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Item 7. Management’s Discussion and Analysis

2023-09-14 compared with 2022-09-15 · 146 added, 172 removed, 142 unchanged (69% of the section changed)

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Clinical Development

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Financing Activities

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

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

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

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

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

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

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

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

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

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

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

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

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

Termination of EDA and Purchase Agreement

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

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

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

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

Termination of Loan Agreement

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

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

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

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

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

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

Headquarters Lease

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

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

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

Our key objectives in the fourth quarter of 2023 are completing enrollment for the RZ402 Phase 2 study in DME to enable announcement of topline results in the first quarter of 2024, as well as initiation of the sunRIZE Phase 3 study for RZ358.

RZ358 Regulatory Status

As discussed in our disclosures on Current Reports on Form 8-K filed with the SEC, toxicology studies in rats and monkeys were conducted as part of the early RZ358 development program and in these studies, rats demonstrated a microvascular liver injury at potentially clinically relevant doses and exposures (“ rat findings ”).

However, there were no adverse liver findings in monkeys at dose levels that were more than 10 times higher than doses that were toxic in rats, and more than 4 times higher than human doses evaluated in clinical studies.

Based on the absence of liver toxicity in monkeys and the lack of adverse liver findings in closely monitored human trials, the Company believes that the toxicity is unique to rats and unlikely relevant to humans.

As is customary in pediatric drug development, there is a progression of the inclusion of younger participants as a program advances through different stages and continues to demonstrate a good safety profile and a prospect of benefit for children based on previous stages.

After the completion of Phase 1 adult healthy volunteer studies for RZ358, Phase 2a single-dose proof of concept studies (“ Phase 2a ”) were conducted in participants with congenital HI who were 12 years of age and older in countries governed by the Regulatory Authorities in the European Union and elsewhere in Europe.

In the US, FDA restricted enrollment in Phase 2a to participants 18 years of age and older and, based on the rat findings, imposed a human drug exposure limit equating to repeat doses of approximately 3 mg/kg per week (“ exposure cap ”).

Subsequently, in the RIZE study European Authorities and other regulatory bodies continued the expected downward age progression, lowering the age for study participants down from 12 years of age to 2 years of age and older.

At the start of the RIZE study the clinical program in the US remained under the 18 years of age and older restriction as well as the exposure cap.

However, in the first half of 2020, while the RIZE study was underway, we reached agreement with FDA to proceed with the RIZE study in the US at all dose levels (no exposure cap) and in younger participants (ages 12 and older).

Following these developments, the study protocol was harmonized globally, other than a regional difference in the minimum permitted age (12 years and older in the US versus 2 years and older in all other geographies).

After the completion of the RIZE study, in the second half of 2022 and the first half of 2023, the Company conducted scientific advice meetings with the Regulatory Authorities in Europe which resulted in alignment with our proposed Phase 3 program including overall study design, dosing regimen, endpoints, sample size and patient population.

Notably, with all available nonclinical (including the rat findings) and clinical information under review, European Authorities aligned with a further downward age progression whereby participants 3 months of age and older will be permitted to be enrolled in the Phase 3 study.

Prior to engaging FDA on Phase 3 planning in the US, we began interacting with the agency in the second half of 2022 to further liberalize the age restriction to achieve alignment with the parameters established by the European Authorities in the RIZE study.

Over the course of these post-RIZE regulatory interactions with FDA, the agency revisited prior concerns regarding the rat findings and, despite the absence of new clinical or nonclinical data (other than the RIZE data), the agency decided to maintain the age restriction of 12 years and above and re-imposed the previous exposure cap which had been removed during the RIZE study (collectively, “ New Restrictions ”).

In the second half of 2022 and the first half of 2023, we interacted with FDA to resolve the New Restrictions, particularly in the context of the advancement of the clinical program in the rest of the world.

Nonetheless, FDA affirmed the New Restrictions at a meeting held with us on May 24, 2023.

We have concluded pre-Phase 3 regulatory and scientific advice meetings with Regulatory Authorities outside of the U.S.

and have reached agreement on the design of the Phase 3 study that will include participants 3 months of age and older.

We believe that the New Restrictions make it infeasible to include the U.S.

in the Phase 3 study at this time, particularly given that the pediatric population with congenital HI has the greatest therapeutic need.

We are evaluating potential nonclinical studies to address FDA’s concerns in parallel with the initiation and advancement of the Phase 3 study outside of the U.S.

Specifically, in the fourth quarter of 2023, we plan to initiate the Phase 3 sunRIZE clinical study of RZ358 which will be a randomized, double-blind, placebo-controlled, parallel arm evaluation of RZ358 in participants with congenital HI who are not adequately responding to standard of care medical therapies.

Topline results from the study are anticipated to be available in the first half of 2025.

In December 2022, we initiated a Phase 2 multi-center, randomized, double-masked, placebo-controlled, parallel-arm study to evaluate the safety, efficacy, and pharmacokinetics of RZ402 administered as a monotherapy over a 12-week treatment period in participants with DME who are naïve to, or have received limited anti-VEGF injections.

The study population is comprised of DME patients with mild to moderate non-proliferative diabetic retinopathy.

Eligible participants are being randomized equally, to one of three RZ402 active treatment arms at doses of 50, 200, and 400 mg, or a placebo control arm, to receive study drug once daily for 12 weeks, before completing a four-week follow-up.

The study is expected to enroll up to approximately 100 patients overall, across approximately 25 investigational sites in the United States.

The principal endpoints of the trial include (i) changes in central subfield thickness of the macula, as measured by Spectral Domain Ocular Coherence Tomography, (ii) changes in visual acuity as measured by the early treatment diabetic retinopathy scale, (iii) the repeat dose pharmacokinetics of RZ402 in patients with DME, and (iv) the safety and tolerability of RZ402.

We expect to complete enrollment in 2023 and to announce results from the study in the first quarter of 2024.

Investment in Marketable Debt Securities

In January 2023, our Board of Directors determined that it was in our best interest to diversify our cash position, which amounted to $146.7 million as of December 31, 2022.

Accordingly, we reinvested an aggregate of $115.0 million of cash held in demand deposit accounts in a portfolio of marketable debt securities and an overnight money market mutual fund with the objective of achieving higher returns on investment.

Factors Impacting our Results of Operations

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

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

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

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

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

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

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

Key Components of Consolidated Statements of Operations

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

Interest and other income.

Interest and other income consist primarily of interest income earned on marketable debt securities and temporary cash investments, amortization of investment premiums and accretion of investment discounts.

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

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

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

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

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

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

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

We also recognize liabilities for embedded derivatives that arose in connection with our legacy debt agreement.

Derivative liabilities are adjusted to fair value at the end of each reporting period until the derivative liability contracts are settled, expire, or meet the conditions for equity classification.

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Employee retention credit.

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

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.

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

Interest and other income.

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

Discount on issuance of derivative liability.

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

Underwriting discount on issuance of derivative.

For derivative liabilities that were issued at a discount versus the grant date fair value of the financial instrument, an expense equal to the amount of the discount was recognized on the issuance date since the derivative liability would have been required to be settled at fair value.

Interest expense.

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

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

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

Loss on extinguishment of debt.

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

DDIC arises from the issuance of debt instruments and other related contracts or agreements which possess certain terms and conditions resulting in additional financing costs arising from origination, exit and final fees, and other incremental and direct costs incurred to consummate the financing, among others.

Loss on extinguishment of loan agreement.

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

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Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Gain from Change in Fair Value of Derivative Liabilities

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

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

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

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

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

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

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

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

Investments in Marketable Debt Securities

We account for our investments in marketable debt securities as available-for-sale securities whereby they are recorded in the consolidated balance sheet at fair value.

Interest income consists of accrued interest earned based on the coupon rate of the security, plus the impact of accreting discounts and amortizing premiums to maturity using the straight-line method which approximates the interest method.

Unrealized gains and losses due to subsequent changes in fair value of the investments are reported in shareholders’ equity as a component of accumulated other comprehensive income (loss).

The individual debt securities in our portfolio are subject to credit risk in the event of default by the issuers.

We review the components of our portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below amortized cost have resulted from a credit-related loss or other factors.

If declines in fair value are due to a deterioration of credit quality of the issuer, we recognize (i) a loss in other comprehensive income (loss) if the reduction in fair value is considered temporary, or (ii) a loss in the consolidated statement of operations if the reduction in fair value is considered other than temporary.

For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if we have the ability and intent to hold the investment until maturity.

The cost basis of any securities sold prior to maturity will be determined using the specific identification method.

Research and Development

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We accrue and charge to expenses clinical trial activities performed by third parties based upon estimates of the percentage of work completed over the life of the individual study in accordance with agreements established with clinical research organizations and clinical trial sites.

We determine the estimates through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

We determine our 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.

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

We recognize the impact of forfeitures in the period that the forfeiture occurs, rather than estimating the number of awards that are not expected to vest in accounting for share-based compensation.

We recognize the impact of forfeitures in the period that the forfeiture occurs, rather than estimating on the grant date the number of awards that are not expected to vest in accounting for share-based compensation.

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

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

For purposes of recognizing compensation cost, we determine the requisite service period as the longest of the derived, implicit and explicit vesting periods for each of the market, performance and service conditions, respectively.

Due to achievement of the performance condition, we began recognizing compensation cost using the grant date fair value in November 2020 and continuing through the end of the requisite service period.

Determination of the requisite service period of the Hybrid Options was based on the date that the performance condition was achieved.

If the Hybrid Options do not ultimately become exercisable due to the option holders’ failure to achieve the required service period, any previously recognized compensation cost will be reversed.

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

Gain from Change in Fair Value of Derivative Liabilities

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

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

Changes in fair value are reflected as gains and losses in our consolidated statements of operations.

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

We also recognize liabilities for embedded derivatives that arose in connection with a legacy debt agreement.

Results of Operations

Results of operations for the fiscal years ended June 30, 2023 and 2022 reflect net losses of approximately $51.8 million and $41.1 million, respectively.

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

Our consolidated statements of operations for the fiscal years ended June 30, 2023 and 2022, along with the changes between fiscal years, are presented below (in thousands, except percentages):

Operating expenses:

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Non-operating income (expense):

Gain from change in fair value of derivative liabilities, net

Employee retention credit

Interest and other income

Gain (loss) from change in fair value of derivative liabilities

Employee retention credit

Underwriting discount on issuance of derivative

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Loss on extinguishment of loan agreement

Total non-operating income (expense), net

Total non-operating income, net

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

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Total R&D expenses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The increase of $11.3 million was primarily attributable to an increase of $5.3 million in R&D compensation and benefits for our R&D workforce.

Cash-based R&D compensation and benefits increased by $3.5 million from $8.2 million for the fiscal year ended June 30, 2022 to $11.7 million for the fiscal year ended June 20, 2023.

This increase was primarily attributable to an increase in the average number of R&D employees from 26 to 36 and an increase in bonuses.

R&D share-based compensation increased by $1.8 million from $1.4 million for the fiscal year ended June 30, 2022 to $3.2 million for the fiscal year ended June 30, 2023.

This increase is primarily attributable to the expense related to stock options granted to employees in June 2022.

Additional increases of $4.3 million were incurred for our two clinical candidate programs, of which the RZ358 had an increase in spending of $1.1 million and the RZ402 program had an increase in spending of $3.2 million.

The increase in RZ358 program costs of $1.1 million primarily was driven by an increase of $3.1 million for higher spending for drug substance and drug product manufacturing and other development activities as we began manufacturing activities for a Phase 3 study where enrollment is planned to be initiated during the fiscal year ending June 30, 2024.

This increase was partially offset by a $2.0 million reduction in milestone payments under our license agreement with XOMA.

For the fiscal year ended June 30, 2022, we incurred a milestone payment due to XOMA upon dosing of the last patient in the Phase 2b clinical study.

We did not incur any RZ358 milestone related costs during the fiscal year ended June 30, 2023.

The RZ402 program cost increase of $3.2 million was primarily attributable to a $3.0 million increase in milestone payments due under our license agreement with ActiveSite.

In February 2023, we dosed the first patient in the RZ402 Phase 2 study, triggering a milestone payment due for $3.0 million to ActiveSite.

There were no RZ402 related milestone costs incurred during the fiscal year ended June 30, 2022.

In addition to the $3.0 million increase in milestone costs, there was a $1.9 million increase in clinical operation costs related to the ongoing Phase 2 study.

These increases were partially offset by a decrease in preclinical, toxicology and other related costs of approximately $1.7 million.

In addition to the increases in R&D compensation and benefits and our clinical programs noted above for the fiscal year ended June 30, 2023, an increase of approximately $0.8 million was incurred related to facilities and employee related travel costs allocable to R&D due to the increased headcount as noted above.

General and Administrative Expenses.

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Total G&A expenses

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

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

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

The increase in G&A expenses of $2.8 million for the fiscal year ended June 30, 2023 was primarily attributable to an increase in G&A compensation and benefits related to our administrative workforce of $2.8 million.

Cash-based G&A compensation and benefits increased by $1.1 million from $2.7 million for the fiscal year ended June 30, 2022 to $3.8 million for the fiscal year ended June 20, 2023.

This increase was attributable to an increase in the average number of G&A employees from 9 to 12 and an increase in compensation related to bonuses.

G&A share-based compensation increased by $1.8 million from $2.2 million for the fiscal year ended June 30, 2022 to $4.0 million for the fiscal year ended June 30, 2023.

This increase is primarily attributable to the expense related to stock options granted to employees in June 2022.

Interest and other income.

For the fiscal year ended June 30, 2023, we recognized $4.2 million of interest income compared to $0.1 million of interest income for the fiscal year ended June 30, 2022.

This increase was primarily due to our decision in January 2023 to invest an aggregate of approximately $115.0 million in marketable debt securities and an overnight money market mutual fund that bear interest at a weighted average effective rate of approximately 5.0%, whereas our temporary cash investments as of June 30, 2022 provided for earnings that were less than 1.0%.

This change in strategy midway through the fiscal year ended June 30, 2023 resulted in interest income of $1.2 million for the first half of the fiscal year and $3.0 million for the second half of the fiscal year.

Change in Fair Value of Derivative Liabilities.

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

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

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

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

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

share deficiency that arose in February 2021.

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

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

For the fiscal year ended June 30, 2023 and 2022, we recognized losses from the change in fair value of embedded derivative liabilities of $5,000 and $20,000, respectively.

Employee Retention Credit.

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

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

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

For the fiscal year ended June 30, 2023, no income was recognized since governmental assistance was no longer available under the CARES Act.

Underwriting discount on issuance of derivative liability.

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

For the fiscal year ended June 30, 2023, we did not recognize any expense related to underwriting discounts.

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

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

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Interest Expense.

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

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

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

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

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

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

For the fiscal year ended June 30, 2023 we did not incur any interest expense due to the repayment of a loan agreement on June 30, 2022.

Loss on extinguishment of loan agreement.

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

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

We incurred a loss on extinguishment of a loan agreement of approximately $1.8 million for the fiscal year ended June 30, 2022.

This extinguishment loss was attributable to our exercise of the loan prepayment option that required a 2.00% prepayment penalty of $0.3 million and the unaccreted discount of $1.5 million was written off.

We did not incur any losses on extinguishment for the fiscal year ended June 30, 2023.

Income Taxes.

For the fiscal year ended June 30, 2022 and 2021, we did not recognize any income tax benefit due to our net losses and our determination that a full valuation allowance was required for our deferred income tax assets.

For the fiscal years ended June 30, 2023 and 2022, we did not recognize any income tax benefit due to our net losses and our determination that a full valuation allowance was required for our deferred income tax assets.

Liquidity and Capital Resources

Short-term Liquidity Requirements

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

As of June 30, 2023, we had cash and cash equivalents of $16.0 million, investments in marketable debt securities $102.3 million and working capital was approximately $99.7 million.

We have incurred cumulative net losses of $261.0 million since our inception and as a clinical stage company we have not generated any meaningful revenue to date.

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For the fiscal years ended June 30, 2023 and 2022, we received net proceeds from the issuance of equity securities of $11.6 million and $165.2 million, respectively.

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

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

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

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

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

As of June 30, 2022, we exercised the prepayment option under a loan agreement which used approximately $16.0 million of the funding from issuances of equity securities earlier in the fiscal year.

The completion of these equity financings is the primary source of remaining cash and cash equivalents and investments in marketable debt securities as of June 30, 2023.

For further information about the key terms and results of our debt and equity financing activities, please refer to the discussion above under the caption Executive Summary .

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

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

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

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

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

This lease, which commenced in October 2022, provides for total base rent payments of approximately $2.9 million through the expected expiration of the lease in July 2027.

Cash payments related to existing contractual obligations for the fiscal year ending June 30, 2024 include approximately (i) $0.7 million under all of our operating lease agreements, and (ii) a potential milestone payment to XOMA of $5.0 million that will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358 that we expect will occur in the next twelve months.

Due to uncertainties in the timing associated with clinical trial activities, it is possible that the milestone payments to XOMA could be delayed beyond our the fiscal year ending June 30, 2024.

Based on our cash and cash equivalents balance of $16.0 million combined with our investment in marketable debt security balance of $102.3 million as of June 30, 2023, we believe we have adequate capital resources to meet all of our contractual obligations and conduct all planned activities to advance our clinical trials at least through the third quarter of calendar year 2025.

Long-term Liquidity Requirements

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

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

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

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

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

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

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

Our most significant long-term contractual obligations consist of additional clinical and regulatory milestone payments up to $35.0 million payable to XOMA and additional milestone payments up to $25.0 million payable to ActiveSite.

Of this total, we expect that $5.0 million will be payable to XOMA during the fiscal year ended June 30, 2024 as discussed above under the caption Short-term Liquidity Requirements .

The remaining $55.0 million is considered a long-term liquidity requirement.

Due to uncertainties in the timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the timing of future clinical and regulatory milestone payments to XOMA and ActiveSite that may be required during the fiscal year ending June 30, 2025 and thereafter.

In addition to the clinical and regulatory milestone payments discussed above, upon the future commercialization of RZ358 and RZ402 we will be obligated to pay additional milestone payments and royalties based on the net sales of the related products sales-based and alternative indication regulatory approvals to XOMA and ActiveSite for an additional $202.5 million.

These future milestones include $185.0 million in potential payments to XOMA and $17.5 million to ActiveSite for various sales-based milestones and alternative indication regulatory approvals.

No assurance can be provided that commercialization will ever be achieved for either of RZ358 and RZ402, whereby none of these future payments may ever be required.

In addition to our licensing obligations, we also have long-term contractual obligations under existing operating lease agreements ranging between approximately $0.6 million to $0.7 million for each of the fiscal years ending June 30, 2025 through 2027.

Based on our current forecast, we expect that our existing cash and cash equivalents will be sufficient to fund our contractual obligations and conduct all planned activities to advance our clinical trials at least through the third quarter of calendar year 2025.

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

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XOMA License Agreement

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

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

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

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

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

The next milestone payment of $5.0 million will be due upon the enrollment of the first patient in a Phase 3 study, which we believe will occur in the next twelve months.

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

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The ActiveSite License Agreement requires various milestone payments ranging from $1.0 million to $10.0 million when milestone events occur, up to an aggregate of $46.5 million of aggregate milestone payments.

The first milestone payment for $1.0 million paid in December 2020 after completion of the preclinical work and submission of an IND to the FDA for RZ402.

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

The first milestone payment for $1.0 million was paid in December 2020 after completion of preclinical work and submission of an IND to the FDA for RZ402.

The second milestone payment for $3.0 million became due upon dosing of the first patient

in a Phase 2 study in February 2023.

Remaining milestone payments under the ActiveSite License Agreement for various clinical and regulatory milestones amount to $25.0 million and milestones after commercial success or alternative indication approvals amount to $17.5 million.

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

Through June 30, 2023, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

2021 Underwritten Public Offering and 2021 Registered Direct Offering

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

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

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

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

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

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

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

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

Cash Flows Summary

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

Presented below is a summary of our operating, investing and financing cash flows for the fiscal years ended June 30, 2023 and 2022 (in thousands):

Net cash provided by (used in):

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For further discussion about changes in our operating results for the fiscal years ended June 30, 2023 and 2022, please refer to Results of Operations above.

For the fiscal year ended June 30, 2023, our non-cash expenses of $7.7 million primarily consisted of share-based compensation expense of $7.3 million and non-cash lease expense of $0.4 million.

For the fiscal year ended June 30, 2022, our non-cash expenses of $8.3 million primarily consisted of share-based compensation expense of $3.7 million, a discount on the issuance of the Class B PFWs derivate liability of $2.5 million, a loss on extinguishment of debt of $1.5 million, accretion of debt discount and issuance costs of $0.4 million, and non-cash lease expense of $0.2 million.

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

For the fiscal year ended June 30, 2023, non-cash gains consisted of discount accretion on investments in marketable debt securities of $1.4 million.

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

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

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

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

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

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

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

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

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

Cash Flows Provided by Investing Activities

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

A similar charge was not incurred for the fiscal year ended June 30, 2023.

For the fiscal year ended June 30, 2023, net changes in operating assets and liabilities increased operating cash flow by $1.0 million, primarily driven by an increase accounts payable and other accrued liabilities of $2.3 million, partially offset by an increase in prepaid expenses and other assets of $1.3 million that associated with prepayments for clinical trials and

manufacturing activities.

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

Cash Flows Used in Investing Activities

For the fiscal year ended June 30, 2023, our net cash utilized in investing activities amounted to $101.5 million, primarily related to the purchase of $107.3 million of marketable debt securities offset by cash inflows provided by $6.0 million of marketable debt securities.

Additionally, our investing activities used $0.2 million for the purchase of furniture and equipment primarily for use in our new office location in Redwood City, California .

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

Cash Flows Provided by Financing Activities

Net cash provided by financing activities for the fiscal year ended June 30, 2023 amounted to $11.6 million.

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

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

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

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

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

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

This amount consisted of proceeds of $12.3 million from the 2022 Private Placement.

The total proceeds from the 2022 Private Placement of $12.3 million were partially offset by payments of $0.8 million for underwriting commissions and other costs related to this offering.

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

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

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

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

For the fiscal year ended June 30, 2022, we used cash of $16.3 million related to our debt financing activities.

Debt financing payments consisted of $0.3 million for payment of additional debt discount and issuance costs under our loan agreement, and $16.0 million for contractual payments required to terminate the loan agreement on June 30, 2022.

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

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

Off-Balance Sheet Arrangements

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What changed 10-K

Item 7. Management’s Discussion and Analysis