What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-09-15 compared with 2021-09-15 · 599 added, 1054 removed, 231 unchanged (88% of the section changed)

Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting

Report of Independent Registered Public Accounting Firm ( Plante & Moran, PLLC ;

Cleveland, Ohio ;

Financial Statements:

1 unchanged sentence

Consolidated statements of operations for the fiscal years ended June 30, 2022 and 2021

Consolidated statements of shareholders’

equity for the fiscal years ended June 30, 2021 and 2020

Consolidated statements of shareholders’ equity for the fiscal years ended June 30, 2022 and 2021

Consolidated statements of cash flows for the fiscal years ended June 30, 2022 and 2021

Notes to consolidated financial statements

Report of Independent Registered Public Accounting

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Rezolute, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Rezolute, Inc.

(the “Company”) as of June 30, 2021, and 2020, the related consolidated statements of operations,

shareholders' equity, and cash flows for each of the years in the two-year period ended June 30, 2021, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in

all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash

flows the years then ended in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Rezolute, Inc.

(the “Company”) as of June 30, 2022 and 2021, the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the two-year period ended June 30, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

Basis for Opinion

The Company's management is responsible for these

financial statements.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

The Company's management is responsible for these financial statements.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is

a matter arising from the current period audit of the consolidated financial statements that was communicated or is required to be communicated

to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions

on the critical audit matter or on the accounts or disclosures to which they relate.

SLR Investment Corp.

Debt - Refer to Note

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

To the Stockholders and Board of Directors of Rezolute, Inc.

Critical Audit Matter Description

On April 14, 2021, the Company entered into

a $30.0 million Loan and Security Agreement (“Loan Agreement”) with certain lenders.

The loan consists of three tranches consisting

of (i) a $15.0 million term A loan that was funded on April 14, 2021, (ii) a $7.5 million term B loan to be funded upon

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

Company no later than September 25, 2022.

The Company is obligated to pay the lenders (i) a non-refundable facility fee in the amount

of 1.00% of each term loan that is funded and (ii) a final fee equal to 4.75% of the aggregated amount of the term loans funded.

the Company entered into an exit fee arrangement that provides for a fee of 4.00% of the funded principal balance of each term loan in

the event certain transactions, as defined in the Loan Agreement, occur prior to April 13, 2031.

The terms of the Loan Agreement further

call for optional and mandatory prepayment options.

The debt and certain terms of the Loan Agreement and exit fee arrangement were analyzed

under ASC 470, Debt , and ASC 815, Embedded Derivatives .

Auditing the Company’s accounting assessment

was challenging and complex given the high degree of estimates and judgements in determining the proper accounting treatment for the debt,

debt discounts and debt issuance costs and the identification of any freestanding instruments or embedded features.

How the Critical Audit Matter Was Addressed

Our audit procedures related to the Loan Agreement

include the following:

Gained an understanding of the Company’s

internal control over financial reporting to identify the types of potential misstatement, assessed the factors that affect the risks

of material misstatement, and designed audit procedures in response to those risks.

Obtained management’s analysis for the

accounting treatment for the debt and related agreements.

Verified all key information to the executed

debt agreement and consulted with the Company’s counsel in applicable areas.

Engaged an internal technical accounting specialist

to evaluate appropriate application of generally accepted accounting principles including the assessment of freestanding financial instruments

and embedded features.

Assessed fair value of all significant items

requiring the application of fair value measures for initial recognition and measurement and subsequent measurement through June 30, 2021.

Substantively tested the ending debt and related

instrument balances, including confirmation procedures as of and for the year ended June 30, 2021 based on the terms of the Loan Agreement.

As described in Note 7, the Company issued pre-funded warrants (“PFWs”) pursuant to underwritten offerings completed in October 2021 as part of the 2021 Registered Direct Offering (2021 RDO) and May 2022 as part of the 2022 Registered Direct Offering (2022 RDO).

The Company performed an analysis of the pre-funded warrants at each period to ensure the classification of the PFWs is accurate as a liability or equity.

The pre-funded warrants issued in October 2021 and the Class A pre-funded warrants in the May offering were determined to be equity classified.

Due to the share deficiency related to the 2022 RDO for the Class B pre-funded warrants, the Company recognized a derivative liability until the authorized share deficiency was cured on June 16, 2022.

We identified the Company's accounting treatment of these warrants as a critical audit matter.

The principal considerations for our determination include the complex auditor judgement required to evaluate appropriate the classification and disclosure of the warrants and the need to consult outside of the engagement team with one of our accounting technical specialists.

How the Critical Audit Matter Was Addressed in the Audit

The primary procedures we performed to audit this critical audit matter included the following:

● We obtained an understanding of the internal controls over the accounting and disclosure for issuance of contracts in the Company’s equity including warrants issued during the year.

● We reviewed the respective contracts and agreements for identification of all significant rights and obligations relevant to the assessment over proper accounting and disclosure of the warrants in accordance with US GAAP.

● We obtained legal confirmation from the Company’s outside counsel of certain rights and obligations pertaining to the underlying security purchase agreements which were relevant to assessing equity versus liability classification.

● We evaluated management’s application of the accounting guidance for equity versus liability classification to the terms of the warrant agreements, including satisfaction of all key conditions necessary for equity classification.

● We evaluated the conditions necessary to ensure the Company had sufficient authorized shares to cover the issuance of all contracts in the Company’s equity and the presentation associated with the reclassification of liability classified warrants to equity upon satisfying the conditions necessary for equity classification.

● We assessed the adequacy of disclosure of the warrant contracts, including related fair value measurements.

/s/ Plante & Moran, PLLC

We have served as the Company’s auditor

Denver, Colorado

We have served as the Company’s auditor since 2013.

Cleveland, Ohio

September 15, 2022

REZOLUTE, INC.

Consolidated Balance

Consolidated Balance Sheets

June 30, 2022 and 2021

(In Thousands, Except

Per Share Amounts)

(In Thousands, Except Per Share Amounts)

Current assets:

2 unchanged sentences

Total current assets

Right-of-use assets, net

Deferred offering costs and other

Long-term assets:

Right-of-use assets

Deposits and other

Property and equipment, net

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Compensation and benefits

Accrued clinical and other

Current portion of operating lease liabilities

Current portion of license fees payable to Xoma

Total current liabilities

Long term liabilities:

Long term debt, net of discount

1 unchanged sentence

Embedded derivative liabilities

License fees payable to Xoma, net of current portion

Total liabilities

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Preferred stock, $ 0.001 par value;

authorized 400 and 20,000 shares as of June 30, 2021 and 2020, respectively;

no shares issued

Common stock, $0.001 par value, authorized 40,000 and 500,000 shares as of June 30, 2021 and 2020, respectively;

400 shares authorized;

no shares issued and outstanding

Common stock, $ 0.001 par value;

100,000 and 40,000 shares authorized as of June 30, 2022, and 2021, respectively;

33,582 and 8,352 shares issued and outstanding as of June 30, 2022 and 2021, respectively

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For the Fiscal Years Ended June 30, 2022 and 2021

(In Thousands, Except Per Share

(In Thousands, Except Per Share Amounts)

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

Rental income

Loss on extinguishment of loan agreement

Total non-operating income (expense), net

Net loss per common share - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

The accompanying notes are an integral part of these consolidated

financial statements.

Net loss per common share:

Weighted average number of common shares outstanding:

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

REZOLUTE, INC.

Consolidated Statements of Shareholders’

Consolidated Statements of Shareholders’ Equity

For the Fiscal Years Ended June 30, 2022 and 2021

(In Thousands, Except Per Share

(In Thousands)

Shareholders'

Balances, June 30, 2020

Issuance of common stock for cash:

Related parties at $14.50 per share

Other investors at $14.50 per share

Advisory fees and other offering costs

Share-based compensation

Fair value of warrants issued to consultants for services

Balances, June 30, 2020

Issuance of Units for cash in private placement

Issuance of Units for cash Fiscal 2021 Equity Financing

Advisory fees and other offering costs related to issuance of Units

Share-based compensation

Reclassification of warrants and stock options from equity

to derivative liability due to authorized share deficiency

Reclassification of derivative liability to equity upon

of authorized share deficiency

Reclassification of warrants and stock options from equity to derivative liability due to authorized share deficiency

Reclassification of derivative liability to equity upon cure of authorized share deficiency

Fair value of warrants issued to consultants for services

1 unchanged sentence

Balances, June 30, 2021

Proceeds from issuance of equity securities for cash in 2022 Registered Direct Offering, net of discounts:

Class A pre-funded warrants

Gross proceeds from issuance of equity securities for cash in Underwritten Public Offering:

2021 pre-funded warrants

Gross proceeds from issuance of common stock for cash:

In 2021 Registered Direct Offering

Under Equity Distribution Agreement

Under LPC Purchase Agreement

Underwriting commissions and other equity offering costs

Share-based compensation

Reclassification of Class B pre-funded warrant derivative liability to equity upon cure of authorized share deficiency

Commitment shares issued under LPC Purchase Agreement

Balances, June 30, 2022

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

4 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

Change in fair value of derivative liabilities

Gain from change in fair value of derivative liabilities, net

Underwriting discount on issuance of derivative

Share-based compensation expense

Non-cash lease expense

Loss on extinguishment of Loan Agreement

Prepayment premium paid

Accretion of debt discount and issuance costs

Non-cash lease expense

Depreciation and amortization expense

1 unchanged sentence

Fair value of shares of common stock issued for services

Impairment of long-lived assets and other

Changes in operating assets and liabilities:

Decrease (increase) in prepaid expenses and other assets

Increase in accounts payable

Decrease in other accrued liabilities

Increase prepaid expenses and other assets

Increase (decrease) in accounts payable

Increase (decrease) in other accrued liabilities

Decrease in license fees payable to XOMA

2 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from private placements of equity:

Payments for offering costs related to equity issuances

Gross proceeds from debt financing

Cash payments for debt discount and issuance costs

Gross proceeds from 2022 Registered Direct Offering, net of underwriting discounts:

Issuance of common stock

Issuance of Class A pre-funded warrants

Issuance of Class B pre-funded warrants

Gross Proceeds from 2021 Underwritten Offering

2021 pre-funded warrants

Gross proceeds from issuance of common stock for cash:

2021 Registered Direct Offering

Under Equity Distribution Agreement

Under LPC Purchase Agreement

Gross Proceeds from issuance of Units for cash in Fiscal 2021 Equity Financing

Payment of commissions and other deferred offering costs

Gross proceeds from Loan Agreement

Payment of debt discount and issuance costs

Prepayment of contractual obligations under Loan Agreement, including prepayment fee

Net Cash Provided by Financing Activities

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

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of fiscal year

Cash, cash equivalents and restricted cash at end of fiscal year

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

REZOLUTE, INC.

Consolidated Statements of Cash Flows, Continued

For the Fiscal Years Ended June 30, 2022 and 2021

(In Thousands)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents, end of fiscal year

Restricted cash, end of fiscal year

Total cash, cash equivalents and restricted cash, end of fiscal year

SUPPLEMENTARY CASH FLOW INFORMATION:

4 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification of warrants and stock

options from equity to derivative liability due to authorized share deficiency

Reclassification of derivative liability to equity upon cureof authorized share deficiency

Reclassification of derivative liabilities to equity upon cure of authorized share deficiency

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

Payables for deferred offering costs subsequently charged to additional paid-in capital

Reclassification of warrants and stock options from equity to derivative liability due to authorized share deficiency

Debt discounts incurred for:

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Notes to Consolidated Financial Statements

Nature of Operations and Summary

of Significant Accounting Policies

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

Nature of Operations

Rezolute, Inc.

(the “Company”) is

a clinical stage biopharmaceutical company developing transformative therapies for metabolic diseases related to chronic glucose imbalance.

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

Change in Domicile

In June 2021, the Company merged with and into our wholly

owned subsidiary, Rezolute Nevada Merger Corporation, a Nevada corporation (“Merger Sub”), pursuant to an Agreement and Plan

of Merger, dated as of June 18, 2021 (the “Reincorporation Merger Agreement”), between the Company and Merger Sub, with Merger Sub

as the surviving corporation (the “Reincorporation Merger”).

At the effective time of the Reincorporation Merger (the “Effective

Time”), the Merger Sub was renamed “Rezolute, Inc.”

and succeeded to the assets, continued 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 the Company's shareholders held on May 26, 2021.

In June 2021, the Company merged with and into its wholly owned subsidiary, Rezolute Nevada Merger Corporation, a Nevada corporation (“Merger Sub”), pursuant to an Agreement and Plan of Merger, dated as of June 18, 2021 (the “Reincorporation Merger Agreement”), between the Company and Merger Sub, with Merger Sub as the surviving corporation (the “Reincorporation Merger”).

At the effective time of the Reincorporation Merger, Merger Sub was renamed “Rezolute, Inc.” and by operation of law succeeded to the Company’s assets, business, and rights and obligations that existed immediately before the Reincorporation Merger.

The Reincorporation Merger Agreement was approved by the Company’s shareholders on May 26, 2021.

Consolidation

Prior to February 12, 2021, the Company had three

wholly owned subsidiaries consisting of AntriaBio Delaware, Inc., Rezolute (Bio) Ireland Limited, and Rezolute Bio UK, Ltd.

12, 2021, the Company filed a certificate of dissolution with the Secretary of State of Delaware to dissolve AntriaBio Delaware, Inc.,

which was a dormant company with no assets, liabilities or operations.

As a result, the Company now has two wholly owned subsidiaries

consisting of Rezolute (Bio) Ireland Limited and Rezolute Bio UK, Ltd.

The accompanying consolidated financial statements include the

accounts of the Company and wholly owned subsidiaries.

The Company has two wholly owned subsidiaries consisting of Rezolute (Bio) Ireland Limited, and Rezolute Bio UK, Ltd.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

Reverse Stock Split

In August 2019, the Company’s Board of Directors

approved a reverse stock split that was subject to shareholder approval at a special meeting that was concluded on October 28, 2019.

approved the proposal whereby the Board of Directors had the ability at any time on or before October 23, 2020 to execute a reverse stock

split and set an exchange ratio between 20 and 100 shares of the Company’s outstanding common stock, $0.001 par value per share,

into one issued and outstanding share of common stock, without any change in the par value per share or the number of shares of common

stock authorized.

On October 7, 2020, the Board of Directors approved a one share for every fifty shares reverse stock split of the common

stock (the “Reverse Stock Split”), resulting in the filing of a Certificate of Amendment (the “Amendment”) to

the Company’s Articles of Incorporation with the Secretary of State of Delaware.

In August 2019, the Company’s Board of Directors approved a reverse stock split that was subject to shareholder approval at a special meeting that was concluded on October 28, 2019.

Shareholders approved the proposal whereby the Board of Directors had the ability at any time on or before October 23, 2020, to execute a reverse stock split and set an exchange ratio between 20 and 100 shares of the Company’s outstanding common stock, $ 0.001 par value per share, into one issued and outstanding share of common stock, without any change in the par value per share or the number of shares of common stock authorized.

On October 7, 2020, the Board of Directors approved a one share for every fifty shares reverse stock split of the common stock (the “Reverse Stock Split”), resulting in the filing of a Certificate of Amendment (the “Amendment”) to the Company’s Articles of Incorporation with the Secretary of State of Delaware.

The Amendment was effective on October 9, 2020.

In connection with the Reverse Stock Split, proportionate

adjustments were made to increase the per share exercise prices and decrease the number of shares of common stock issuable upon exercise

of stock options and warrants whereby approximately the same aggregate price is required to be paid for such securities upon exercise

as had been payable immediately preceding the Reverse Stock Split.

In addition, any fractional shares that would otherwise be issued as

a result of the Reverse Stock Split were rounded up to the nearest whole share.

All references in the accompanying consolidated financial

statements to the number of shares of common stock and per share amounts have been retroactively adjusted to give effect to the Reverse

In connection with the Reverse Stock Split, proportionate adjustments were made to increase the per share exercise prices and decrease the number of shares of common stock issuable upon exercise of stock options and warrants whereby approximately the same aggregate price is required to be paid for such securities upon exercise as had been payable immediately preceding the Reverse Stock Split.

In addition, any fractional shares that would otherwise be issued as a result of the Reverse Stock Split were rounded up to the nearest whole share.

All references in the accompanying consolidated financial statements to the number of shares of common stock and per share amounts have been retroactively adjusted to give effect to the Reverse Stock Split.

Basis of Presentation

The Company’s consolidated financial statements

have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Comprehensive income (loss) is defined as

net income (loss) plus other comprehensive income (loss).

Other comprehensive income (loss) is comprised of revenues, expenses, gains,

and losses that under GAAP are reported as separate components of shareholders’

equity instead of net income (loss).

For the fiscal

years ended June 30, 2021 and 2020, the only component of comprehensive loss was the Company’s net loss as the Company has no items

constituting any other comprehensive income (loss).

The Company’s Chief Executive Officer also

serves as the Company’s chief operating decision maker (the “CODM”) for purposes of allocating resources and assessing

performance based on financial information of the Company.

Since its inception, the Company has determined that its activities as a clinical

stage biopharmaceutical company are classified as a single reportable operating segment.

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Comprehensive income (loss) is defined as net income (loss) plus other comprehensive income (loss).

Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are reported as separate components of shareholders’ equity instead of net income (loss).

For the fiscal years ended June 30, 2022 and

REZOLUTE, INC.

Notes to Consolidated Financial Statements

2021, the only component of comprehensive loss was the Company’s net loss as the Company has no items constituting any other comprehensive income (loss).

The Company’s Chief Executive Officer also serves as the Company’s chief operating decision maker for purposes of allocating resources and assessing performance based on financial information of the Company.

Since its inception, the Company has determined that its activities as a clinical stage biopharmaceutical company are classified as a single reportable operating segment.

Use of Estimates

The preparation of financial statements in conformity

with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts in the consolidated financial

statements and the accompanying notes.

The Company bases its estimates and assumptions on current facts, historical experience, and various

other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that

are not readily apparent from other sources.

The Company’s significant accounting estimates include, but are not necessarily limited

to, determination of the fair value of derivative liabilities for authorized share deficiency, fair value of the embedded derivatives

associated with debt financing, fair value of share-based payments and warrants, management’s assessment of going concern, clinical

trial accrued liabilities, estimates of the probability and potential magnitude of contingent liabilities, and the valuation allowance

for deferred tax assets due to continuing and expected future operating losses.

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts in the consolidated financial statements and the accompanying notes.

The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources.

The Company’s significant accounting estimates include, but are not necessarily limited to, determination of the fair value of derivative liabilities for authorized share deficiencies, fair value of the embedded derivatives associated with debt financings, fair value of share-based payments and warrants, management’s assessment of going concern, clinical trial accrued liabilities, and estimates of the probability and potential magnitude of contingent liabilities.

Actual results could differ from those estimates.

Risks and Uncertainties

The Company's operations may be subject to significant

risks and uncertainties including financial, operational, regulatory and other risks associated with a clinical stage company, including

the potential risk of business failure discussed in Note 2, and the future impact of COVID-19 discussed in Note 10.

The Company's operations may be subject to significant risks and uncertainties including financial, operational, regulatory and other risks associated with a clinical stage company, including the potential risk of business failure discussed in Note 2.

Cash and Cash Equivalents

All highly liquid investments purchased with an

original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified

as cash and cash equivalents.

All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents.

Cash and cash equivalents consist primarily of demand deposits with financial institutions.

The Company determines if an arrangement includes

a lease as of the date an agreement is entered into.

Operating leases are included in right-of-use (“ROU”) assets and operating

lease liabilities in the Company's consolidated balance sheets.

ROU assets and operating lease liabilities are initially recognized based

on the present value of the future minimum lease payments at the commencement date of the lease.

The Company generally uses its incremental

borrowing rate based on the information available at the lease commencement date in determining the present value of future payments.

The Company determines if an arrangement includes a lease as of the date an agreement is entered into.

Operating leases are included in right-of-use (“ROU”) assets and operating lease liabilities in the Company's consolidated balance sheets.

ROU assets and operating lease liabilities are initially recognized based on the present value of the future minimum lease payments at the commencement date of the lease.

The Company generally uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments.

The Company's leases may include options to extend or terminate the lease;

these options are included in the calculation of ROU assets

and operating lease liabilities when it is reasonably certain that the Company will exercise the options.

Lease expense is recognized

on a straight-line basis over the lease term.

these options are included in the calculation of ROU assets and operating lease liabilities when it is reasonably certain that the Company will exercise the options.

Lease expense is recognized on a straight-line basis over the lease term.

The Company has elected not to apply the recognition requirements for short-term leases.

1 unchanged sentence

Property and Equipment

Property and equipment consist solely of office

furniture and equipment that is recorded at cost.

Depreciation expense is calculated using the straight-line method over the estimated

useful lives of the assets which range from 3 to 5 years.

Property and equipment consist solely of office furniture and equipment that is recorded at cost.

Depreciation expense is calculated using the straight-line method over the estimated useful lives of the assets which range from 3 to 5 years .

Maintenance and repairs are expensed as incurred.

2 unchanged sentences

Debt Discounts and Issuance Costs

Debt discounts and issuance costs (“DDIC”)

incurred to obtain new debt financing or modify existing debt financing consist of incremental direct costs incurred for fees paid to

the lender, professional fees and due diligence services.

DDIC is presented in the accompanying consolidated balance sheets as a reduction

in the carrying value of the debt and is accreted to interest expense using the effective interest method.

Debt discounts and issuance costs (“DDIC”) incurred to obtain new debt financings or modify existing debt financings consist of incremental direct costs incurred for fees paid to the lender, professional fees and due diligence services.

DDIC is presented in the accompanying consolidated balance sheets as a reduction in the carrying value of the debt and is accreted to interest expense using the effective interest method.

Deferred Offering Costs

Commissions, legal fees and other costs that are directly associated with equity financings are capitalized as deferred offering costs, pending a determination of the success of the offering.

Deferred offering costs related to successful offerings are charged to additional paid-in capital in the period that the offering is successful.

Deferred offering costs related to unsuccessful equity offerings are recorded as an expense in the period when it is determined that an offering is unsuccessful.

Research and Development Costs

Research and development costs are expensed as

Intangible assets for in-licensing costs incurred under license agreements with third parties are charged to expense, unless

the licensing rights have separate economic value in alternative future research and development projects or otherwise.

Research and development costs are expensed as incurred.

Intangible assets for in-licensing costs incurred under license agreements with third parties are charged to expense, unless the licensing rights have separate economic value in alternative future research and development projects or otherwise.

Clinical Trial Accruals

Clinical trial costs are a component of research

and development expenses.

The Company accrues and 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.

The Company determines 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

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.

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

The Company accrues and 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.

The Company determines 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

The Company measures the fair value of employee

and director services received in exchange for all equity awards granted, including stock options, based on the fair market value of the

award as of the grant date.

The Company computes the fair value of stock options using the Black-Scholes-Merton (“BSM”) option

pricing model and recognizes the cost of the equity awards over the period that services are provided to earn the award, usually the vesting

For awards granted which contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation

cost is recognized as an expense on a straight-line basis over the requisite service period as if the award was, in substance, a single

The Company recognizes 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.

For stock options with vesting that is dependent

on achieving certain market, performance and service conditions (“Hybrid Options”), the Company recognizes compensation expense

over the requisite service period beginning on the date when the performance condition is considered probable of occurrence.

determines 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.

If the Hybrid Options do not ultimately become exercisable due to the failure of the option holder

to achieve the requisite service period, any previously recognized compensation cost is 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

Derivative Liability for Authorized Share

During periods in which the Company has an inadequate

number of authorized shares of common stock to fully settle all outstanding stock options and warrants, the Company did not meet equity

classification for all contracts required to be settled in common stock as the Company could be required to settle outside of the Company’s

sole control, certain contracts in cash to the extent of the deficiency.

In order to determine the specific stock options and warrants

that may require cash settlement, the Company adopted an accounting policy to select the stock options and warrants with the earliest

issuance dates to compute the estimated fair value of the financial instruments associated with the authorized share deficiency.

value of the stock options and warrants associated with the deficiency are computed on the date the deficiency arose, at the end of each

reporting period and on the date when the deficiency was cured, using the BSM option-pricing model.

Key assumptions inherent in this valuation model

include the historical volatility of the Company’s common stock, the remaining contractual term of the options and warrants, and

the market price of our common stock on the valuation date.

Changes in these factors from period to period can result in significant increases

and decreases in fair value of the derivative liability, with corresponding gains or losses reflected in our operating results for each

reporting period.

If the Company’s shareholders subsequently approve a sufficient increase in authorized shares or if a sufficient

number of shares are cancelled, the Company will no longer include the derivative liability in its balance sheets after the approval date.

However, any gains or losses reflected prior to the approval date are not reversed.

The Company measures the fair value of employee and director services received in exchange for all equity awards granted, including stock options, based on the fair market value of the award as of the grant date.

The Company computes the fair value of stock options using the Black-Scholes-Merton (“BSM”) option pricing model and recognizes the cost of the equity awards over the period that services are provided to earn the award, usually the vesting period.

For awards granted which contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award was, in substance, a single award.

The Company recognizes 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.

For stock options with vesting that is dependent on achieving certain market, performance and service conditions (“Hybrid Options”), the Company recognizes compensation expense over the requisite service period beginning on the date when the performance condition is considered probable of occurrence.

The Company determines 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.

If the Hybrid Options do not ultimately become exercisable due to the failure of the option holder to achieve the requisite service period, any previously recognized compensation cost is reversed.

However, if the Hybrid Options do

REZOLUTE, INC.

Notes to Consolidated Financial Statements

not ultimately become exercisable due to the failure to achieve the market condition, previously recognized compensation cost will not be reversed.

Derivative Liability for Authorized Share Deficiencies

During the fiscal year ended June 30, 2021, the Company did not have an adequate number of authorized shares of common stock to fully settle all outstanding stock options and warrants.

Therefore, the Company did not satisfy the criteria for equity classification for all contracts required to be settled in common stock since the Company could have been required to settle certain contracts in cash to the extent of the deficiency.

In order to determine the specific stock options and warrants that may have been required for cash settlement, the Company adopted an accounting policy to select the stock options and warrants with the earliest issuance dates to compute the estimated fair value of the financial instruments associated with the authorized share deficiency.

Fair value of the stock options and warrants associated with the deficiency was computed on the date the deficiency arose and on the date when the deficiency was cured, using the BSM option-pricing model.

In May 2021, the Company’s shareholders approved an increase in authorized shares whereby cash settlement was no longer required, and the derivative liability was reclassified to equity.

In May 2022, the Company issued Class B pre-funded warrants that resulted in an authorized share deficiency.

Since the issuance of Class B pre-funded warrants caused the authorized share deficiency, the Company accounted for such warrants as a derivative liability from the issuance date until June 2022 when shareholders approved an increase in authorized shares that resulted in the reclassification of the related derivative liability to equity.

The Class B pre-funded warrants were issued in an underwritten offering at a discount to fair value.

The Company adopted an accounting policy to charge this discount to expense on the issuance date.

Gains or losses that result from accounting for authorized share deficiencies as derivative liabilities are not subsequently reversed upon receipt of shareholder approval.

Embedded Derivatives

When the Company enters into a financial instrument

such as a debt or equity agreement (the “Host Contract”), the Company assesses whether the economic characteristics of any

embedded features would meet the definition of a derivative instrument, and if so whether the features are considered clearly and closely

related to the primary economic characteristics of the Host Contract.

When it is determined that (i) an embedded feature possesses economic

characteristics that are not clearly and closely related to the primary economic characteristics of the Host Contract, and (ii) a separate,

stand-alone instrument with the same terms would meet the definition of a financial derivative instrument and cannot be classified in

shareholders’

equity, then the embedded feature is bifurcated from the Host Contract and accounted for as a derivative instrument.

The estimated fair value of the derivative feature is recorded separately from the carrying value of the Host Contract, with subsequent

changes in the estimated fair value recorded as a non-operating gain or loss in the Company’s consolidated statements of operations.

When the Company enters into a financial instrument such as a debt or equity agreement (the “Host Contract”), the Company assesses whether the economic characteristics of any embedded features would meet the definition of a derivative instrument, and if so whether the features are considered clearly and closely related to the primary economic characteristics of the Host Contract.

When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the Host Contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument and cannot be classified in shareholders’ equity, then the embedded feature is bifurcated from the Host Contract and accounted for as a derivative liability.

The estimated fair value of the derivative feature is recorded separately from the carrying value of the Host Contract, with subsequent changes in the estimated fair value recorded as a non-operating gain or loss in the Company’s consolidated statements of operations.

Governmental Assistance

In response to the COVID-19 pandemic discussed

in Note 10, the United States government has designed programs to assist businesses in dealing with the financial hardships caused by

the pandemic.

The Company recognizes the right to receive governmental assistance payments in the period in which all legal requirements

necessary have been met and other related conditions on which they depend are substantially met.

The Company accounts for income taxes under the

asset and liability method.

Under this method, deferred income tax assets and liabilities are determined based on differences between

financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be

in effect when the differences are expected to be recovered or settled.

Realization of deferred income tax assets is dependent upon future

taxable income.

A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred income tax asset

will not be realized based on the weight of available evidence, including expected future earnings.

The Company recognizes an uncertain tax position

in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely

on its technical merits.

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

The Company recognizes the right to receive governmental assistance payments in the period in which all legal requirements necessary have been met and other related conditions on which they depend are substantially met.

The Company accounts for income taxes under the asset and liability method.

Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities

REZOLUTE, INC.

Notes to Consolidated Financial Statements

and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled.

Realization of deferred income tax assets is dependent upon future taxable income.

A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred income tax asset will not be realized based on the weight of available evidence, including expected future earnings.

The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits.

Only after a tax position passes the first step of recognition will measurement be required.

Under the measurement

step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement.

Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement.

This is determined on a cumulative probability basis.

The full impact of any change in recognition or measurement is reflected in the

period in which such change occurs.

The full impact of any change in recognition or measurement is reflected in the period in which such change occurs.

Interest and penalties related to income taxes are recognized in the provision for income taxes.

Net Loss Per Share

Basic net loss per share is computed by dividing

the net loss applicable to common shareholders by the weighted average number of shares of common stock outstanding for each period presented.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options and warrants,

to the extent dilutive.

If the impact is dilutive for the calculation of basic or diluted net income (loss) per share, the Company applies

the two-class method of allocating earnings for participating warrants that are entitled to participate in any dividends to holders of

shares of common stock.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Basic net loss per share is computed by dividing net loss applicable to common shareholders by the weighted average number of outstanding shares of common stock and pre-funded warrants that are accounted for as equity instruments.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options and warrants, to the extent dilutive.

Also to the extent dilutive, for periods in which pre-funded warrants are accounted for as derivative liabilities, the calculation of diluted net loss per share is further adjusted to eliminate gains on changes in fair value of such pre-funded warrants and the related pre-funded warrant shares are included in the weighted average number of shares outstanding.

For participating warrants that are entitled to participate in dividend to holders of shares of common stock, the Company applies the two-class method of allocating earnings if the impact is dilutive for the calculation of both basic and diluted net loss per share.

Recent Accounting Pronouncements

Standards Required to be Adopted in Future

Standards Required to be Adopted in Future Years.

The following accounting standards are not yet effective;

management has not completed its full and comprehensive evaluation

to determine the impact that adoption these standards may have on the Company’s consolidated financial statements.

In June 2016, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses

management has not completed its full and comprehensive evaluation to determine the impact that adoption of these standards may have on the Company’s consolidated financial statements.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 amends the guidance on the impairment of financial

This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses

rather than incurred losses.

ASU 2016-13 amends the guidance on the impairment of financial instruments.

This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses.

November 2019, ASU 2016-13 was amended by ASU 2019-10, Financial Instruments- Credit Losses (Topic 326), Derivatives and Hedging

(Topic 815), and Leases (Topic 842) whereby the effective date for ASU 2016-13 for smaller reporting companies is now required for

fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company does not expect the adoption

of this accounting guidance will have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging –

Contracts in Entity’s Own Equity

(Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity).

ASU 2020-06 reduces the

number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion

features being separately recognized from the host contract as compared with current GAAP.

Additionally, ASU 2020-06 affects the diluted

earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced

disclosures about the terms of convertible instruments and contracts in an entity’s own equity.

ASU 2020-06 allows entities to use

a modified or full retrospective transition method and is effective for smaller reporting companies for fiscal years beginning after December

15, 2023, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning

after December 15, 2020, including interim periods within those fiscal years.

Other accounting standards that have been issued

or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not currently expected

to have a material impact on the Company’s financial statements upon adoption.

The Company is in the clinical stage and has not

yet generated any revenues.

For the fiscal year ended June 30, 2021, the Company incurred a net loss of $20.9 million and net cash used

in operating activities amounted to $20.4 million.

As of June 30, 2021, the Company had an accumulated deficit of $168.1 million, cash

and cash equivalents of $41.0 million and total current liabilities of $2.0 million.

As discussed in Note 7, in December 2020 the Company

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

that provides for an “at the

market offering”

for the sale of up to $50.0 million in shares of the Company’s common stock.

No proceeds were received under

this agreement for the fiscal year ended June 30, 2021;

however, an aggregate net proceeds of approximately $1.5 million was received

by the Company from July 1, 2021 through August 31, 2021 as discussed in Note 15.

As discussed in Note 5, the Company entered into

a loan and security agreement in April 2021 that provides for total borrowings up to $30.0 million.

The Company received gross proceeds

of $15.0 million in April 2021 and the remaining $15.0 million is available subject to satisfaction of certain conditions described

in the loan agreement.

As a condition of the loan agreement, the Company is required to maintain a restricted cash balance of $5.0 million

beginning no later than December 31, 2021.

Borrowings under the loan agreement provide for interest at 8.75% plus a variable margin

of at least 0.12%.

The Company is permitted to make interest-only payments through May 1, 2023, and the maturity date is on April 1,

As discussed in Note 15, the Company entered into

a purchase agreement in August 2021 with Lincoln Park Capital Fund, LLC (“LPC”) that provides for issuances of common

stock up to an aggregate of $20.0 million.

The Company received aggregate proceeds of $1.0 million under this agreement in August 2021.

In November 2019, ASU 2016-13 was amended by ASU 2019-10, Financial Instruments- Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) whereby the effective date for ASU 2016-13 for smaller reporting companies is now required for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company does not expect the adoption of this accounting guidance will have a material impact on its consolidated financial statements.

In August 2020, FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity).

ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP.

Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity.

ASU 2020-06 allows entities to use a modified or full retrospective transition method and is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Management believes the Company’s existing

cash and cash equivalents balance of $41.0 million, and additional proceeds available pursuant to the at-the-market agreement and the

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

Note 3 —

In November 2020, the Company entered into an

assignment, assumption and amendment of lease agreement for ancillary office space in Bend, Oregon.

The leased space consists of approximately

5,000 square feet and provides for average monthly rent of approximately $8,400 through the expiration date in February 2024.

provides one option to renew the lease for an additional three years at market rates.

The Company determined it was not reasonably assured

that this renewal option would be exercised whereby the resulting lease term was estimated at 40 months.

Using a discount rate of 6.0%,

the Company recognized an ROU asset and corresponding operating lease liability of approximately $0.3 million at inception of the lease.

As of June 30, 2021 and 2020, the carrying value

of all ROU assets and operating lease liabilities was as follows (in thousands):

intends to adopt this standard effective July 1, 2022.

The Company does not expect the adoption of this accounting guidance will have a material impact on its consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do not require adoption until a future date are not currently expected to have a material impact on the Company’s financial statements upon adoption.

NOTE 2 — LIQUIDITY

The Company is in the clinical stage and has not yet generated any revenues.

For the fiscal year ended June 30, 2022, the Company incurred a net loss of $ 41.1 million and net cash used in operating activities amounted to $ 39.6 million.

As of June 30, 2022, the Company had an accumulated deficit of $ 209.2 million, cash and cash equivalents of $ 150.4 million, and total current liabilities of $ 2.5 million.

As discussed in Note 4, the Company is subject to license agreements that provide for future contractual payments upon achievement of various milestone events.

Pursuant to the ActiveSite License Agreement, a $ 3.0 million milestone payment will be due upon dosing of the first patient in a Phase 2 clinical trial for RZ402.

Additionally, pursuant to the XOMA License Agreement (as defined below), a $ 5.0 million milestone payment will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358.

After underwriting discounts of $ 7.1 million, the Company received proceeds of approximately $ 110.5 million upon closing of a registered direct offering on May 4, 2022.

This amount consists of $ 39.1 million related to the issuance of 10.9 million Class B pre-funded warrants where exercise was subject to shareholder approval of an increase in the Company’s authorized shares, for which approval was received in June 2022, and the remainder of $ 71.4 million related to unrestricted issuances of equity securities.

As discussed in Note 15, in July 2022 the Company received gross proceeds of approximately $ 12.3 million related to a private placement of approximately 3.2 million shares of common stock.

Management believes the Company’s cash and cash equivalents balance of $ 150.4 million as of June 30, 2022, and additional proceeds received in July 2022 from the private placement, will be adequate to carry out currently planned activities through September 2023, at a minimum.

NOTE 3 — LEASES

In November 2020, the Company entered into an assignment, assumption and amendment of lease agreement for ancillary office space in Bend, Oregon.

The leased space consists of approximately 5,000 square feet and provides for average monthly rent of approximately $ 8,400 through the expiration date in February 2024.

The lease provides one option to renew the lease for an additional three years at market rates.

The Company determined it was not reasonably assured that this renewal option would be exercised whereby the resulting lease term was estimated at 40 months .

Using a discount rate of 6.0 %, the Company recognized an ROU asset and corresponding operating lease liability of approximately $ 0.3 million at inception of the lease.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

As of June 30, 2022 and 2021, the carrying value of all ROU assets and operating lease liabilities was as follows (in thousands):

Right-of-use assets, net

Operating lease liabilities:

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

operating lease expense was as follows (in thousands):

For the fiscal years ended June 30, 2022 and 2021, operating lease expense was as follows (in thousands):

Research and development

General and administrative

As of June 30, 2021, the weighted-average remaining

lease term under operating leases was 1.9 years, and the weighted-average discount rate used to determine the operating lease liabilities

For the fiscal year ended June 30, 2021, cash paid for amounts included in the measurement of operating lease liabilities amounted

to $0.3 million, which is included in the determination of net cash used in operating activities in the consolidated statement of cash

As of June 30, 2022, the weighted-average remaining lease term under operating leases was 1.7 years, and the weighted-average discount rate used to determine the operating lease liabilities was 6.0 %.

For the fiscal year ended June 30, 2022, cash paid for amounts included in the measurement of operating lease liabilities amounted to $ 0.3 million, which is included in the determination of net cash used in operating activities in the consolidated statement of cash flows.

Future Lease Payments

Future payments under operating lease agreements

as of June 30, 2021 are as follows (in thousands):

Future payments under operating lease agreements as of June 30, 2022 are as follows (in thousands):

Fiscal year ending June 30,

2 unchanged sentences

Present value of operating lease liabilities

Headquarters Lease

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

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

The landlord is required to make improvements to the facility before it is suitable for occupancy by the Company.

The Company anticipates the improvements will be completed in the first quarter of the fiscal year ended June 30, 2023, triggering the commencement of the lease.

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.

In addition, the lease provides an allowance of approximately $ 0.1 million that may be utilized by the Company for the purchase of furniture and equipment.

The average base rent payable in cash over the 60-month lease term is approximately $ 48,000 per month.

Upon commencement of the lease, the Company expects to recognize a right-of-use asset and a related operating lease liability for approximately $ 2.3 million.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

License Agreements

Assuming the lease commences in September 2022, future payments under this operating lease agreement are as follows (in thousands):

Fiscal year ending June 30,

Total lease payments

NOTE 4 —LICENSE AGREEMENTS

XOMA License Agreement

In December 2017, the

Company entered into a license agreement (“License Agreement”) with XOMA Corporation (“Xoma”), through its

wholly-owned subsidiary, XOMA (US) LLC, pursuant to which Xoma granted an exclusive global license to the Company to develop and commercialize

Xoma 358 (formerly X358, now RZ358) for all indications.

In January 2019, the License Agreement was amended with an updated payment schedule,

as well as revising the amount the Company was required to expend on development of RZ358 and related licensed products, and revised provisions

with respect to the Company’s diligence efforts in conducting clinical studies.

On March 31, 2020, the

parties entered into Amendment No.

3 to the License Agreement to extend the payment schedule for the remaining balance of approximately

$2.6 million.

The revised payment schedule provided for seven quarterly payments to be paid from March 31, 2020 through September 30,

As discussed in Note

7, the Company completed a private placement of equity securities for gross proceeds of $41.0 million in October 2020, which resulted

in acceleration of the entire obligation.

On October 23, 2020, the Company paid the outstanding balance of $1.4 million.

As of June 30,

2021, the Company does not have any remaining balance payable under Amendment No.

3 to the License Agreement.

Upon the achievement of

certain clinical and regulatory events, the Company will be required to make up to $37.0 million in aggregate milestone payments to Xoma.

In addition to the December 2017 License Agreement

between the Company and Xoma, the parties also entered into a stock purchase agreement (“Stock Purchase Agreement”), pursuant

to which, Xoma owns approximately 162,000 shares of the Company’s common stock as of June 30, 2021.

The Stock Purchase Agreement

provided Xoma with the right and option to require the Company to use its best efforts to facilitate orderly sales of the shares to a

third party or purchase the shares (the “Put Option”).

On November 3, 2020, the Company’s shares of common stock were

approved for listing on the Nasdaq Capital Market and the Put Option terminated.

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

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

In January 2022, the Company was required to make a milestone payment under the XOMA License Agreement of $ 2.0 million that became due upon the dosing of the last patient in the Company’s ongoing Phase 2b Clinical Trial for RZ358.

Upon the achievement of certain clinical and regulatory events under the XOMA License Agreement, the Company will be required to make additional milestone payments to XOMA up to $ 35.0 million.

After the clinical and regulatory milestones, the Company will be required, upon the future commercialization of RZ358, to pay royalties to XOMA based on the net sales of the related products and additional milestone payments to XOMA up to $ 185.0 million related to annual net sales amounts.

The next milestone payment of $ 5.0 million will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358.

ActiveSite License Agreement

On August 4, 2017, the Company entered into

a Development and License Agreement with ActiveSite Pharmaceuticals, Inc.

(“ActiveSite”) pursuant to which the

Company acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Portfolio”).

Company is initially using the PKI Portfolio to develop an oral PKI therapeutic for diabetic macular edema (RZ402) and may use the

PKI Portfolio to develop other therapeutics for different indications.

The ActiveSite Development and License Agreement

requires various milestone payments up to $46.5 million.

The first milestone payment for $1.0 million was due after acceptance of an

Initial Drug Application, or IND, filed with the U.S.

Food and Drug Administration (“FDA”).

The Company is also required

to pay royalties equal to 2.0% of any sales of products that use the PKI Portfolio.

On October 28, 2020, the Company submitted an

IND to the FDA.

On December 3, 2020, the Company received FDA clearance for the IND application filed by the Company.

This clearance resulted

in the Company owing the first milestone payment of $1.0 million, which was paid in December 2020.

There have been no events that would

result in any royalty payments owed under the ActiveSite Development and License Agreement to date.

Loan and security agreement

On April 14, 2021, the Company entered into

a $30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp.

and certain other lenders (the

“Lenders”).

The Lenders agreed to loan up to $30.0 million in three tranches consisting of (i) a $15.0 million term A

loan that was funded on April 14, 2021, (ii) a $7.5 million term B loan to be funded upon request by the Company no later than

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

Funding of the term B loan is subject to the Company’s ability to obtain at least $35.0 million of equity or subordinated

debt financing by January 2022 and the achievement of certain clinical milestones related to RZ358 and RZ402.

Funding of the term C loan

is subject to the Company’s ability to (i) meet the conditions for funding the term B loan, and (ii) obtaining an additional $35.0

million of equity or subordinated debt financing, and the achievement of certain additional clinical milestones related to RZ358 and RZ402

by September 2022.

Each term loan has a maturity date of April 1, 2026 (the “Maturity Date”).

On August 4, 2017, the Company entered into a Development and License Agreement (the “ActiveSite License Agreement”) with ActiveSite Pharmaceuticals, Inc.

(“ActiveSite”) pursuant to which the Company acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Portfolio”).

The Company is initially using the PKI Portfolio to develop an oral PKI therapeutic for diabetic macular edema (RZ402) and may use the PKI Portfolio to develop other therapeutics for different indications.

The ActiveSite Development and License Agreement requires various milestone payments up to $ 46.5 million if all milestone payments are achieved.

The first milestone payment for $ 1.0 million was paid in December 2020 after clearance was received for an Initial Drug Application, or IND, filed with the US Food and Drug Administration (“FDA”).

The next milestone payment of $ 3.0 million will be due upon dosing of the first patient in a Phase 2 clinical trial for RZ402.

The Company is also required to pay royalties equal to 2.0 % of any sales of products that use the PKI Portfolio.

There have been no events that would result in any royalty payments owed under the ActiveSite License Agreement to date.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

In addition, the Company’s cash and cash

equivalents became subject to a blocked account control agreement (“BACA”) in favor of the Lenders whereby a cash balance

of at least $5.0 million must be maintained beginning on the earlier of (i) December 31, 2021, and (ii) the date the term B loan is funded.

In the event of a default under the Loan Agreement, the BACA would enable the Lenders to prevent the release of funds from the Company’s

cash accounts.

Outstanding borrowings bear interest at a floating

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

Benchmark Administration Ltd.

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

For the period from April 14,

2021 through 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 June 30, 2021.

The Company is permitted to make interest-only payments on each term loan through May 1, 2023.

Company’s request, the interest-only period can be extended until May 1, 2024, if the Company obtains

at least $70.0 million of equity or subordinated debt financing by September 2022 and

no event of default shall have occurred.

The Company will be required to make monthly payments of principal and interest commencing

at the end of the interest-only period.

The Company is obligated to pay the Lenders (i)

a non-refundable facility fee in the amount of 1.00% of each term loan that is funded (the “Facility Fee”), and (ii) a final

fee equal to 4.75% of the aggregate amount of the term loans funded (the “Final Fee”).

As of June 30, 2021, the Company incurred

debt discounts for an aggregate of $1.7 million that consisted of $0.5 million for financial advisory and legal fees, an aggregate of

$0.8 million for the Facility Fee and the Final Fee, and an aggregate of $0.4 million as an exit fee accounted for as an embedded derivative

and a prepayment fee related to the term A loan.

The Final Fee is payable upon the earliest to occur of (i) the Maturity Date, (ii) the

acceleration of the term loans, and (iii) the prepayment of the term loans.

The total debt discount of $1.7 million related to the

term A loan is being accreted to interest expense using the effective interest method which results in an overall current effective interest

rate of 12.6% as of June 30, 2021.

Concurrently with the execution of the Loan

Agreement, the Company entered into an exit fee agreement (the “Exit Fee Agreement”) that provides for a fee of 4.00% of

the funded principal balance of each term loan in the event certain transactions (defined as “Exit Events”) occur prior

to April 13, 2031.

Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of

control transactions, and issuances of common stock that result in new investors owning more than 35% of the Company’s shares.

As of April 14, 2021, the Company allocated a portion of the proceeds from the term A loan to recognize a liability for the fair

value of this embedded derivative for approximately $354,000.

Fair value was determined based on the Company’s strategic

corporate development plans it has performed a detailed evaluation of the different types of Exit Events that could occur and using

a discounted rate equivalent to the effective rate for the term A loan.

Fair value of this embedded derivative is assessed at the

end of each reporting period with changes in fair value recognized as a nonoperating gain or loss.

As of June 30, 2021, there was a

change in fair value of $5,869 recorded as a non-operating loss on change in fair value of embedded derivative.

The Company has the option to prepay all, but

not less than all, of the outstanding principal balance of the term loans.

In the event of a voluntary or mandatory prepayment prior to

the Maturity Date, the Company will incur a prepayment fee ranging from 1.00% to 3.00% of the outstanding principal balance.

The Company’s obligations under the Loan

Agreement are secured by a first-priority security interest in substantially all the Company’s assets, including its intellectual

This security interest will not be released until all obligations are repaid, including a requirement to pay an Exit Fee of

$0.6 million for certain fundamental transactions that may occur through April 13, 2031.

The Loan Agreement contains customary representations,

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

upon the occurrence of a material adverse change affecting the Company.

Upon the occurrence of an event of default, a default interest

rate of an additional 5.00% per annum may be applied to the outstanding loan balance, and the Lenders may declare all outstanding obligations

immediately due and payable and exercise all their rights and remedies as set forth in the Loan Agreement.

NOTE 5 — LOAN AND SECURITY AGREEMENT

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

(“SLR”) and certain other lenders (collectively, the “Lenders”).

The Lenders agreed to loan up to $ 30.0 million consisting of (i) a $ 15.0 million term A loan that was funded on April 14, 2021, and (ii) term B and term C loans for an aggregate of $ 15.0 million, which were subject to the Company’s ability to obtain prescribed amounts of financing and achieve certain clinical milestones.

The Company did not achieve the initial clinical milestones by January 2022 and the term B and term C loans were no longer a potential source of liquidity.

The maturity date of the term A loan was April 1, 2026 (the “Maturity Date”).

In addition, the Company’s cash and cash equivalents became subject to a blocked account control agreement (“BACA”) in favor of the Lenders whereby a cash balance of at least $ 5.0 million was required beginning on December 31, 2021.

In the event of a default under the Loan Agreement, the BACA would have enabled the Lenders to prevent the release of funds from the Company’s cash accounts and accordingly the Company accounted for the BACA as a restricted cash account.

Outstanding borrowings provided for interest at a floating rate equal to (a) 8.75 % per annum plus (b) the greater of (i) the rate per annum published by the Intercontinental Exchange Benchmark Administration Ltd.

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

For the period from April 14, 2021 through February 28, 2022, the IEBA rate for a term of one month was approximately 0.12 % per annum.

For the period from March 1, 2022 through June 30, 2022, the IEBA rate for a term of one month was approximately 0.23 % per annum.

Therefore, the contractual rate was 8.98 % and 8.87 % as of June 30, 2022 and 2021, respectively.

The Company was permitted to make interest-only payments on each term loan through May 1, 2023.

The Company was obligated to pay the Lenders (i) a non-refundable facility fee in the amount of 1.00 % of each term loan (the “Facility Fee”), and (ii) a final fee equal to 4.75 % of the aggregate amount of the term loans funded (the “Final Fee”).

As of June 30, 2021, the Company incurred debt discounts for an aggregate of $ 1.7 million that consisted of $ 0.5 million for financial advisory and legal fees, an aggregate of $ 0.8 million for the Facility Fee and the Final Fee, and an aggregate of $ 0.4 million as an exit fee accounted for as an embedded derivative.

The Final Fee was 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 was accreted to interest expense using the effective interest method which resulted in an overall current effective interest rate of 12.6 %.

Concurrently with the execution of the Loan Agreement, the Company entered into an exit fee agreement (the “Exit Fee Agreement”) that provides for a fee of 4.00 % of the funded principal balance of each term loan in the event certain transactions (defined as “Exit Events”) occur prior to April 13, 2031.

Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of control transactions, and issuances of common stock that result in new investors owning more than 35 % of the Company’s shares.

As of April 14, 2021, the Company allocated a portion of the proceeds from the term A loan to recognize a liability for the fair value of all embedded derivatives related to the Loan Agreement for approximately $ 381,000 .

Fair value of the Exit Events derivative was determined based on the Company’s strategic corporate development plans by considering a detailed evaluation of the different types of Exit Events that could occur and using a discounted rate equivalent to the effective rate for the term A loan.

Fair value of embedded derivatives is assessed at the end of each reporting period with changes in fair value recognized as a nonoperating gain or loss.

As of June 30, 2022 and 2021, there was a change in fair value of approximately $ 20,000 and $ 6,000 recorded as a non-operating loss on change in fair value of embedded derivatives.

As of June 30, 2022, the Company was permitted to prepay the outstanding principal balance of the term loan by incurring a prepayment fee of 2.00 % of the outstanding principal balance.

On June 30, 2022, the Company exercised its option to prepay the outstanding principal of the term A loan and terminate the Loan Agreement.

Accordingly, the Company paid a total of $ 16.0 million consisting of the outstanding principal of $ 15.0 million, the Final Fee of $ 0.7 million and the prepayment fee of $ 0.3 million.

As of June 30, 2022, a loss on

REZOLUTE, INC.

Notes to Consolidated Financial Statements

As of June 30, 2021, the Company had outstanding

contractual obligations under the Loan Agreement consisting of the principal balance of $15.0 million and the Final Fee of $0.7 million

for a total of $15.7 million.

After deducting the unaccreted discount of $1.7 million, the net carrying value was $14.0 million as of

June 30, 2021.

Future minimum principal payments and the net carrying value of the term A loan is as follows as of June 30, 2021 (in thousands):

Fiscal year ending June 30,

Total contractual payments

Less unaccreted debt discount

Net carrying value

DERIVATIVE LIABILITY FOR AUTHORIZED SHARE DEFICIENCY

As discussed in Note 7, the Company reduced the

number of its authorized shares of common stock from 500.0 million shares to 10.0 million shares as of February 17, 2021.

of this change, the Company had approximately 8.4 million shares of common stock issued and outstanding, plus approximately 2.4 million

shares that were required to be reserved for issuance pursuant to the Company’s stock option plans and outstanding warrant agreements.

Accordingly, a total of 10.8 million shares were required to be authorized, which resulted in a deficiency of approximately 0.8 million

shares that were unavailable to settle outstanding stock options and warrants as of February 17, 2021.

Since the Company could have been

required to settle in cash for up to 0.8 million shares, liability classification for these instruments was required beginning on February

The Company’s accounting policy

provided for selection of the stock options and warrant agreements with the earliest issuance dates to compute the estimated fair

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

These stock options and warrants were generally

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

The fair value of such stock options and warrants

amounted to $3.6 million, which was reclassified from shareholders’

equity to a derivative liability as of February 17, 2021.

As a result of the expiration of stock options and warrants for approximately 0.1 million shares from February 2021 through May

2021, the authorized share deficiency was reduced to approximately 0.7 million shares as of May 26, 2021, when the Company’s

shareholders approved an increase in authorized shares from 10.0 million shares to 40.0 million shares.

Presented below is a summary of the derivative

liability associated with the stock options and warrants that were subject to the Company’s accounting policy as of February 17,

2021 and May 26, 2021 (in thousands, except per share amounts):

extinguishment of the Loan Agreement of $ 1.8 million was recognized for the unaccreted discount of $ 1.5 million and the 2.00 % prepayment penalty of $ 0.3 million.

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

This security interest was released on June 30, 2022, upon termination of the Loan Agreement.

The Exit Fee Agreement discussed above was not impacted by the termination of the Loan Agreement.

NOTE 6 — DERIVATIVE LIABILITIES FOR AUTHORIZED SHARE DEFICIENCIES

Deficiency Triggered by Issuance of Class B Pre-Funded Warrants

As discussed in Note 7, the Company issued pre-funded warrants (“PFWs”) pursuant to underwritten offerings completed in October 2021 and May 2022.

Exercisability of 10,947,371 Class B PFWs for net proceeds of approximately $ 39.1 million received in May 2022 was subject to the Company’s ability to obtain shareholder approval for an increase in authorized shares.

Since the ability to obtain shareholder approval was outside the Company’s control, liability classification was required beginning on the date of issuance of the Class B PFWs on May 4, 2022.

The fair value of the Class B PFWs on the date of issuance was equal to the amount paid by investors of approximately $ 41.6 million or $ 3.80 per share, which was accounted for as a derivative liability beginning on May 4, 2022.

As discussed in Note 7, the Company’s shareholders approved an increase in authorized shares from 40.0 million shares to 100.0 million shares on June 16, 2022.

Upon receipt of shareholder approval for the authorized share increase on June 16, 2022, fair value of the derivative liability had decreased to $ 35.0 million or $ 3.20 per share, which resulted in a gain of $ 6.6 million.

This gain is included in non-operating income and the liability of $ 35.0 million was reclassified into shareholders’ equity on June 16, 2022.

Underwriter discounts of approximately $ 2.5 million related to the Class B PFWs were expensed at the date of issuance.

Fair value of the Class B PFWs was determined using the BSM option-pricing model with the following assumptions as of June 16, 2022:

Market price of common stock

Exercise price

Risk-free interest rate

Dividend rate

Remaining expected term (years)

Historical volatility

Deficiency Triggered by Charter Revision

As discussed in Note 7, the Company reduced the number of its authorized shares of common stock from 500.0 million shares to 10.0 million shares on February 17, 2021.

At the time of this change, the Company had approximately 8.4 million shares of common stock issued and outstanding , plus approximately 2.4 million shares that were required to be reserved for issuance pursuant to the Company’s stock option plans and warrant agreements.

Accordingly, a total of 10.8 million shares were required to be authorized, which resulted in a deficiency of approximately 0.8 million shares that were unavailable to settle outstanding stock options and warrants as of February 17, 2021.

Since the Company could have been required to settle in cash for up to 0.8 million shares, liability classification for these instruments was required beginning on February 17, 2021.

The Company’s accounting policy provided for selection of the stock options and warrant agreements with the earliest issuance dates to compute the estimated fair value of the financial instruments associated with the authorized share deficiency.

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

The fair value of such stock options and warrants amounted to $ 3.6 million, which was reclassified from shareholders’ equity to a derivative liability as of February 17, 2021.

As a result of the expiration of stock options and

REZOLUTE, INC.

Notes to Consolidated Financial Statements

warrants for approximately 0.1 million shares from February 2021 through May 2021, the authorized share deficiency was reduced to approximately 0.7 million shares as of May 26, 2021, when the Company’s shareholders approved an increase in authorized shares from 10.0 million shares to 40.0 million shares.

Presented below is a summary of the derivative liability associated with the stock options and warrants that were subject to the Company’s accounting policy as of February 17, 2021 and May 26, 2021 (in thousands, except per share amounts):

February 17, 2021

2 unchanged sentences

Fair value of derivative liability

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Due to the reduction in fair value of the

derivative liability from $3.6 million as of February 17, 2021 to $1.8 million as of May 26, 2021, the Company recognized a non-cash

change in fair value of approximately $1.8 million in the accompanying consolidated statements of operations for the fiscal year

ended June 30, 2021.

The primary factor that resulted in this gain was a reduction in the market price in the Company's common stock

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.

value of the stock options and warrants set forth above was determined using the BSM option-pricing model with the following

weighted-average assumptions as of February 17, 2021 and May 26, 2021:

Due to the reduction in fair value of the derivative liability from $ 3.6 million as of February 17, 2021 to $ 1.8 million as of May 26, 2021, the Company recognized a non-cash gain from the change in fair value of approximately $ 1.8 million in the accompanying consolidated statements of operations for the fiscal year ended June 30, 2021.

This gain is included in non-operating income and the liability of $ 1.8 million was reclassified into shareholders’ equity on May 26, 2021.

The primary factor that resulted in this gain was a reduction in the market price in the Company’s common stock 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.

Fair value of the stock options and warrants set forth above was determined using the BSM option-pricing model with the following weighted-average assumptions as of February 17, 2021 and May 26, 2021:

February 17, 2021

5 unchanged sentences

Historical volatility

SHAREHOLDERs’

NOTE 7 — SHAREHOLDERS’ EQUITY

Changes in Authorized Capital Stock

For the period from April 24, 2019 through

February 16, 2021, the Company was authorized to issue 500.0 million shares of common stock and 20.0 million shares of preferred

On February 17, 2021, the Company filed a certificate of correction (the “Charter Revision”) with the

Secretary of State of Delaware that changed the number of authorized shares of common Stock from 500.0 million shares to 10.0

million shares.

The Charter Revision also reduced the number of authorized shares of preferred stock from 20.0 million shares to 0.4

million shares on February 17, 2021.

In connection with the Reincorporation Merger discussed in

Note 1, the Company’s shareholders approved an increase in authorized shares from 10.0 million shares to 40.0 million shares

of common stock as of June 18, 2021.

Accordingly, as of June 30, 2021 the Company is authorized to issue 40.0 million shares of

common stock and 0.4 million shares of preferred stock.

For the period from April 24, 2019 through February 16, 2021, the Company was authorized to issue 500.0 million shares of common stock and 20.0 million shares of preferred stock.

On February 17, 2021, the Company filed a certificate of correction (the “Charter Revision”) with the Secretary of State of Delaware that changed the number of authorized shares of common Stock from 500.0 million shares to 10.0 million shares.

The Charter Revision also reduced the number of authorized shares of preferred stock from 20.0 million shares to 0.4 million shares on February 17, 2021.

In connection with the Reincorporation Merger discussed in Note 1, the Company’s shareholders approved an increase in authorized shares from 10.0 million shares to 40.0 million shares of common stock as of June 18, 2021.

Accordingly, as of June 30, 2021, the Company was authorized to issue 40.0 million shares of common stock and 0.4 million shares of preferred stock.

On June 16, 2022, the Company’s shareholders approved an increase of authorized shares from 40.0 million shares to 100.0 million shares of common stock.

Accordingly, as of June 30, 2022, the Company was authorized to issue 100.0 million shares of common stock and 0.4 million shares of preferred stock.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Reverse Stock Split

As discussed in Note 1, the Company effected a

Reverse Stock Split on October 9, 2020.

All references in the accompanying consolidated financial statements to the number of shares

of common stock and per share amounts have been retroactively adjusted to give effect to the Reverse Stock Split.

As discussed in Note 1, the Company effected a Reverse Stock Split on October 9, 2020.

May 2022 Registered Direct Offering

On May 1, 2022, the Company 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 the Company’s 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 approximately 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.

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

The 2022 RDO closed on May 4, 2022 and the Company received net proceeds of approximately $ 110.5 million.

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

Pursuant to the Private Placement, the Company entered into a securities purchase agreement (“SPA”) on May 4, 2022 with Handok, Inc.

(“Handok”), an entity affiliated with a member of the Board of Directors, and certain of Handok’s affiliates (collectively, the “Purchasers”).

Contingent upon satisfaction of certain closing conditions set forth in the SPA, the Company agreed to sell to the Purchasers 3.2 million shares of common stock at a price of $ 3.80 per share.

As discussed in Note 15, the closing of the Private Placement occurred in July 2022 and resulted in the receipt of net cash proceeds of approximately $ 11.6 million.

2022 Pre-Funded Warrants

The offering price of $ 3.799 per share for the Class A PFWs and the Class B PFWs (collectively, the “2022 PFWs”) is equal to the public offering price for the shares of common stock issued in the 2022 RDO less the $ 0.001 per share price that is required to be paid to the Company upon exercise of the 2022 PFWs.

The exercise price of the 2022 PFWs is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock, and also upon any distributions for no consideration of assets to the Company's shareholders.

In the event of certain corporate transactions, the holders of the 2022 PFWs will be entitled to receive, upon exercise of the 2022 PFWs, the kind and amount of securities, cash or other property that the holders would have received had they exercised the 2022 PFWs immediately prior to such transaction.

The 2022 PFWs do not entitle the holders thereof to any voting rights or any of the other rights or privileges to which holders of common stock are entitled.

Each Class A PFW is exercisable upon issuance.

The Class B PFWs became exercisable for shares of common stock upon receipt of shareholder approval for an increase in the number of authorized shares of common stock as discussed below under the caption Required Shareholder Approval .

As of June 30, 2022, no shares underlying the 2022 PFWs have been exercised.

Required Shareholder Approval

The closing of the 2022 RDO resulted in the issuance of the approximately 18.0 million shares of common stock and Class A PFWs for approximately 2.0 million shares.

After these issuances, the Company had utilized the entire 40.0 million of authorized shares of common stock that were available under its corporate charter, consisting of issued shares and shares of common stock reserved for issuance under stock option plans and outstanding warrants discussed in Note 7.

Accordingly, the Company did not have a sufficient number of shares of common stock available to permit exercise of

REZOLUTE, INC.

Notes to Consolidated Financial Statements

any of the Class B PFWs.

Therefore, the Class B PFWs were exercisable for shares of common stock to the extent that shareholders subsequently approved an increase in the number of authorized shares (the “Shareholder Approval”), which the Company was required to use its best efforts to obtain at an annual meeting of shareholders to be held by June 30, 2022.

As noted under the caption Changes in Authorized Capital Stock the Company obtained shareholder approval for an increase of authorized shares on June 16, 2022.

As of June 30, 2022, the 10.9 million Class B PFWs issued were exercisable and no shares underlying the Class B PFWs have been exercised.

The Company accounted for the gross proceeds of $ 41.6 million received from the issuance of the Class B PFWs as derivative liabilities whereby future changes in the fair value of the derivative liabilities would result in gains or losses until such time that Shareholder Approval was obtained.

As discussed in Note 6, upon receipt of shareholder approval for an increase in authorized shares to 100.0 million shares, the Company reclassified the derivative liability to shareholders’ equity.

Registration Rights Agreement

In connection with the offer of the Class B PFWs, the Company entered into registration rights agreements with the purchasers.

Pursuant to the registration rights agreements, the Company was required to file a registration statement with the SEC to register for resale the shares issuable upon exercise of the Class B PFWs, within two days of receipt of Shareholder Approval, and to have such registration statement declared effective by July 5, 2022 in the event the registration statement was not reviewed by the SEC.

The Company would be obligated to pay certain liquidated damages to the purchasers if the Company (i) failed to file the registration statement when required, (ii) failed to cause the registration statement to be declared effective by the SEC when required, and (iii) if the Company to fails to maintain the effectiveness of the registration statement.

On June 17, 2022, the Company filed the initial registration statement with the SEC to register the shares issuable upon exercise of the Class B PFWs, which was within 2 days of the Company’s shareholder meeting held on June 16, 2022.

Subsequently on July 1, 2022, the registration was declared effective by the SEC.

If the Company fails to comply with the registration rights agreement, it will be obligated to pay 2.0 % of the purchase price of the Class B PFWs for an aggregate of approximately $ 0.8 million as liquidated damages.

If liquidated damage payments are required in the future, they will be charged to expense in the period incurred.

2021 Underwritten Public Offering

On October 12, 2021, the Company 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 aggregate gross proceeds from the Underwritten Offering amounted to $ 50.0 million, excluding the Underwriters’ Option discussed below, 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 $ 46.7 million.

The Company granted the 2021 Underwriters a 30-day option to purchase up to an additional 1,153,845 shares of its common stock in the 2021 Underwritten Offering at a public offering price of $ 6.50 per share, less underwriting 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.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

2021 Pre-Funded Warrants

The 2021 PFWs have an exercise price of $ 0.01 per share, which is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock.

Each 2021 PFW is exercisable at any time and from time to time after issuance with no stated expiration date.

In the event of certain corporate transactions, the holders of the 2021 PFWs will be entitled to receive, upon exercise of the 2021 PFWs, the kind and amount of securities, cash or other property that the holders would have received had they exercised the 2021 PFWs immediately prior to such transaction.

The 2021 PFWs do not entitle the holders thereof to any voting rights or any of the other rights or privileges to which holders of common stock are entitled.

The gross proceeds of $ 10.8 million received from issuance of the 2021 PFWs was recorded as a component of shareholders’ equity within additional paid-in capital.

In accordance with the terms of the warrant agreement, holders of the outstanding warrants are not entitled to exercise any portion of the 2021 PFWs if, upon exercise of such portion of the warrant, the holder’s aggregate ownership of the Company’s common stock or the combined voting power beneficially owned by such holder would exceed a designated percentage elected by the holder ranging from 4.99 % to 19.99 %, after giving effect to the exercise (the “Maximum Ownership Percentage”).

Upon at least 61 days ’ prior notice to the Company, any warrant holder may elect to increase or decrease the Maximum Ownership Percentage to any other percentage not to exceed 19.99 %.

As of June 30, 2022, no shares underlying the 2021 PFWs have been exercised.

2021 Registered Direct Offering

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

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

Equity Distribution Agreement

On December 18, 2020, the Company and Oppenheimer

(the “Agent”) entered into an EDA that provides for an “at the market offering”

for the sale of

up to $50.0 million in shares of the Company’s common stock (the “Placement Shares”) through the Agent.

acting as sales agent and is required to use commercially reasonable efforts to sell all of the Placement Shares requested to be sold

by the Company, consistent with the Agent’s normal trading and sales practices, on mutually agreed terms between the Agent and the

The EDA will terminate when all of the Placement Shares have been sold, or earlier upon the election of either the Company or

The Company has no obligation to sell any of the

Placement Shares under the EDA.

The Company intends to use the net proceeds, if any, from Placement Shares sold under the EDA for general

corporate purposes, including working capital.

Under the terms of the EDA, the Company agreed to pay the Agent a commission equal to 3.0%

of the gross sales price of the Placement Shares plus certain expenses incurred by the Agent in connection with the offering.

June 30, 2021, no shares were sold pursuant to the EDA and no commissions were incurred.

As of June 30, 2021, deferred offering costs

incurred by the Company amounted to an aggregate of $0.2 million that is included under the caption deferred offering costs and other

in the accompanying consolidated balance sheet.

Fiscal 2021 Equity Financing

On September 15, 2020, the Company entered into

financial advisory agreements to undertake a private placement of equity or equity equivalent securities (the “Fiscal 2021 Equity

Financing”).

Pursuant to the financial advisory agreements, the Company agreed to pay transaction fees to the financial advisors

for an aggregate of 6.0% of the gross proceeds plus out-of-pocket expenses.

In addition, for any financing completed within 60 days of

the closing of the Fiscal 2021 Equity Financing, the financial advisors were entitled to additional transaction fees equal to 6.0% of

the gross proceeds.

As of June 30, 2021, the advisory agreements were no longer active.

In December 2020, the Company and Oppenheimer & Co.

(the “Agent”) entered into an Equity Distribution Agreement (“EDA”) that provides for an “at the market offering” for the sale of up to $ 50.0 million in shares of the Company’s common stock (the “Placement Shares”) through the Agent.

The Agent was acting as sales agent and was required to use commercially reasonable efforts to sell all of the Placement Shares requested to be sold by the Company, consistent with the Agent’s normal trading and sales practices, on mutually agreed terms between the Agent and the Company.

Under the terms of the EDA, the Company agreed to pay the Agent a commission equal to 3.0 % of the gross sales price of the Placement Shares plus certain expenses incurred by the Agent in connection with the offering.

For the year ended June 30, 2022, the Company sold 138,388 shares of its common stock pursuant to the EDA for net proceeds of approximately $ 1.5 million.

The EDA was scheduled to terminate when all of the Placement Shares had been sold, or earlier upon the election of either the Company or the Agent.

The Company provided the Agent with notice of termination in May 2022 and no further shares will be issued under the EDA.

LPC Purchase Agreement

In August 2021, the Company entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “RRA”) with Lincoln Park Capital Fund, LLC (“LPC”), which provided that the Company could sell to LPC up to an aggregate of $ 20.0 million shares (the “Purchase Shares”) of its common stock.

The Company concurrently filed a prospectus supplement with the SEC to register the shares issuable under the Purchase Agreement.

The aggregate number of shares that the Company could sell to LPC under the Purchase Agreement was 1,669,620 shares of common stock, subject to certain exceptions set forth in the Purchase Agreement.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

On October 9, 2020, the Company completed the

Fiscal 2021 Equity Financing through the sale of units (the “Units”) consisting of (i) approximately 2.5 million shares of

common stock, and (ii) warrants entitling the holders to purchase approximately 0.8 million shares of common stock.

The warrants are exercisable

at $19.50 per share for a period of seven years, may be exercised on a cash or cashless basis at the election of the holders, and holders

are entitled to share in any dividends or distributions payable to holders of common stock on an as-converted basis (the “Participating

Warrants”).

The Units were issued for a purchase price of

$16.50 per unit, resulting in gross proceeds of $41.0 million.

Pursuant to the financial advisory agreements, the Company paid transaction

fees of $2.5 million, and costs for professional fees and other offering costs amounted to approximately $1.1 million.

After deducting

the financial advisory fees and other offering costs, the estimated net proceeds amounted to approximately $37.4 million.

the terms of the Fiscal 2021 Equity Financing, the Company executed the Reverse Stock Split of fifty shares into one share as discussed

in Note 1 and agreed to enable trading of its common stock on the Nasdaq Capital Market, whereby the Company’s listing application

was approved by Nasdaq on November 3, 2020.

The Company also entered into a registration rights agreement (“RRA”), pursuant

to which the Company agreed to use commercially reasonable efforts to register (i) the shares of common stock included in the Units, and

(ii) the shares of common stock issuable upon exercise of the warrants.

LPC’s initial purchase consisted of 95,708 Purchase Shares at a purchase price of approximately $ 10.45 per share for a total purchase price of $ 1.0 million.

Concurrently, the Company issued 33,799 shares of common stock to LPC as an initial fee for its commitment to purchase shares of common stock under the Purchase Agreement.

Subject to the terms of the Purchase Agreement, the Company had the right, in its sole discretion, to present LPC with a purchase notice (a “Regular Purchase Notice”), directing LPC to purchase up to 25,000 Purchase Shares (a “Regular Purchase”).

LPC’s committed obligation under any single Regular Purchase generally could not exceed $ 2.0 million.

The Purchase Agreement provided for a purchase price per share for each Regular Purchase (the “Purchase Price”) equal to the lesser of (i) the lowest sale price of the common stock on the Nasdaq Capital Market (“NCM”) on the purchase date of such shares;

and (ii) the average of the three lowest closing sale prices for the common stock traded on the NCM during the ten consecutive business days ending on the business day immediately preceding the purchase date of such shares.

On September 17, 2021, the Company submitted a Regular Purchase Notice, resulting in the sale of 20,000 Purchase Shares to LPC for net proceeds of approximately $ 0.2 million.

The Company provided LPC with notice of termination of the Purchase Agreement in May 2022 and no further shares are issuable under this agreement.

Pursuant to the RRA, the Company agreed to use its reasonable best efforts to maintain effectiveness of the registration statement and the related prospectus supplement within prescribed deadlines set forth in the RRA.

In addition, the Company is required to use its reasonable best efforts to secure and maintain its listing of the Purchase Shares on the NCM.

LPC had no obligation to purchase shares under the Purchase Agreement unless the Company complies with the terms of the RRA.

Fiscal 2021 Equity Financing

On September 15, 2020, the Company entered into financial advisory agreements to undertake a private placement of equity or equity equivalent securities (the “Fiscal 2021 Equity Financing”).

Pursuant to the financial advisory agreements, the Company agreed to pay transaction fees to the financial advisors for an aggregate of 6.0 % of the gross proceeds plus out-of-pocket expenses.

In addition, for any financing completed within 60 days of the closing of the Fiscal 2021 Equity Financing, the financial advisors were entitled to additional transaction fees equal to 6.0 % of the gross proceeds.

As of June 30, 2021, the advisory agreements were no longer active.

On October 9, 2020, the Company completed the Fiscal 2021 Equity Financing through the sale of units (the “Units”) consisting of (i) approximately 2.5 million shares of common stock, and (ii) warrants entitling the holders to purchase approximately 0.8 million shares of common stock.

The warrants are exercisable at $ 19.50 per share for a period of seven years , may be exercised on a cash or cashless basis at the election of the holders, and holders are entitled to share in any dividends or distributions payable to holders of common stock on an as-converted basis (the “Participating Warrants”).

The Units were issued for a purchase price of $ 16.50 per unit, resulting in gross proceeds of $ 41.0 million.

Pursuant to the financial advisory agreements, the Company paid transaction fees of $ 2.5 million, and costs for professional fees and other offering costs amounted to approximately $ 1.1 million.

After deducting the financial advisory fees and other offering costs, the estimated net proceeds amounted to approximately $ 37.4 million.

Pursuant to the terms of the Fiscal 2021 Equity Financing, the Company executed the Reverse Stock Split of fifty shares into one share as discussed in Note 1 and agreed to enable trading of its common stock on the NCM, whereby the Company’s listing application was approved by Nasdaq on November 3, 2020.

The Company also entered into a registration rights agreement, pursuant to which the Company agreed to use commercially reasonable efforts to register (i) the shares of common stock included in the Units, and (ii) the shares of common stock issuable upon exercise of the warrants.

The Company successfully registered the Units on November 27, 2020.

Fiscal 2020 Private Placement

In connection with a Series AA Preferred Stock

financing in January 2019, the Company granted call options to Handok, Inc.

and Genexine, Inc.

(collectively, “H&G”) whereby

upon the earlier of (i) December 31, 2020 and (ii) such date that the Company requested H&G to provide additional financing, each

investor was entitled to purchase up to $10.0 million of common stock at a purchase price equal to the greater of (i) $14.50 per share

or (ii) 75% of the volume weighted average closing price (“VWAP”) of the Company’s common stock during the thirty consecutive

trading days prior to the date of the notice.

On June 19, 2019, the Company entered into a financial

advisory agreement to undertake a private placement (the “Fiscal 2020 Private Placement”) of (i) the shares of common stock

issuable under the H&G call options for a total of $20.0 million, plus (ii) up to $10.0 million of equity or equity equivalent securities

to be issued to other investors.

On July 23, 2019, the Company entered into purchase agreements whereby H&G exercised their call options

to purchase an aggregate of approximately 1.4 million shares of common stock for gross cash proceeds of $20.0 million at a purchase price

of $14.50 per share.

In addition, during July and August 2019 other investors purchased an aggregate of approximately 279,000 shares of

common stock at a purchase price of $14.50 per share for gross cash proceeds of $4.1 million.

Pursuant to the financial advisory agreement,

the Company paid a fee of 6.0% of the gross proceeds received from the Fiscal 2020 Private Placement.

The total advisory fees and other

offering costs amounted to approximately $1.5 million, resulting in net proceeds of $22.6 million for the year ended June 30, 2020.

Restricted Cash

In connection with the Fiscal 2020 Private Placement,

one of the investors purchased approximately 262,000 shares of common stock for gross proceeds of $3.8 million.

The Company agreed to

spend the proceeds for research and development related to RZ358 or for the Company’s planned uplisting of its common stock to a

national stock exchange.

For the year ended June 30, 2020, the Company expended the entire amount of the restricted cash proceeds on qualified

activities whereby there were no restrictions on cash balances as of June 30, 2020.

REZOLUTE, INC.

Notes to Consolidated

Financial Statements

Compensation and Warrants

Notes to Consolidated Financial Statements

NOTE 8 — SHARE-BASED COMPENSATION AND WARRANTS

Stock Option Plans

Presented below is a summary of the number of

shares authorized, outstanding, and available for future grants under each of the Company’s stock option plans as of June 30, 2021

(in thousands):

Presented below is a summary of the number of shares authorized, outstanding, and available for future grants under each of the Company’s stock option plans as of June 30, 2022 (in thousands):

Plan Termination

Number of Shares

February 2020

The Company currently has one active stock option

plan, the 2021 Equity Incentive Plan (the “2021 Equity Plan”).

On March 31, 2021, the Company’s Board of Directors adopted

the 2021 Equity Plan that will terminate on March 31, 2030.

On May 26, 2021, the 2021 Equity plan was approved by the Company’s

shareholders with authority to issue up to 1.2 million shares of common stock.

Pursuant to the 2021 Equity Plan, no awards may be granted

under the four legacy stock option plans shown in the table above, but all outstanding awards previously granted under those plans shall

remain outstanding and subject to the terms of the respective plans.

Stock options outstanding under these plans expire pursuant to their

contractual provisions on various dates through 2031.

The Company currently has one active stock option plan, the 2021 Equity Incentive Plan (the “2021 Equity Plan”).

On March 31, 2021, the Company’s Board of Directors adopted the 2021 Equity Plan that will terminate on March 31, 2030.

On May 26, 2021, the 2021 Equity plan was approved by the Company’s shareholders with authority to issue up to 1.2 million shares of common stock.

Pursuant to the 2021 Equity Plan, no awards may be granted under the three legacy stock option plans shown in the table above, but all outstanding awards previously granted under those plans shall remain outstanding and subject to the terms of the respective plans.

On June 16, 2022, the Company’s shareholders approved an amendment to the 2021 Equity Plan, increasing the number of shares of common stock to be issued under the plan up to 10.7 million shares of common stock.

Stock options outstanding under these plans expire pursuant to their contractual provisions on various dates through 2031.

2022 Employee Stock Purchase Plan

On June 16, 2022, the Company’s shareholders approved the adoption of the 2022 Employee Stock Purchase Plan (the “2022 ESPP”).

The 2022 ESPP provides an opportunity for employees to purchase the Company’s common stock through accumulated payroll deductions.

The 2022 ESPP has consecutive offering periods that begin approximately every 6 months commencing on the first trading day on or after July 1 and terminating on the last trading day of the offering period ending on December 31 and commencing on the first trading day on or after January 1 and terminating on the last trading day of the offering period ending on June 30.

The 2022 ESPP reserves 0.5 million shares for purchases.

The first offering period began on July 1, 2022.

June 2022 Grants

On June 14, 2021, the Board of Directors granted

stock options for an aggregate of approximately 0.7 million shares of common stock to certain officers, employees and independent directors

at an exercise price of $12.28 per share (the “June 2021 Grants”).

Stock options for an aggregate of approximately 0.5 million

shares were granted to the Company’s chief executive officer, independent directors and employees with less than one year of service

that provide for vesting of 1/36th of the total award each month commencing on July 1, 2021, and stock options for approximately 0.2 million

shares granted to employees with more than one year of service that provided for vesting of 25% of the award on grant date with the remainder

of the award vesting for approximately 2.1% the total award each month until full vesting occurs.

The aggregate fair value of the June

2021 Grants was $7.3 million, of which $0.6 million was recognized in June 2021 and the remaining $6.7 million will be recognized over

the respective vesting periods.

Stock Option Cancellations

Certain outstanding stock options held by officers

and other employees of the Company were either subject to restrictive vesting terms (requiring a sustained increase in market price to

$29.00 per share before vesting commenced) or that had relatively high exercise prices ranging from $50.00 to $103.00 per share.

29, 2021, three officers of the Company voluntarily surrendered their awards for approximately 0.3 million shares for no consideration.

The previously unrecognized compensation cost for these awards amounted to approximately $0.7 million that was charged to expense on the

date of cancellation.

Hybrid Options

In July 2019, the Company granted employee stock

options for approximately 0.2 million shares that commence vesting upon the achievement of market, performance and service conditions

(“Hybrid Options”).

The Hybrid Options will become exercisable when all of the following have occurred:

(i) the option recipient

has been employed by the Company for at least one year, (ii) the Company’s shares of common stock have been listed for trading on

a national stock exchange, and (iii) such date no later than July 31, 2023, when the Company’s closing stock price exceeds $29.00

per share for 20 trading days in any consecutive 30-day period.

Total unrecognized compensation cost, net of forfeitures, for the Hybrid

Options amounted to approximately $1.9 million as of November 3, 2020 when the performance condition to obtain a listing on a national

stock exchange was achieved.

Prior to this date, no compensation cost had been recognized for the Hybrid Options since it was not considered

probable that the performance condition would be achieved.

Upon achievement of the performance condition, the Company recognized compensation

cost of approximately $0.5 million for the period from the grant date through November 3, 2020.

On June 23, 2022, the Board of Directors granted stock options for an aggregate of approximately 7.0 million shares of common stock to certain officers, employees and independent directors at an exercise price of $ 3.40 per share (the “June 2022 Grants”).

Stock options were granted for an aggregate of approximately (i) 0.4 million shares were granted to independent directors and consultants, (ii) stock options for approximately 3.3 million shares granted to officers of the Company and (iii) 3.2 million shares granted to employees.

Vesting of these granted stock options generally occurs over a period between three and four years .

The aggregate fair value of the grants in June 2022 was $ 18.3 million, of which $ 0.1 million was recognized in June 2022 and the remaining $ 18.2 million will be recognized over the respective vesting periods.

REZOLUTE, INC.

Notes to Consolidated

Financial Statements

Notes to Consolidated Financial Statements

Stock Option Cancellations

Certain outstanding stock options held by officers and other employees of the Company were either subject to restrictive vesting terms (requiring a sustained increase in market price to $ 29.00 per share before vesting commenced) or that had relatively high exercise prices ranging from $ 50.00 to $ 103.00 per share.

On June 29, 2021, three officers of the Company voluntarily surrendered their awards for approximately 0.3 million shares for no consideration.

The previously unrecognized compensation cost for these awards amounted to approximately $ 0.7 million that was charged to expense on the date of cancellation.

Stock Options Outstanding

The following table sets forth a summary of the

combined stock option activity under all of the Company’s stock option plans for the fiscal years ended June 30, 2021 and 2020

(shares in thousands):

The following table sets forth a summary of the combined stock option activity under all of the Company’s stock option plans for the fiscal years ended June 30, 2022 and 2021 (shares in thousands):

Outstanding, beginning of fiscal year

Stock options granted:

Awards with time-based vesting

Awards with performance-based vesting

Stock options cancelled:

Awards with time-based vesting

Awards with performance-based vesting

Stock options forfeited:

Awards with time-based vesting

Awards with performance-based vesting

Directors and officers

Outstanding, end of fiscal year

Vested, end of fiscal year

_________________

(1) Represents the weighted average

exercise price.

(2) Represents the weighted average

remaining contractual term until the stock options expire.

For the fiscal year ended June 30, 2021, the

aggregate fair value of stock options granted for approximately 0.7 million shares of common stock that provide solely for time-based

vesting, amounted to $7.5 million or approximately $10.47 per share as of the grant dates.

For the fiscal year ended June 30, 2020, the

aggregate fair value of stock options granted for approximately 0.5 million shares of common stock that provide solely for time-based

vesting, amounted to $4.2 million or approximately $8.38 per share as of the grant date.

For the fiscal year ended June 30, 2020, the

aggregate fair value of stock options granted for approximately 0.2 million shares of common stock that provide for hybrid vesting, amounted

to $2.1 million or approximately $9.51 per share as of the grant date.

Fair value was computed using the BSM option-pricing model and

will result in the recognition of compensation cost ratably over the expected vesting period of the stock options.

For the fiscal years

ended June 30, 2021 and 2020, the fair value of stock options that provide for time-based and hybrid vesting was estimated on the date

of grant using the BSM option-pricing model, with the following weighted-average assumptions:

(1) Represents the weighted average exercise price.

(2) Represents the weighted average remaining contractual term until the stock options expire.

For the fiscal year ended June 30, 2022, the aggregate fair value of stock options granted for approximately 7.4 million shares of common stock amounted to $ 20.1 million or approximately $ 2.72 per share as of the grant dates.

For the fiscal year ended June 30, 2021, the aggregate fair value of stock options granted for approximately 0.7 million shares of common stock amounted to $ 7.5 million or approximately $ 10.47 per share as of the grant date.

Fair value was computed using the BSM option-pricing model and will result in the recognition of compensation cost ratably over the expected vesting period of the stock options.

The fair value of stock options was estimated on the date of grant using the BSM option-pricing model, with the following weighted-average assumptions for the fiscal years ended June 30, 2022 and 2021:

Market price of common stock on grant date

4 unchanged sentences

REZOLUTE, INC.

Notes to Consolidated

Financial Statements

Share-based compensation expense is included in

compensation and benefits under the following captions in the consolidated statements of operations for the fiscal years ended June 30,

2021 and 2020 (in thousands):

Notes to Consolidated Financial Statements

Share-based compensation expense is included in under the following captions in the consolidated statements of operations for the fiscal years ended June 30, 2022 and 2021 (in thousands):

Research and development

General and administrative

Unrecognized share-based compensation expense

for stock options that provide solely for time-based vesting as of June 30, 2021 was approximately $7.9 million.

This amount is expected

to be recognized over a remaining weighted average period of 2.7 years.

As of June 30, 2021, unrecognized compensation of $0.3 million

related to the remaining Hybrid Options is being recognized ratably over a weighted average term of 3.1 years.

The Company has issued warrants to purchase shares

of common stock in conjunction with various debt and equity financings and for services.

As of June 30, 2021 and 2020, all of the warrants

For the fiscal years ended June 30, 2021 and 2020, no warrants were exercised.

Presented below is a summary of grants and

expirations for the fiscal years ended June 30, 2021 and 2020 (shares in thousands):

Unrecognized share-based compensation expense for stock options that provide solely for time-based vesting as of June 30, 2022 was approximately $ 23.9 million.

This amount is expected to be recognized over a remaining weighted average period of 3.7 years.

As of June 30, 2022, unrecognized compensation of $ 0.2 million related to the remaining Hybrid Options is being recognized ratably over a weighted average period of 2.1 years.

In connection with the 2021 RDO discussed in Note 7, the Company issued 2021 PFWs to purchase 1,661,461 shares of common stock at an issuance price of $ 6.49 per warrant for gross proceeds of $ 10.8 million.

The 2021 PFWs may be exercised at any time by paying the exercise price of $ 0.01 per share, subject to the terms discussed in Note 7.

Additionally, in connection with the 2022 RDO discussed in Note 7, the Company issued 1,973,684 Class A PFWs and 10,947,371 Class B PFWs to purchase an aggregate of 12,921,055 shares of common stock at an issuance price of $ 3.799 per warrant.

As of June 30, 2022 all of the Class A PFWs and Class B PFWs may be exercised at any time by paying the exercise price of $ 0.001 per share, subject to the terms discussed in Note 7.

The Company has issued warrants to purchase shares of common stock in conjunction with other debt and equity financings and for services.

As of June 30, 2022 and 2021, all of the warrants were vested.

For the fiscal years ended June 30, 2022 and 2021, no warrants were granted or exercised.

Excluding the pre-funded warrants discussed above, the following table summarizes activity for all other warrants for the fiscal years ended June 30, 2022 and 2021 (shares in thousands):

Outstanding, beginning of fiscal year

Warrants issued

Warrants granted

Warrant expirations

Outstanding, end of fiscal year

_______________

Outstanding, fiscal year

(1) Represents the weighted average exercise price.

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

(3) Represents warrants granted for consulting services in November 2019 with an expiration date in November 2024.

The fair value of the warrants of $67,000 was determined using the BSM option-pricing model.

Since the warrants were immediately vested,

this entire amount is included in consulting and outside services under research and development expenses for the fiscal year ended June 30,

Key assumptions for the valuation of these warrants included the closing price of the Company’s shares of common stock of

$14.50 on the grant date, the exercise price of $6.50 per share, historical volatility of 119%, and an expected term of 5.0 years.

(4) Represents warrants granted in connection with the Fiscal 2021 Equity Financing on October 9, 2020 as

discussed in Note 7.

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 holder.

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

(3) Represents warrants granted in connection with the Fiscal 2021 Equity Financing on October 9, 2020.

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 holder.

REZOLUTE, INC.

Notes to Consolidated

Financial Statements

Notes to Consolidated Financial Statements

NOTE 9 — INCOME TAXES

Net Operating Loss Carryforwards

The Company files income tax returns in the US federal jurisdiction and in several states including California, Colorado, and Oregon.

The Company’s federal and state tax returns for the 2019 fiscal year and forward are subject to examination by taxing authorities.

As of June 30, 2022, the Company has U.S.

federal net operating loss (“NOL”) carryforwards of approximately $ 145.1 million, of which approximately $ 90.4 million does not expire and $ 54.7 million will begin to expire in 2031 through 2038.

Additionally, the Company has Colorado and California NOL carryforwards that begin to expire in 2031.

Federal and state laws impose substantial restrictions on the utilization of NOL carryforwards in the event of an ownership change for income tax purposes, as defined in Section 382 of the Internal Revenue Code (“IRC”).

Pursuant to IRC Section 382, annual use of the Company’s NOL carryforwards is limited in the event that a cumulative change in ownership of more than 50% occurs within a three-year period.

The Company recently completed an IRC Section 382 analysis and concluded that $ 33.4 million of NOL carryforwards that begin to expire in 2031 will expire without any opportunity for utilization.

Accordingly, after giving effect to the limitations under IRC Section 382, the Company has US Federal NOL carryforwards available for utilization of $ 111.7 million as of June 30, 2022.

These NOL carryforwards consist of $ 21.3 million that will begin to expire in 2031 and $ 90.4 million that does not expire.

Assuming that further IRC Section 382 ownership changes do not occur, these NOL carryforwards consist of approximately (i) $ 6.8 million that is not subject to any limitations or expiration dates, and (ii) $ 104.9 million that is subject to limitations whereby amounts ranging from $ 1.2 million to $ 4.1 million cumulatively becomes available for unrestricted use in future years.

Income Tax Expense

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

the reconciliation between the income tax benefit computed by applying the statutory U.S.

federal income tax rate to the pre-tax loss

before income taxes, and total income tax expense recognized in the financial statements is as follows (in thousands):

Income tax benefit at statutory U.S.

Income tax benefit attributable to U.S.

For the fiscal years ended June 30, 2022 and 2021, the reconciliation between the income tax benefit computed by applying the statutory U.S.

federal income tax rate to the pre-tax loss before income taxes, and total income tax expense recognized in the consolidated financial statements is as follows (in thousands):

Income tax benefit at statutory US federal rate

Income tax benefit attributable to US states

Impact of reduction in Colorado tax rate

4 unchanged sentences

Total income tax expense

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

the Company did not recognize any current income tax expense or benefit due to a full valuation allowance on its deferred income tax assets.

For the fiscal years ended June 30, 2022 and 2021, the Company did not recognize any current income tax expense or benefit due to a full valuation allowance on its deferred income tax assets.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Deferred Income Tax Assets and Liabilities

As of June 30, 2021 and 2020, the income tax

effects of temporary differences that give rise to significant deferred income tax assets and liabilities are as follows (in thousands):

As of June 30, 2022 and 2021, the income tax effects of temporary differences that give rise to significant deferred income tax assets and liabilities are as follows (in thousands):

Deferred income tax assets:

4 unchanged sentences

Accrued expenses and other

Property and equipment

Total deferred income tax assets

1 unchanged sentence

Net deferred income tax assets

Deferred income tax liability- property, equipment and other

Net deferred income tax assets

For the fiscal year ended June 30, 2021, the valuation

allowance increased by $2.6 million, primarily as a result of the increase in net operating losses.

In assessing the realizability of

deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax

assets will not be realized.

NOL Carryforwards and Other Matters

The Company files income tax returns in the U.S.

federal jurisdiction and in several states including California, Colorado, and Oregon.

The Company’s federal and state tax returns

for the 2018 fiscal year and forward are subject to examination by taxing authorities.

As of June 30, 2021, the Company has U.S.

NOL carryforwards of approximately $104.4 million, of which approximately $49.8 million does not expire and $54.6 million will begin to

expire in 2031.

Additionally, the Company has Colorado and California NOL carryforwards that begin to expire in 2031.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Federal and state laws impose substantial restrictions

on the utilization of NOL carryforwards in the event of an ownership change for income tax purposes, as defined in Section 382 of

the Internal Revenue Code (“IRC”).

Pursuant to IRC Section 382, annual use of the Company’s NOL carryforwards may be

limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.

The Company has not completed

an IRC Section 382 analysis regarding the limitation of NOL carryforwards.

However, it is possible that past ownership changes will result

in the inability to utilize a significant portion of the Company’s NOL carryforward that was generated prior to any change of control.

The Company’s ability to use its remaining NOL carryforwards may be further limited if the Company experiences an IRC Section 382

ownership change in connection with future changes in the Company’s stock ownership.

The Company did not have any unrecognized tax

benefits as of June 30, 2021 and 2020.

The Company’s policy is to account for any interest expense and penalties for unrecognized

tax benefits as part of the income tax provision.

The Company does not anticipate that unrecognized tax benefits will significantly increase

or decrease within the next twelve months.

Commitments and Contingencies

Please refer to Note 4 for further discussion

of commitments to make milestone payments and to pay royalties under license agreements with Xoma and ActiveSite.

In December 2019, COVID-19 was reported to

have surfaced in Wuhan, China, and by March 2020 the spread of the virus had resulted in a world-wide pandemic.

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

orders are being lifted gradually, a full recovery of the U.S.

economy may not occur until 2022 or later.

Federal and state

governments in the U.S.

have approved funding for many programs that may provide financial assistance to individuals and businesses.

The Company intends to pursue all material types of government assistance that it may be entitled to.

For the fiscal year ended June

30, 2021, the Company qualified for employee retention credits from the U.S.

government that resulted in total benefits of

approximately $0.5 million that are included in non-operating income in the accompanying consolidated statement of operations.

assurance can be provided that the Company will qualify and realize any additional benefits from such assistance.

COVID-19 has resulted in an economic environment

that is unfavorable for many businesses to pursue new equity financings.

Accordingly, the current economic environment is expected to

present greater challenges for the Company to obtain additional funding for its clinical programs on terms that are acceptable to the

Company’s Board of Directors.

In February 2020, the Company announced the initiation

of its Phase 2b trial in Congenital Hyperinsulinism (“HI”).

New site initiation and enrollment resumed during the fiscal quarter

ended December 31, 2020.

However, similar to many other clinical studies conducted by other companies throughout the world, effects of

the pandemic remain uncertain, and no guarantees can be made that future site initiation or enrollment will not be encountered again.

There are no mitigation strategies we can employ to help avoid potential timeline delays should there be an extended enrollment pause

due to COVID-19.

The long-term effects of COVID-19 are expected to require additional safeguards to protect patients and staff engaged

in clinical activities, and extended periods of time required to complete clinical trials, both of which are expected to result in higher

overall costs.

While the current business disruption is expected to be temporary, the long-term financial impact and the duration cannot

be reasonably estimated at this time.

Registration Rights Agreement

In connection with the Purchase Agreement further discussed in Note 15, the Company entered into a Registration

Rights Agreement whereby it agreed to register all the shares issuable under the facility.

The Company filed a prospectus supplement to

meet this obligation.

For the fiscal year ended June 30, 2022, the valuation allowance increased by $ 12.3 million, primarily as a result of the increase in net operating losses.

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

Unrecognized Tax Benefits

The Company did not have any unrecognized tax benefits as of June 30, 2022 and 2021.

The Company’s policy is to account for any interest expense and penalties for unrecognized tax benefits as part of the income tax provision.

The Company does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Licensing Commitments

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

Employment Agreements

As of June 30, 2021, the Company was subject to

employment agreements with two officers and an employee that provide for aggregate annual base salaries of $0.9 million.

the Company terminates employment of the officers without cause, severance benefits include (i) between six months and three years of

base salary, (ii) 150% of annual target bonuses applicable to the terminated executive, and (iii) continuation of certain medical and

dental benefits.

In addition, vesting is accelerated for unvested stock options that would have otherwise vested during the period that

the severance benefits are paid out.

The Company has a defined contribution employee

benefit plan under section 401(k) of the Internal Revenue Code (the “401(k) Plan”).

The 401(k) Plan covers all eligible employees

who are entitled to participate six months after commencement of employment.

The Company matches contributions up to 4% of the participating

employee’s compensation with such matching contributions vested immediately.

Total contributions by the Company to the 401(k) Plan

amounted to approximately $0.1 million for each of the fiscal years ended June 30, 2021 and 2020.

As of June 30, 2022, the Company was subject to employment agreements with two officers and an employee that provide for aggregate annual base salaries of $ 1.3 million.

In the event the Company terminates employment of the officers without cause, severance benefits include (i) between six months and three years of base salary, (ii) 150 % of annual target bonuses applicable to the terminated executive, and (iii) continuation of certain medical and dental benefits.

In addition, vesting is accelerated for unvested stock options that would have otherwise vested during the period that the severance benefits are paid out.

The Company has a defined contribution employee benefit plan under section 401(k) of the Internal Revenue Code (the “401(k) Plan”).

The 401(k) Plan covers all eligible employees who are entitled to participate six months after the commencement of employment.

The Company matches contributions up to 4 % of the participating employee’s compensation with such matching contributions vested immediately.

Total contributions by the Company to the 401(k)

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Plan amounted to approximately $ 0.2 million and $ 0.1 million for the fiscal years ended June 30, 2022 and 2021, respectively.

Legal Matters

to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business.

June 30, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s

results of operations.

At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range

of loss is probable and reasonably estimable under ASC 450, Contingencies .

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business.

As of June 30, 2022, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations.

At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies .

Legal fees are expensed as incurred.

Related Party Transactions

NOTE 11 — RELATED PARTY TRANSACTIONS

Related Party Licensing Agreement

On September 15, 2020, the Company entered into

an exclusive license agreement with Handok, Inc.

(the “Handok License”) for the territory of the Republic of Korea.

License relates to pharmaceutical products in final dosage form containing the pharmaceutical compounds developed or to be developed by

the Company, including those related to RZ358 and RZ402.

The Handok License is in effect for a period of 20 years after the first commercial

sale of each product, and requires (i) milestone payments of $0.5 million upon approval of a New Drug Application (“NDA”)

for each product in the territory, and (ii) the Company will sell products ordered by Handok at a transfer price equal to 70% of the net

selling price of the products.

On September 15, 2020, the Company entered into an exclusive license agreement with Handok (the “Handok License”) for the territory of the Republic of Korea.

The Handok License relates to pharmaceutical products in final dosage form containing the pharmaceutical compounds developed or to be developed by the Company, including those related to RZ358 and RZ402.

The Handok License is in effect for a period of 20 years after the first commercial sale of each product and requires (i) milestone payments of $ 0.5 million upon approval of a New Drug Application (“NDA”) for each product in the territory, and (ii) the Company will sell products ordered by Handok at a transfer price equal to 70 % of the net selling price of the products.

To date, no milestone payments have been earned by the Company.

Master Services Agreement

Effective July 1, 2019, the Company entered into

a Master Services Agreement (“MSA”) with Handok, Inc.

and Genexine, Inc.

whereby the Company agreed to assist in an evaluation

of their joint venture for a long-acting growth hormone program referred to as GX-H9.

For the fiscal year ended June 30, 2020, the Company

billed an aggregate of $0.2 million under the MSA, including $0.1 million for employee services and $0.1 million for reimbursable expenses.

Amounts received under the MSA for employee services are reflected as a reduction of research and development compensation costs in the

accompanying consolidated statement of operations for the fiscal year ended June 30, 2020.

No amounts were billed under the MSA for the

fiscal year ended June 30, 2021.

SUPPLEMENTAL FINANCIAL INFORMATION

Investors in Registered Direct Offerings

In connection with the 2021 Underwritten Offering discussed in Note 7, a group of affiliated investors purchased approximately (i) 1,930,000 shares of common stock at $ 6.50 per share for a total of $ 12.5 million, and (ii) 123,000 2021 PFWs at $ 6.49 each for a total of $ 0.8 million.

In connection with the 2022 RDO discussed in Note 7, certain officers and directors of the Company purchased 111,840 shares of common stock at $ 3.80 per share for a total of $ 0.4 million.

In addition, the group of affiliated investors discussed above purchased (i) 3,421,052 shares of common stock at $ 3.80 per share for a total of $ 12.2 million, and (ii) 3,421,053 Class B PFWs at $ 3.799 each for a total of $ 12.2 million.

NOTE 12 - SUPPLEMENTAL FINANCIAL INFORMATION

Property and Equipment

Property and equipment consist of the following as of June 30, 2021

and 2020 (in thousands):

Property and equipment consisted of the following as of June 30, 2022 and 2021 (in thousands):

Office furniture and equipment

Less accumulated depreciation

Depreciation expense related to property and equipment

amounted to approximately $13,000 and $11,000 for the fiscal years ended June 30, 2021 and 2020, respectively.

Employee Termination Benefits

In March 2021, the Company entered into a severance

agreement with an officer of the Company that provides for aggregate payments of $0.2 million paid in monthly installments from March

2021 through September 2021.

The severance agreement also resulted in the modification of certain stock options that were permitted to

continue vesting through September 2021, whereby an aggregate of 46,250 stock options exercisable at a weighted average price of $18.17

will now expire in December 2021.

Absent the modification, stock options for an aggregate of 38,750 vested shares would have expired in

June 2021 and stock options for 7,500 never would have vested.

The Company accounted for the modification of the original awards, whereby

compensation cost was remeasured on the date of the modification that resulted in an increase in fair value of the modified awards for

$0.1 million.

Accordingly, an aggregate charge of $0.3 million related to severance costs and the modification of stock options is included

in compensation expense under general and administrative expenses in the accompanying consolidated statements of operations

for the fiscal year ended June 30, 2021.

Depreciation expense related to property and equipment amounted to approximately $ 13,000 for each of the fiscal years ended June 30, 2022 and 2021.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

For the fiscal year ended June 30, 2021, activity

affecting the accrued liability for severance benefits is summarized as follows (in thousands):

Accrued severance, beginning of period

Severance expense incurred

Cash payments

Accrued severance, end of period

The liability for accrued severance costs is included

in accrued compensation and benefits in the accompanying consolidated balance sheet as of June 30, 2021.

Net Loss Per Share

Basic net loss per share is computed by dividing

net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period.

For the fiscal

years ended June 30, 2021 and 2020, basic and diluted net loss per share were the same since all common stock equivalents were anti-dilutive.

As of June 30, 2021 and 2020, the following potential common stock equivalents were excluded from the computation of diluted net loss

per share since the impact of inclusion was anti-dilutive (in thousands):

NOTE 13 — NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted average number of outstanding shares of common stock and pre-funded warrants that are accounted for as equity instruments.

For the calculation of diluted net loss per share, if the impact of accounting for pre-funded warrants as derivative liabilities is dilutive, the numerator is adjusted to eliminate gains on changes in fair value of such pre-funded warrants, and the denominator is adjusted to include the related pre-funded warrant shares.

The calculation of the weighted average number of shares outstanding for purposes of diluted net loss per share is also required to include the dilutive effect, if any, of stock options, warrants, and other common stock equivalents computed using the treasury stock method.

For the fiscal years ended June 30, 2022 and 2021, all of such common stock equivalents were antidilutive and exclude from the calculations.

In addition, the impact of applying the two-class method related to the Participating Warrants, was antidilutive for the calculation of both basic and diluted net loss per share.

Presented below are the calculations of the numerators and the denominators for basic and diluted net loss per share for the fiscal years ended June 30, 2022 and 2021 (in thousands except per share amounts):

Calculation of Numerators:

Net loss for calculation of basic net loss per share

Dilutive derivative gains, net of losses, related to Class B PFWs:

Gain from change in fair value of derivative liability

Underwriting discount on issuance of derivative

Net loss for the calculation of diluted net loss per share

Calculation of Denominators:

Weighted Average number of common shares outstanding

Weighted average shares related to pre-funded warrants:

Weighted average shares for basic net loss per share

Weighted average adjustment for Class B PFWs

Weighted average shares for diluted net loss per share

Net loss per share of common stock:

__________________

(1) For the calculation of diluted net loss per share, the net impact of the discount expense and the derivative gain related to the Class B PFWs is dilutive and has been eliminated from the denominator for the period from the issuance date on May 4, 2022 through June 16, 2022, when the fair value of the Class B PFWs was reclassified to stockholders’ equity.

(2) Represents the weighted average number of shares related to the 2021 PFWs discussed in Note 7 for the period from the issuance date on October 15, 2021 through June 30, 2022.

(3) Represents the weighted average number of shares related to the Class A PFWs discussed in Note 7 for the period from the issuance date on May 4, 2022 through June 30, 2022.

(4) Represents the weighted average number of shares related to the Class B PFWs discussed in Note 7 for the period when they became equity-classified on June 16, 2022 through June 30, 2022.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

(5) Represents the weighted average number of shares related to the Class B PFWs discussed in Note 7 during the period when they were liability-classified from the issuance date on May 4, 2022 through June 15, 2022.

As of June 30, 2022 and 2021, the following potential common stock equivalents were excluded from the calculation of diluted net loss per share since the impact of inclusion was anti-dilutive (in thousands):

Stock options

As discussed in Note 7 under the caption Fiscal

2021 Equity Financing, the Company issued Participating Warrants whereby the holders are entitled to share in any dividends or distributions

payable to holders of common stock on an as-converted basis.

Accordingly, the calculation of basic and diluted EPS requires use of the

two-class method whereby earnings for the reporting period are required to be allocated between the holders of common stock and the Participating

Warrants if the impact is dilutive.

This allocation is required regardless of whether a dividend is declared for any such undistributed

As a result of the Company’s net loss for the fiscal year ended June 30, 2021, the use of the two-class method was not

required since the impact was antidilutive.

NOTE 14 —

FINANCIAL INSTRUMENTS AND SIGNFICANT CONCENTRATIONS

NOTE 14 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS

Fair Value Measurements

Fair value is defined as the price that would

be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement

When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers

assumptions that market participants would use when pricing the asset or liability.

The Company applies the following fair value hierarchy,

which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest

level of input that is available and significant to the fair measurement:

Level 1—Quoted prices in active

markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2—Other than quoted

prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market

collaboration, for substantially the full term of the asset or liability.

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.

When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2—Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.

Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at the measurement date.

The derivative liabilities for the authorized share deficiencies discussed in Note 6 were classified under Level 3.

These liabilities were required to be measured at fair value on a recurring basis from February 17, 2021 until May 26, 2021 for the first deficiency and from May 4, 2022 until June 16, 2022 for the second deficiency.

Key valuation assumptions are summarized in Note 6.

The embedded derivative liabilities discussed in Note 5 were classified under Level 3 and were required to be measured at fair value on a recurring basis beginning on April 14, 2021.

Fair value was determined based on management’s

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Level 3—Unobservable inputs for

the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations

in which there is little, if any market activity for the asset or liability at measurement date.

The embedded derivative liabilities discussed

in Note 5 were classified under Level 3 and were required to be measured at fair value on a recurring basis beginning on April 14, 2021.

Fair value was determined based on management’s assessment of the probability and timing of occurrence for the embedded derivatives

using a discounted rate equal to the effective interest rate for the term A loan.

The derivative liability for authorized share

deficiency discussed in Note 6 was also classified under Level 3.

This liability was required to be measured at fair value on a recurring

basis from February 17, 2021 until May 26, 2021 when the deficiency was cured.

Key valuation assumptions are summarized in Note 6.

The following tables set forth a summary of changes

in the fair value of the Company’s derivative liabilities for which fair value was determined by Level 3 inputs (in thousands):

Balance, June 30, 2020

Fair value of derivative liabilities incurred:

Authorized share deficiency on February 17, 2021

Embedded derivatives on April 14, 2021

Changes in fair value of authorized share derivative liability

Fair value of authorized shares derivative liability reclassified to equity on May

Changes in fair value of embedded derivative liability

Balance, June 30, 2021

Due to the relatively short maturity of the respective

instruments, the fair value of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximated their

carrying values as of June 30, 2021 and 2020.

The Company did not have any other assets and liabilities measured at fair value as of June

30, 2021 and 2020.

The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the

actual date of the events or change in circumstances that caused the transfer.

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

Company did not have any transfers of its assets or liabilities between levels of the fair value hierarchy.

assessment of the probability and timing of occurrence for the embedded derivatives using a discounted rate equal to the effective interest rate for the term A loan.

The following table sets forth a summary of changes in the fair value of embedded derivative liabilities for which fair value was determined by Level 3 inputs for the fiscal years ended June 30, 2022 and 2021 (in thousands):

Fair value, beginning of fiscal year

Fair value of embedded derivatives upon execution of Loan Agreement

Loss from change in fair value

Fair value, end of fiscal year

Due to the relatively short maturity of the respective instruments, the fair value of cash and cash equivalents, accounts payable and accrued liabilities approximated their carrying values as of June 30, 2022 and 2021.

The Company did not have any other assets and liabilities measured at fair value as of June 30, 2022 and 2021.

The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer.

During the fiscal years ended June 30, 2022 and 2021, the Company did not have any transfers of its assets or liabilities between levels of the fair value hierarchy.

Fair Value of Debt

Management believes the interest rate and other

provisions of the Company’s term loan approximates the rate at which the Company could obtain alternative financing.

the carrying amount of the term loan approximated its fair value as of April 14, 2021 and June 30, 2021.

Management believes the interest rate and other provisions of the Company’s term loan approximated the rate at which the Company could obtain alternative financing.

Therefore, the carrying amount of the term loan was approximated at its fair value as of June 30, 2021.

Significant Concentrations

Financial instruments that subject the Company

to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash.

The Company maintains its cash and cash

equivalents at high-quality financial institutions.

For the fiscal years ended June 30, 2021 and 2020, cash deposits exceeded the amount

of federal insurance provided on such deposits.

As of June 30, 2021 and 2020, the Company had cash, and cash equivalents with a single

financial institution with a balance of $41.0 million and $10.0 million, respectively.

The Company has never experienced any losses related

to its investments in cash and cash equivalents.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Subsequent Events

Equity Issuances

For the period from July

1, 2021 through August 31, 2021, the Company sold 138,388 shares of its common stock pursuant to the EDA discussed in Note 7 for net proceeds

of approximately $1.5 million.

LPC Purchase Agreement

In August 2021, the Company entered into a

purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the "RRA") with LPC, which

provides that the Company may sell to LPC up to $20.0 million of shares (the “Purchase Shares”) of its common stock.

Company concurrently filed a prospectus supplement with the SEC to register the shares issuable under the Purchase Agreement.

aggregate number of shares that the Company can sell to LPC under the Purchase Agreement may not exceed 1,669,620 shares of common

stock, subject to certain exceptions set forth in the Purchase Agreement.

LPC’s initial purchase consisted of 95,708

Purchase Shares at a purchase price of approximately $10.45 per share for a total purchase price of $1.0 million and the Company issued

the commitment shares for 33,799 shares of common stock to LPC as an initial fee for its commitment to purchase shares of our common stock

under the Purchase Agreement.

Subject to the terms of the Purchase Agreement, the Company has the right, in its sole discretion, to present

LPC with a purchase notice (a “Regular Purchase Notice”), directing LPC to purchase up to 25,000 Purchase Shares (a “Regular

Purchase”), which amounts may be increased under certain circumstances.

LPC’s committed obligation under any single Regular

Purchase generally will not exceed $2.0 million.

The Purchase Agreement provides for a purchase price per Purchase Shares for each Regular

Purchase (the “Purchase Price”) equal to the lesser of (i) the lowest sale price of the common stock on the Nasdaq Capital

Market (“NCM”) on the purchase date of such shares;

and (ii) the average of the three lowest closing sale prices for the common

stock traded on the NCM during the ten consecutive business days ending on the business day immediately preceding the purchase date of

In addition, on any date on which the Company

submits a Regular Purchase Notice for the maximum amount allowed for such a Regular Purchase to LPC, the Company also has the right, in

its sole discretion, to present LPC with an accelerated purchase notice (an “Accelerated Purchase Notice”), directing LPC

to purchase an amount of Purchase Shares (an “Accelerated Purchase”), which number of Purchase Shares will not exceed the

lesser of (i) 300% of the number of shares purchased pursuant to such Regular Purchase Notice and (ii) 30% of the total volume

of shares of the common stock traded on the NCM during the Accelerated Purchase period.

The Purchase Price per Purchase Share for each

such Accelerated Purchase will be equal to the lesser of 97% of (i) the volume-weighted average price of the common stock on the NCM during

the applicable Accelerated Purchase period on the applicable Accelerated Purchase date;

and (ii) the closing sale price of the common

stock on the NCM on the applicable Accelerated Purchase date.

Pursuant to the RRA, the Company agreed to maintain

effectiveness of the registration statement and the related prospectus supplement within prescribed deadlines set forth in the RRA.

addition, the Company is required to use its reasonable best efforts to secure and maintain its listing of the Purchase Shares on the

Nasdaq Capital Market.

LPC has no obligation to purchase shares under the Purchase Agreement unless the Company complies with the terms

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash.

The Company maintains its cash, cash equivalents and restricted cash at high-quality financial institutions.

For the fiscal years ended June 30, 2022 and 2021, cash deposits exceeded the amount of federal insurance provided on such deposits.

As of June 30, 2022 and 2021, substantially all of the Company’s cash and cash equivalents was invested with a single financial institution.

The Company has never experienced any losses related to its investments in cash and cash equivalents.

NOTE 15 — SUBSEQUENT EVENTS

July 2022 Financing

In July 2022, the company entered into amended securities purchase agreements with Handok and certain of its affiliates.

Upon amendment of the securities and purchase agreement, the Company received gross proceeds of $ 12.3 million in exchange of the issuance of approximately 3.2 million shares of our common stock.

The Company incurred approximately $ 0.8 million for underwriting commissions and other offering costs, resulting in net proceeds of $ 11.6 million.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data