million.

Accordingly, an expense was recognized on the issuance date for the amount of the underwriting discount of $2.5 million.

Interest Expense.

expense was approximately $0.4 million for the fiscal year ended June 30, 2021, whereas we did not incur any interest expense for the

fiscal year ended June 30, 2020.

Interest expense for the fiscal year ended June 30, 2021 was solely attributable to Loan Agreement entered

into in April 2021 consisted of (i) accretion of discount of $0.1 million, and (ii) interest expense of $0.3 million based on the contractual

rate of 8.87%.

Interest expense for approximately $1.8 million for the fiscal year ended June 30, 2022.

Interest expense for the fiscal year ended June 30, 2022 was solely attributable to the Loan Agreement entered in April 2021 and consisted of (i) accretion of discount of $0.4 million, and (ii) interest expense of $1.4 million based on the contractual rate of approximately 8.9%.

Interest expense was approximately $0.4 million for the fiscal year ended June 30, 2021.

Interest expense for the fiscal year ended June 30, 2021 was solely attributable to Loan Agreement and consisted of (i) accretion of discount of $0.1 million, and (ii) interest expense of $0.3 million based on the contractual rate of approximately 8.9%.

Loss on extinguishment of loan agreement.

Loss on extinguishment of the Loan Agreement was approximately $1.8 million for the fiscal year ended June 30, 2022, whereas we did not incur any losses on extinguishment for the fiscal year ended June 30, 2021.

The extinguishment loss of $1.8 million was attributable to our exercise of the prepayment option under the Loan Agreement that required a 2.00% prepayment penalty of $0.3 million and the unaccreted discount of $1.5 million was written off.

Income Taxes.

For the fiscal year

ended June 30, 2021 and 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 income tax assets.

For the fiscal year ended June 30, 2022 and 2021, 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 income tax assets.

Liquidity and Capital Resources

As of June 30, 2021, we had cash and cash equivalents

of $41.0 million and working capital was approximately $40.0 million.

We have incurred cumulative net losses of $168.1 million since our

inception and as a clinical stage company we have not generated any revenue to date.

In October 2020, we received aggregate net proceeds

of approximately $37.4 million from investors in a private placement of units that consisted of approximately 2.5 million shares of common

stock and warrants for the purchase of approximately 0.8 million shares of common stock (the “

Fiscal 2021 Equity Financing ”).

The completion of the Fiscal 2021 Equity Financing

resulted in acceleration of a $1.4 million obligation payable under Amendment No.

3 to our License Agreement with XOMA Corporation (“

Xoma ”).

We made this required payment to Xoma on schedule in October 2020.

On October 28, 2020, we submitted an IND to the FDA related to RZ402.

On December 3, 2020, we received FDA clearance for the IND application, which resulted in our obligation to make the first milestone payment

to ActiveSite of $1.0 million in December 2020.

In December 2020, we entered into an EDA with

Oppenheimer & Co.

Agent ”) that provides for an “at the market offering”

for the sale of

up to $50.0 million in shares of our 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 that we request to be sold, consistent

with the Agent’s normal trading and sales practices, on mutually agreed terms between the Agent and us.

The EDA will terminate when

all of the Placement Shares have been sold, or earlier upon the election of either us or the Agent.

We have no obligation to direct the

Agent to sell any of the Placement Shares.

We agreed to pay the Agent a commission equal to 3.0% of the gross sales price of the Placement

Shares plus certain expenses incurred by the Agent in connection with the offering.

Through June 30, 2021, no shares were sold pursuant

to the EDA and no commissions were incurred.

For the period from July 1, 2021 through August 31, 2021, we sold 138,388 shares of our common

stock for which aggregate net proceeds of approximately $1.5 million were received.

In April 2021, we entered into a Loan Agreement

that provides for total borrowings up to $30.0 million in three tranches.

The initial tranche of funding for $15.0 million was received

in April 2021.

Under the Loan Agreement, we are required to maintain a restricted cash balance of at least $5.0 million beginning

no later than December 31, 2021.

The second and third tranches under the Loan Agreement provide for additional loans in the amount

of $7.5 million per tranche, up to a total of $15.0 million.

However, our ability to gain access to additional funding is dependent upon

the outcome of certain clinical results and our ability to raise up to an additional $70.0 million in equity or subordinated debt financing

and the achievement of certain clinical milestones related to RZ358 and RZ402 by prescribed deadlines.

Accordingly, no assurance can be

provided that we will meet the conditions to qualify for borrowings under the second and third tranches.

We are permitted to make

interest-only payments on each term loan at least through May 1, 2023, and the maturity date is on April 1, 2026.

to our consolidated financial statements included in Item 8 of this Annual Report for additional information.

In August 2021, we entered into the Purchase Agreement

with LPC that provides for issuances of common stock up to an aggregate of $20.0 million as discussed above under the caption Recent

Developments .

We received aggregate proceeds of $1.0 million under the Purchase Agreement in August 2021.

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.

economy had been largely shut down by mass quarantines and government mandated stay-in-place orders to halt the spread of the

While these orders have been relaxed, a full recovery of the U.S.

economy may not occur until 2022 or later.

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.

We believe our existing cash and cash equivalents

balance of $41.0 million as of June 30, 2021, combined with additional proceeds available pursuant to the EDA and the Purchase Agreement

with LPC, will be adequate to carry out currently planned activities at least through September 30, 2022.

Presented below is additional discussion about

the ongoing requirements pursuant to our license agreements with Xoma and ActiveSite, along with additional information about our ongoing

financing activities that impacted our liquidity and capital resources for the fiscal year ended June 30, 2021.

Short-term Liquidity Requirements

As of June 30, 2022, we had cash and cash equivalents of $150.4 million and working capital was approximately $149.6 million.

We have incurred cumulative net losses of $209.2 million since our inception and as a clinical stage company we have not generated any meaningful revenue to date.

Accordingly, our primary source of liquidity has historically been from the completion of private placements and public offerings of our equity securities, as well as proceeds from the issuance of debt securities.

For the fiscal years ended June 30, 2022 and 2021, we received net proceeds from the issuance of equity securities of $165.2 million and $37.5 million, respectively.

The completion of these equity financings is the primary factor that resulted in our cash and cash equivalents balance of $150.4 million as of June 30, 2022.

Furthermore, in July 2022 we closed on the Private Placement of shares of common stock that resulted in additional net proceeds of $11.6 million.

For further information about the key terms and results of our debt and equity financing activities, please refer to the discussion above under the caption Executive Summary and the discussion below under the caption 2021 Underwritten Public Offering and 2021 Registered Direct Offering .

For the fiscal year ended June 30, 2022, we had cash outflows of $16.3 million due to our election to terminate the Loan Agreement discussed above under the caption Executive Summary .

Upon termination of the Loan Agreement, our only remaining contractual obligation is to pay an exit fee of $600,000 which would be triggered if we entered into certain change of control transactions or similar events defined in the exit fee agreement.

In April 2022 we entered into a lease agreement for a new corporate headquarters facility in Redwood City, California.

This lease provides for total base rent payments of approximately $2.9 million through the expected expiration of the lease in July 2027.

Cash payments related to existing contractual obligations for the fiscal year ending June 30, 2023 include approximately (i) $0.3 million under all operating lease agreements, (ii) a potential milestone payment to XOMA of $5.0 million due upon dosing of the first patient in a Phase 3 clinical trial for RZ358 that we expect will occur in the first half of calendar year 2023, and (iii) a potential milestone payment to ActiveSite of $3.0 million due upon dosing of the first patient in a Phase 2 clinical trial for RZ402 that we expect will occur in the fourth quarter of calendar year 2022.

Due to uncertainties in the timing associated with clinical trial activities, it is not possible to accurately determine whether the milestone payments to XOMA and ActiveSite will occur during the fiscal year ending June 30, 2023.

Based on our cash and cash equivalents balance of $150.4 million as of June 30, 2022, we believe we have adequate capital resources to meet all of our contractual obligations and conduct all planned activities to advance our clinical trials during the fiscal year ending June 30, 2023.

Long-term Liquidity Requirements

Our most significant long-term contractual obligations consist of milestone payments up to $35.0 million payable to XOMA and up to $45.5 million payable to ActiveSite, for a total of $80.5 million.

Of this total, we expect that $5.0 million will be payable to XOMA and $3.0 million will be payable to ActiveSite during the fiscal year ending June 30, 2023.

Accordingly, the remainder of $72.5 million is considered a long-term liquidity requirement.

Our current expectations are that we will incur additional milestone payments of $5.0 million payable to XOMA for the year ending June 30, 2024.

Due to uncertainties in the timing associated with clinical trial activities, there is even greater uncertainty in forecasting the milestone payments to XOMA and ActiveSite during the fiscal year ending June 30, 2024 and thereafter.

In addition to our licensing obligations, we also have long-term contractual obligations under existing operating lease agreements of approximately $0.6 million to $0.7 million for each of the fiscal years ending June 30, 2024 through 2027.

Based on our current forecast, we expect that our existing cash and cash equivalents will be sufficient to fund our contractual obligations and conduct all planned activities to advance our clinical trials for at least the first half of the fiscal year ending June 30, 2024.

Therefore, we will need to obtain additional equity or debt financing in order to fund all of our long-term liquidity requirements.

Presented below is additional discussion about the ongoing requirements pursuant to our license agreements with XOMA and ActiveSite, along with additional information about our ongoing financing activities that impacted our liquidity and capital resources for the fiscal year ended June 30, 2022.

XOMA License Agreement

In December 2017, we

entered into a license agreement (“

License Agreement ”) with 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.

The amended License

Agreement set forth an updated payment schedule, as well as revised the amount we were required to expend on development of RZ358 and

related licensed products.

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

Equity 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.

first such milestone payment of $2.0 million will be triggered upon enrollment of the last patient in our ongoing phase 2 clinical study

and we believe that, subject to COVID-19 conditions, we will be able to substantially complete enrollment by the end 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.

In December 2017, we entered into a license agreement (“XOMA License Agreement”) with XOMA through its wholly-owned subsidiary, XOMA (US) LLC, pursuant to which XOMA granted an exclusive global license to develop and commercialize XOMA 358 (formerly X358, now RZ358) for all indications.

In January 2019, the XOMA License Agreement was amended with an updated payment schedule, as well as revised the amount we were required to expend on development of RZ358 and related licensed products, and revised provisions with respect to our diligence efforts in conducting clinical studies.

Upon the achievement of certain clinical and regulatory events, we will be required to make up to $35.0 million in aggregate milestone payments to XOMA.

The first such milestone payment of $2.0 million was triggered upon enrollment of the last patient in our ongoing phase 2 clinical study in January 2022.

The next milestone payment of $3.0 million will be due upon the enrollment of the first patient in a Phase 3 study, which we believe will occur in the first half of calendar year 2023.

Additionally, upon the future commercialization of RZ358, we will be required to pay royalties to XOMA based on the net sales of the related products, and milestone payments up to an additional $185.0 million if future annual sales related to RZ358 exceed targets ranging from $100.0 million to $1.0 billion.

Through June 30, 2022, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

ActiveSite License Agreement

In August 2017, we entered into a Development

and License Agreement with ActiveSite 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.

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 paid in December 2020

after completion of the preclinical work and submission of an IND to the FDA for RZ402.

We will also be required to pay royalties equal

to 2.0% of any sales of products that use the PKI Program.

Through June 30, 2021, no events have occurred that would result in the requirement

to make additional milestone payments and no royalties have been incurred.

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.

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 $37.4 million.

Pursuant to the terms of the private placement, we executed the Reverse Stock Split.

Loan Agreement

On April 14, 2021, we entered into the Loan Agreement

that provides for total borrowings 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 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 the term B loan is subject to our ability to obtain

at least $35 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 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 ”).

addition, 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 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 our cash accounts.

Outstanding borrowings bear interest at a floating

rate equal to (a) 8.75% per annum plus (b) the greater of (i) the rate per annum published by the Intercontinental Exchange Benchmark

Administration Ltd.

IEBA ”) for a term of one month and (ii) 0.12% per annum.

As of April 14, 2021 and June 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 each of these

We are permitted to make interest-only payments on each term loan through May 1, 2023.

At our request, the interest-only period

can be extended until May 1, 2024, if we obtain at least $70.0 million of equity or subordinated debt financing by September 2022 and

assuming no event of default has occurred.

We will be required to make monthly payments of principal and interest commencing at the end

of the interest-only period of the term loans.

We are 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 ”).

At the closing on April 14, 2021, we 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 accounted for as an embedded derivative

and a prepayment fee 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 whereby the current overall effective rate was 12.6% as of June 30, 2021.

Concurrently with the execution of the Loan Agreement,

we entered into an exit fee agreement (the “

Exit Fee Agreement ”) that provides for a fee of 4.0% 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 our outstanding shares.

We have 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, we will incur a prepayment fee ranging from 1.00% to 3.00% of the outstanding principal balance.

Our obligations under the Loan Agreement are secured

by a first-priority security interest in substantially all of our assets, including our intellectual property.

The Loan Agreement contains

customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches

of covenants, and a default upon the occurrence of a material adverse change affecting us.

Upon the occurrence of an event of default,

a default interest rate of an additional 5.0% 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.

In August 2017, we entered into a Development and License Agreement with ActiveSite (“ActiveSite License Agreement”) pursuant to which we acquired the rights to ActiveSite’s PKI portfolio.

We are planning to use the PKI Program to develop, file, manufacture, market and sell products for diabetic macular edema and other therapeutic indications.

The ActiveSite License Agreement requires 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 paid in December 2020 after completion of the preclinical work and submission of an IND to the FDA for RZ402.

The next milestone payment for $5.0 million will be due upon enrollment of the first patient in a Phase 2 study, which we expect to occur in the fourth quarter of calendar year 2022.

We will also be required to pay royalties equal to 2.0% of any sales of products that use the PKI Program.

Through June 30, 2022, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

2021 Underwritten Public Offering and 2021 Registered Direct Offering

In October 2021, we entered into an underwriting agreement with Oppenheimer & Co., Inc., as representative of the underwriters listed therein (the “2021 Underwriters”) for the planned issuance and sale of equity securities in an underwritten public offering (the “2021 Underwritten Offering”).

On October 15, 2021, closing occurred for the Underwritten Offering resulting in the issuance of (i) 6,030,847 shares of common stock at $6.50 per share for gross proceeds of $39.2 million, and (ii) 1,661,461 pre-funded warrants to purchase 1,661,461 shares of common stock at an issuance price of $6.49 per warrant (the “2021 PFWs”) for gross proceeds of $10.8 million.

The Company granted the Underwriters a 30-day option to purchase up to an additional 1,153,845 shares of its common stock in the Underwritten Offering at a public offering price of $6.50 per share, less underwriting discounts and commissions (the “Underwriters’ Option”).

In November 2021, the Underwriters’ Option was partially exercised for 116,266 shares resulting in gross proceeds of approximately $0.8 million.

The aggregate gross proceeds from the Underwritten Offering amounted to $50.7 million, excluding the Underwriters’ Option, and before deductions for underwriting commissions of 6.0% of the gross proceeds and other offering costs of approximately $0.3 million.

After deducting total offering costs of $3.3 million, the net proceeds of the Underwritten Offering amounted to approximately $47.2 million.

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

The closing for the 2021 RDO occurred on October 27, 2021, whereby we received gross proceeds of $5.0 million.

Cash Flows Summary

Presented below is a summary of our operating,

investing and financing cash flows for the years ended June 30, 2021 and 2020 (in thousands):

Presented below is a summary of our operating, investing and financing cash flows for the years ended June 30, 2022 and 2021 (in thousands):

Net cash provided by (used in):

3 unchanged sentences

Cash Flows Used in Operating Activities

For the fiscal years ended June 30, 2021 and 2020,

cash flows used in operating activities amounted to $20.4 million and $24.2 million, respectively.

The key components in the calculation

of our cash used in operating activities are as follows (in thousands):

For the fiscal years ended June 30, 2022 and 2021, cash flows used in operating activities amounted to $39.6 million and $20.4 million, respectively.

The key components in the calculation of our cash used in operating activities are as follows (in thousands):

Non-cash expenses

Non-cash gains, net

Prepayment premium

Changes in operating assets and liabilities, net

For the fiscal year ended June 30, 2021, our net

loss was $20.9 million compared to $20.3 million for the fiscal year ended June 30, 2020.

For further discussion about changes in our

operating results for the fiscal years ended June 30, 2021 and 2020, please refer to Results of Operations above.

For the fiscal year ended June 30, 2021, our non-cash

expenses of $4.4 million primarily consisted of share-based compensation expense of $4.0 million, non-cash lease expense of $0.3 million,

and accretion of debt discount of $0.1 million.

For the fiscal year ended June 30, 2020, our non-cash expenses of $3.7 million primarily

consisted of share-based compensation expense of $3.3 million, non-cash lease expense of $0.2 million and the fair value of warrants issued

for services of $0.1 million.

For the fiscal year ended June 30, 2021, non-cash

gains primarily consisted of a gain of $1.8 million attributable to a gain from change in fair value of a derivative liability related

to a deficiency in our authorized shares that existed from February 17, 2021 until May 26, 2021.

We did not have any non-cash gains for

the fiscal year ended June 30, 2020.

For the fiscal year ended June 30, 2021, net

changes in operating assets and liabilities reduced operating cash flow by $2.1 million, primarily driven by (i) cash payments to

reduce our license fee obligations to Xoma by $1.8 million;

(ii) an increase in prepaid expenses and other assets and other of $0.4

million that was primarily related to prepayments for clinical trials, and (iii) a decrease in other accrued liabilities of $0.1

These payments that reduced our operating cash flow were partially offset by an increase in accounts payable of $0.1

For the fiscal year ended June 30, 2020, net changes in operating assets and liabilities reduced operating cash flow by

$7.5 million, primarily driven by (i) cash payments to reduce our license fee obligations to Xoma by $6.7 million and (ii) a

reduction in other accrued liabilities of $1.1 million that was primarily related to payments for accrued bonuses of $0.6 million,

operating lease liabilities of $0.2 million, and accrued vacation benefits of $0.2 million.

These payments that reduced our

operating cash flow were partially offset by an increase in accounts payable of $0.3 million.

For the fiscal year ended June 30, 2022, our net loss was $41.1 million compared to $20.9 million for the fiscal year ended June 30, 2021.

For further discussion about changes in our operating results for the fiscal years ended June 30, 2022 and 2021, please refer to Results of Operations above.

For the fiscal year ended June 30, 2022, our non-cash expenses of $8.3 million primarily consisted of share-based compensation expense of $3.7 million, a discount on the issuance of the Class B PFWs derivate liability of $2.5 million, a loss on extinguishment of debt of $1.4 million, accretion of debt discount and issuance costs of $0.4 million, and non-cash lease expense of $0.2 million.

For the fiscal year ended June 30, 2021, our non-cash expenses of $4.4 million primarily consisted of share-based compensation expense of $4.0 million, non-cash lease expense of $0.3 million, and accretion of debt discount of $0.1 million.

For the fiscal year ended June 30, 2022, non-cash gains consisted of a gain of $6.5 million attributable to changes in fair value of the Class B PFW derivative liability related to a deficiency in our authorized shares that existed from May 4, 2022 until June 16, 2022.

For the fiscal year ended June 30, 2021, non-cash gains consisted of a gain of $1.8 million were attributable to a gain from change in fair value of a derivative liability related to a deficiency in our authorized shares that existed from February 17, 2021 until May 26, 2021.

For the fiscal year ended June 30, 2022, we paid a prepayment premium of $0.3 million in connection with the termination of the Loan Agreement.

The cash payment for this amount is included as a financing cash outflow and as a component of our net loss.

Accordingly, an adjustment is required to remove this amount from our operating cash outflows.

A similar charge was not incurred for the year ended June 30, 2021.

For the fiscal year ended June 30, 2022, net changes in operating assets and liabilities reduced operating cash flow by $0.6 million, primarily driven by an increase in prepaid expenses and other assets and other of $0.9 million that was primarily related to prepayments for clinical trials and manufacturing activities, partially offset by a decrease other accrued liabilities of $0.2 million.

For the fiscal year ended June 30, 2021, net changes in operating assets and liabilities reduced operating cash flow by $2.1 million, primarily driven by (i) cash payments to reduce our license fee obligations to XOMA by $1.8 million;

(ii) an increase in prepaid expenses and other assets and other of $0.4 million that was primarily related to prepayments for clinical trials, and (iii) a decrease in other accrued liabilities of $0.1 million.

These payments that reduced our operating cash flow were partially offset by an increase in accounts payable of $0.1 million.

Cash Flows Provided by Investing Activities

We did not have any cash flows from investing

activities for the fiscal years ended June 30, 2021 and 2020.

We did not have any cash flows from investing activities for the fiscal years ended June 30, 2022 and 2021.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities for

the fiscal year ended June 30, 2021 amounted to $51.5 million.

This amount included (i) $41.0 million received from a private placement

of Units in October 2020 for the purchase of approximately 2.5 million shares of common stock at a purchase price of $16.50 per share

and (ii) $15.0 million of gross proceeds from the Loan Agreement entered into in April 2021.

The total proceeds from equity and debt financing

activities amounted to $56.0 million and were partially offset by payments of $3.7 million related to financial advisory fees and other

costs of equity financings and payment of $0.7 million for debt discount and issuance costs.

Net cash provided by financing activities for

the fiscal year ended June 30, 2020 amounted to $22.6 million.

This amount consisted of (i) $20.0 million received from 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 were partially offset by fees of $1.5

million under a financial advisory agreement to result in net proceeds of $22.6 million.

Net cash provided by financing activities for the fiscal year ended June 30, 2022 amounted to $149.0 million.

This amount included (i) $50.7 million received from a the 2021 Underwritten Offering of Units in October 2021 for the issuance of approximately 6.8 million shares of common stock at a purchase price of $6.50 per share and issuance of 1.7 million of the 2021 PFWs at a purchase price of $6.49 per share, (ii) $5.0 million received from the 2021 RDO related to the issuance of common stock in October 2021 for the purchase of approximately 0.8 million shares at a purchase price of $6.50 per share, (iii) $110.5 million of proceeds after underwriter discounts from the 2022 RDO in May 2022 for the purchase of approximately 18.0 million shares of common stock at a purchase price of $3.80 per share and purchase of an aggregate of approximately 12.9 Class A PFWs and Class B PFWs at a purchase price of $3.799 per share, and (iv) $2.7 million in gross proceeds for the issuance of common stock under the Purchase Agreement and the Agent EDA.

The total proceeds from equity financing activities amounted to $168.9 million and were partially offset by payments of $3.7 million related to financial advisory fees and other costs of equity financings.

Cash inflows from financing activity was also offset by $16.3 million in financing cash outflows due to the early payment of the SLR Term Loan in June 2022.

For the fiscal year ended June 30, 2022, we used cash of $0.3 million for payment of additional debt discount and issuance costs under the Loan Agreement, and $16.0 million for contractual payments required to terminate the Loan Agreement on June 30, 2022.

The contractual payments included (i) repayment of the principal balance of the term A loan for $15.0 million, (ii) a prepayment fee equal to 2.00% of the outstanding principal balance for a total of $0.3 million, and (ii) a final fee equal to 4.75% of the aggregate amount of the term loans funded for a total of $0.7 million.

The security interests and liens granted in April 2021 when we entered into the Loan Agreement were released on June 30, 2022.

Net cash provided by financing activities for the fiscal year ended June 30, 2021 amounted to $51.5 million.

This amount included (i) $41.0 million received from an October 2020 equity financing that provided for the issuance of units consisting of 2.5 million shares of common stock and warrants to purchase 0.8 million shares of common stock, and (ii) $15.0 million of gross proceeds from the term A loan pursuant to the Loan Agreement entered into in April 2021.

The total proceeds from equity and debt financing activities amounted to $56.0 million and were partially offset by payments of $3.7 million related to financial advisory fees and other costs of the October 2020 equity financing and payment of $0.7 million for debt discount and issuance costs related to the Loan Agreement.

Off-Balance Sheet Arrangements

During the fiscal years ended June 30, 2021 and

2020, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special

purpose entities, which were established for the purpose of facilitating off - balance sheet arrangements.

During the fiscal years ended June 30, 2022 and 2021, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off - balance sheet arrangements.

Recently Issued Accounting Pronouncements

See Note 1 to our consolidated financial statements

included in Item 8 of this Annual Report regarding the impact of certain accounting pronouncements on our consolidated financial statements.

and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined

by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

See Note 1 to our consolidated financial statements included in Item 8 of this Annual Report regarding the impact of certain accounting pronouncements on our consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis