What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-09-19 compared with 2023-09-14 · 347 added, 351 removed, 401 unchanged (64% of the section changed)

Financial Statements and Supplementary Data.

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

Reports of Independent Registered Public Accounting Firms ( Grant Thornton, LLP ;

Newport Beach, California ;

248 ) ( Plante & Moran, PLLC ;

Cleveland, Ohio ;

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Report of Independent Registered Public Accounting Firm

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

To the Board of Directors and Shareholders

Rezolute, Inc.

and subsidiaries

Opinion on the financial statements

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

(the “Company”) as of June 30, 2023 and 2022, the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the two-year period ended June 30, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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

and subsidiaries (the “Company”) as of June 30, 2024, the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the year ended June 30, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024, and the results of its operations and its cash flows for the year ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

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.

These financial statements are the responsibility of the Company’s management.

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

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.

We conducted our audit 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.

As part of our audit 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 audit 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.

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

Our audit 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 audit provides a reasonable basis for our opinion.

Critical audit matters

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We determined that there are no critical audit matters.

/s/ Plante & Moran, PLLC

/ s / GRANT THORNTON LLP

We have served as the Company’s auditor since 2024.

Newport Beach, California

September 19, 2024

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Rezolute, Inc.

(the “Company”) as of June 30, 2023, the related statement of operations, shareholders' equity, and cash flows for year then ended, 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, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

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 audit.

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

We conducted our audit 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 audit, 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.

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

Our audit 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 audit provides a reasonable basis for our opinion.

/s/ Plante & Moran, PLLC

We served as the Company’s auditor from 2013 to 2024.

Cleveland, Ohio

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Long-term assets:

Investments in marketable debt securities

Right-of-use assets

Property and equipment, net

Deposits and other

Investments in marketable debt securities

Property and equipment, net

Liabilities and Shareholders' Equity

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Accrued liabilities:

Compensation and benefits

Accrued clinical and other

Compensation and benefits

Current portion of operating lease liabilities

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Operating lease liabilities, net of current portion

Embedded derivative liabilities

Embedded derivative liability

Total liabilities

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400 shares authorized;

no shares issued and outstanding

no shares issued

Common stock, $ 0.001 par value;

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Interest and other income, net

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

Employee retention credit

Underwriting discount on issuance of derivative

Interest expense

Loss on extinguishment of loan agreement

Total non-operating income (expense), net

Other comprehensive loss:

Net unrealized loss on available-for-sale marketable debt securities

Loss from change in fair value of warrant derivative liability

Loss from change in fair value of embedded derivative liability

Total non-operating income, net

Other comprehensive income (loss):

Net unrealized gain (loss) on marketable debt securities

Comprehensive loss

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.

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Balances, June 30, 2022

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

Gross proceeds from issuance of common stock for cash in 2022 Private Placement

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

Net change in accumulated other comprehensive loss

Balances, June 30, 2023

Gross proceeds from issuance of equity securities for cash in 2022 Private Placement

Underwriting discounts and other equity offering costs

Proceeds from issuance of equity securities in 2024 Underwritten Offering, net of underwriting discounts

2024 Pre-Funded Warrants

Other equity offering costs

Issuance of common stock upon exercise of stock options

Share-based compensation

Net change in other accumulated comprehensive loss

Cashless exercise of pre-funded warrants

Acquisition and retirement of treasury shares pursuant to Exchange Agreement

Reclassification of warrant derivative liability to equity

Net change in accumulated other comprehensive loss

Balances, June 30, 2024

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Share-based compensation expense

Loss from change in fair value of warrant derivative liability

Loss from change in fair value of embedded derivative liability

Non-cash lease expense

Loss from change in fair value of derivative liabilities

Accretion of discounts and amortization of premiums on marketable debt securities, net

Depreciation and amortization expense

Gain from change in fair value of derivative liabilities, net

Underwriting discount on issuance of derivative

Loss on extinguishment of Loan Agreement:

Prepayment premium paid

Accretion of debt discount and issuance costs

Depreciation expense

Changes in operating assets and liabilities:

Increase in prepaid expenses and other assets

Increase (decrease) in accounts payable

Increase in prepaid expenses, deposits, and other assets

Increase in accounts payable

Increase in accrued liabilities

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Purchase of property and equipment

Total Cash Used in Investing Activities

Total Cash Provided by (Used in) Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Gross proceeds from issuance of common stock for cash:

2022 Private Placement

2021 Registered direct offering

Under Equity Distribution Agreement

Under LPC Purchase Agreement

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

Proceeds from exercise of stock options

Net cash payment pursuant to Exchange Agreement

Proceeds from issuance of equity securities in 2024 Underwritten 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

Payment of commissions and other offering costs

Payment of debt discount and issuance costs

Prepayment of contractual obligations under Loan Agreement, including prepayment fee

Issuance of pre-funded warrants

Gross proceeds from issuance of common stock in 2022 Private Placement

Payment of commissions and other deferred offering costs

Net Cash Provided by Financing Activities

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

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of fiscal year

Cash and cash equivalents at end of fiscal year

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

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(In Thousands)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents, end of year

Restricted cash, end of year

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

SUPPLEMENTARY CASH FLOW INFORMATION:

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NON-CASH INVESTING AND FINANCING ACTIVITIES:

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

Acquisition of treasury shares in exchange for pre-funded warrant derivative liability

Receivable from exercise of stock options

Payables for offering costs charged to additional paid-in capital

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

REZOLUTE, INC.

Notes to Consolidated Financial Statements

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

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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 late-stage rare disease company focused on significantly improving outcomes for individuals with hypoglycemia caused by hyperinsulinism.

The Company’s primary clinical assets consist of (i) ersodetug (formerly known as RZ358), which is a potential treatment for all forms of hyperinsulinism, including congenital hyperinsulinism, an ultra-rare pediatric genetic disorder characterized by excessive production of insulin by the pancreas, and (ii) RZ402, which is an oral plasma kallikrein inhibitor (“PKI”) being developed as a potential therapy for the chronic treatment of diabetic macular edema.

Consolidation

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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 year ended June 30, 2023, components of comprehensive loss included the Company’s net loss and unrealized gains (losses) on investments in marketable debt securities.

For the fiscal year ended June 30, 2022, the only component of comprehensive loss was the Company’s net loss as the Company had no items constituting any other comprehensive income (loss).

For the fiscal years ended June 30, 2024 and 2023, components of comprehensive loss included the Company’s net loss and unrealized gains (losses) on investments in marketable debt securities.

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.

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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 if other than temporary impairment exists for marketable debt securities, the fair value of derivative liabilities, fair value of share-based payments and warrants, management’s assessment of going concern, and clinical trial accrued liabilities.

The Company’s significant accounting estimates include, but are not necessarily limited to, determination if an allowance for credit losses is required or if other than temporary impairment exists for marketable debt securities, fair value of an derivative liabilities, fair value of share-based payments, management’s assessment of going concern, and estimates related to clinical trial accrued liabilities.

Actual results could differ from those estimates.

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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

REZOLUTE, INC.

Notes to Consolidated Financial Statements

consist primarily of demand deposits with financial institutions, money market funds and corporate commercial paper purchased with a maturity of three months or less.

Cash and cash equivalents consist primarily of demand deposits with financial institutions, money market funds and corporate commercial paper purchased with a maturity of three months or less.

Investments in Marketable Debt Securities

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The investment policy also places restrictions on the length of maturities and concentrations by type and issuer.

The Company’s investments are issued by financial institutions that management believes are of high credit quality.

However, they are exposed to credit risk in the event of default by the issuers.

The Company’s investments are issued by issuers that management believes are of high credit quality.

However, all issuers are exposed to credit risk in the event of default.

The Company classifies investments in marketable debt securities that mature in less than one year as short-term assets.

For investments that mature in more than one year, the investments are classified as long-term assets unless management intends to liquidate the investments to fund current operations before the scheduled maturity dates.

The Company accounts for its investments in marketable debt securities as available-for-sale securities whereby they are recorded in the consolidated balance sheet at fair value.

The Company accounts for all of its investments in marketable debt securities as available-for-sale securities whereby they are recorded in the consolidated balance sheet at fair value.

Interest income is recognized in the consolidated statement of operations, consisting 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.

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The Company reviews the components of its 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, the Company recognizes (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 the Company has 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.

If declines in fair value below amortized costs are due to the deterioration of an issuer’s credit quality, the Company is required to record an allowance for credit losses related to such investments with a corresponding loss recognized in the consolidated statements of operations.

Allowances for credit losses may be reversed in subsequent periods if conditions improve and credit-related losses are no longer expected.

For declines in fair value that are solely due to changes in interest rates, impairment is not recognized if the Company has the ability and intent to hold the investment until maturity.

Prepaid Expenses and Other

Prepaid expenses and other includes nonrefundable advance payments for goods and services that will be used or rendered in future research and development activities.

These advance payments are deferred and recognized as expenses in the period that the related goods are delivered, or services are performed.

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

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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 to determine the present value of future payments.

The Company generally uses its incremental borrowing rate based on the information available at the lease commencement date to determine the discount rate used to compute the present value of future payments.

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

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Maintenance and repairs are expensed as incurred.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Debt Discounts and Issuance Costs

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

Research and Development Costs

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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 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.

The Company measures the fair value of employee and director services received in exchange for grants of stock options and other equity awards granted, based on the fair 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 value 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.

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

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

REZOLUTE, INC.

Notes to Consolidated Financial Statements

characteristics of the Host Contract.

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 whether such 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, 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 necessary legal requirements 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 in effect when the differences are expected to be recovered or settled.

Fair Value of Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance set forth by the Financial Accounting Standards Board (“FASB”) in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the

Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and during each subsequent quarterly period while the warrants are outstanding.

Liability-classified warrants are valued using the BSM option-pricing model at issuance, and for each subsequent reporting period.

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

Under this method, deferred income tax assets and liabilities that 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 in effect when the differences are expected to be recovered or settled.

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

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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.

This is determined on a cumulative probability basis.

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

This calculation 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.

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

Interest and penalties related to income taxes will be recognized as a component of income tax expense.

Net Loss Per Share

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Common shares associated with pre-funded warrants are included in the computation of both basic and diluted net loss per share since the exercise price is negligible and all of the pre-funded warrants are fully vested and exercisable.

To the extent dilutive, during 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 the fair value of such pre-funded warrants, net of related discounts upon issuance, and the related pre-funded warrant shares are included in the weighted average number of shares outstanding

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

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

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.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

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

Treasury Shares

The Company accounts for purchases of treasury shares under the cost method.

In accordance with Nevada law, acquired treasury shares may be retired by the Company.

Upon retirement, the treasury shares are no longer accounted for as issued and outstanding.

Recent Accounting Pronouncements

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The following accounting standard was adopted in the fiscal year ended June 30, 2024:

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.

The Company adopted this standard using the full retrospective transition method effective July 1, 2022.

The adoption did not have any impact on the Company’s consolidated financial statements.

Standards Required to be Adopted in Future Years.

The following accounting standard is not yet effective but will be adopted effective on July 1, 2023:

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

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

Measurement of Credit Losses on Financial Instruments.

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

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

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

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

ASU 2016-13 will be implemented during the fiscal quarter ending September 30, 2023 and will impact the Company’s evaluation of impairment of investments in marketable debt securities.

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.

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 expected credit loss model, if declines in fair value below amortized costs are due to the deterioration of an issuer’s credit quality, the Company is required to record an allowance for credit losses related to such investments with a corresponding loss recognized in the consolidated statements of operations.

Allowances for credit losses may be reversed in subsequent periods if conditions improve and credit-related losses are no longer expected.

For declines in fair value that are solely due to changes in interest rates, impairment is not recognized if the Company has the ability and intent to hold the investment until maturity.

Effective as of July 1, 2023, the Company implemented the guidance in ASU 2016-13.

The adoption of ASU 2016-13 did not have any impact on the accompanying consolidated financial statements.

Standard Required to be Adopted in Future Periods.

The following accounting standard has not yet been adopted by the Company:

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures” .

ASU 2023-09 requires disclosure of additional income tax information, primarily related to the rate reconciliation and income taxes paid.

This ASU is intended to enhance the transparency and decision usefulness of income tax disclosures.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Management has not determined the timing for adoption of this standard.

The adoption of ASU 2023-09 and other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not currently expected to have a material impact on the Company’s consolidated financial statements upon adoption.

NOTE 2 — LIQUIDITY

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For the fiscal year ended June 30, 2024, the Company incurred a net loss of $ 68.5 million and net cash used in operating activities amounted to $ 57.4 million.

As of June 30, 2023, the Company had an accumulated deficit of $ 261.0 million, and the Company’s capital resources consisted of cash and cash equivalents of $ 16.0 million, short-term investments in marketable debt securities of $ 85.9 million and long-term investments in marketable debt securities of $ 16.5 million.

As of June 30, 2024, the Company had an accumulated deficit of $ 329.4 million, and the Company’s capital resources consisted of cash and cash equivalents of $ 70.4 million and in marketable debt securities totaling $ 56.7 million.

As discussed in Note 7, the Company completed the 2024 Underwritten Offering in June 2024 that resulted in the issuance of approximately 13.0 million shares of common stock and 3.8 million prefunded warrants for net proceeds of $ 62.6 million after underwriting discounts and other offering costs.

As of June 30, 2024, the Company had total liabilities of $ 11.7 million, including total current liabilities of $ 9.6 million.

As discussed in Note 5, the Company is subject to license agreements that provide for future contractual payments upon achievement of various milestone events.

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.

First patient dosing milestone for the RZ358 Phase 3 clinical trial is expected to occur within the next 12 months.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Management believes the Company’s cash and cash equivalents and investments in marketable securities will be adequate to meet the Company’s contractual obligations and carry out ongoing clinical trials and other planned activities through September 2024, at a minimum.

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

The commitment to pay the last patient dosing milestone of $ 5.0 million for the ersodetug Phase 3 clinical trial is expected to be recognized as a liability within 12 months.

As discussed in Note 15, in July 2024 the Company received net proceeds of approximately $ 6.0 million related to a private placement of 1.5 million shares of common stock.

Management believes the Company’s cash and cash equivalents, investments in marketable debt securities, and additional proceeds from the July 2024 private placement, will be adequate to meet the Company’s contractual obligations and carry out ongoing clinical trials and other planned activities through September 2025, at a minimum.

NOTE 3 — INVESTMENTS IN MARKETABLE DEBT SECURITIES

The estimated fair value of investments in marketable debt securities are classified as follows in the consolidated balance sheet as of June 30, 2023 (in thousands):

Investments in marketable debt securities are classified as follows in the consolidated balance sheets as of June 30, 2024 and 2023 (in thousands):

Short-term investments

2 unchanged sentences

The Company only invests in liquid, high quality debt securities.

However, all of these investments are subject to interest rate and credit risk that may result in fluctuations in the fair value of the investments.

To minimize the exposure due to an adverse shift in interest rates, the Company generally invests in securities with expected maturities of two years or less and maintains a weighted average maturity of one year or less.

As of June 30, 2023 investments in marketable debt securities with a fair value of $ 85.9 million are scheduled to mature during the 12-month period ending June 30, 2024 and substantially all of the remaining investments with a fair value of $ 16.5 million, are scheduled to mature during the 12-month period ending June 30, 2025.

During the fiscal year ended June 30, 2023, no securities classified as available-for-sale were sold and the only redemptions occurred were as a result of the maturity of the respective investments.

During the fiscal year ended June 30, 2022, the Company did not have any investments in marketable debt securities.

Accrued interest receivable on all marketable debt securities amounted to $ 0.3 million which is included in other current assets in the accompanying consolidated balance sheet as of June 30, 2023.

Nonetheless, all of these investments are subject to interest rate and credit risk that may result in fluctuations in the fair value of the investments.

To minimize the exposure due to an adverse shift in interest rates, the Company generally invests in securities with expected maturities of two years or less while maintaining a weighted average maturity of one year or less.

As of June 30, 2024 investments in marketable debt securities with an aggregate fair value of $ 56.5 million are scheduled to mature during the 12-month period ending June 30, 2025.

All of the remaining investments with a fair value of $ 0.3 million, are scheduled to mature during the 12-month period ending June 30, 2026.

During the fiscal year ended June 30, 2024, marketable debt securities for $ 115.1 million matured and approximately $ 66.4 million of the proceeds were reinvested in additional marketable debt securities.

The Company did not sell any marketable debt securities prior to the scheduled maturity dates for the fiscal year ended June 30, 2024.

Accrued interest receivable on all marketable debt securities amounted to $ 0.4 million and $ 0.3 million as of June 30, 2024 and 2023, respectively.

Accrued interest is included in other current assets in the accompanying consolidated balance sheet.

For the fiscal years ended June 30, 2024 and 2023, the Company did no t recognize any allowance for credit losses or other than temporary impairment related to investments in marketable debt securities.

The following table summarizes the unrealized gains and losses that result in differences between the amortized cost basis and fair value of the Company’s marketable debt securities held as of June 30, 2024 (in thousands):

7 unchanged sentences

Asset-backed securities

Available-for-sale investments

Gross Unrealized

Amortized Cost

Corporate commercial paper

Obligations of U.S.

government agencies

Treasury obligations

Corporate notes and bonds

Asset-backed securities

NOTE 4 — LEASES

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

In October 2023, the Company entered into an addendum to the lease agreement for its office in Bend, Oregon.

The addendum provided for a 36 -month extension, resulting in a new expiration date in February 2027.

The average base rent payable over the remaining lease term is approximately $ 9,000 .

Upon execution of the addendum, the Company re-measured the Bend, Oregon operating lease liability at approximately $ 345,000 using a discount rate of 10.0 %, and the related right-of-use asset was recognized for approximately $ 351,000 .

In April 2022, the Company 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 November 2027.

3 unchanged sentences

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

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Upon commencement of the lease, the Company recognized a right-of-use asset for approximately $ 2.3 million, and a related operating lease liability for approximately $ 2.2 million.

As of June 30, 2023 and 2022, the carrying values of all of the Company’s right-of-use assets and operating lease liabilities were as follows (in thousands):

As of June 30, 2024 and 2023, the carrying values of all of the Company’s right-of-use assets and the related operating lease liabilities were as follows (in thousands):

Right-of-use assets

Operating lease liabilities:

For the fiscal years ended June 30, 2023 and 2022, operating lease expense was as follows (in thousands):

For the fiscal years ended June 30, 2024 and 2023, operating lease expense included under the following captions in the accompanying consolidated statements of operations (in thousands):

Research and development

General and administrative

In addition to base rent expense, the Company’s facility leases require variable payments, including the proportionate share of the real estate taxes, building insurance and common area maintenance costs related to the facilities.

These variable payments are excluded from the determination of operating lease liabilities and amounted to an aggregate of $ 0.1 million for the fiscal year ended June 30, 2024.

As of June 30, 2024, the weighted-average remaining lease term under operating leases was 3.3 years, and the weighted-average discount rate used to determine the operating lease liabilities was 7.2 %.

As of June 30, 2023, the weighted-average remaining lease term under operating leases was 4.3 years, and the weighted-average discount rate used to determine the operating lease liabilities was 6.8 %.

Future Lease Payments

Future payments under operating lease agreements as of June 30, 2023 are as follows (in thousands):

Future payments under all operating lease agreements as of June 30, 2024 are as follows (in thousands):

Fiscal year ending June 30,

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XOMA License Agreement

In December 2017, the Company entered into a license agreement (“XOMA License Agreement”) with XOMA Corporation (“XOMA”), through its wholly-owned subsidiary, XOMA (U.S.) 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.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

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.

In April 2024, the Company was required to make a milestone payment under the XOMA License Agreement of $ 5.0 million that became due upon dosing of the first patient in the Company’s Phase 3 Clinical Trial for ersodetug.

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 $ 30.0 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.

After the clinical and regulatory milestones, the Company will be required, upon the future commercialization of ersodetug, 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.

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

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.

The Company records a liability for milestone payments under license agreements in the period that the milestone event is achieved.

The next milestone payment of $ 5.0 million will be due upon dosing of the last patient in the ongoing Phase 3 clinical trial for ersodetug.

ActiveSite License Agreement

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The maturity date of the outstanding borrowings was April 1, 2026 (the “Maturity Date”), but the Company elected to repay the entire amount and terminated the Loan Agreement on June 30, 2022.

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 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.

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 for a total of $ 0.6 million in the event certain transactions (defined as “Exit Events”) occur prior to April 13, 2031.

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

The Company is accounting for the Exit Fee Agreement as an embedded derivative liability with an estimated fair value of $ 0.4 million as of June 30, 2023 and 2022.

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

The Company is accounting for the Exit Fee Agreement as an embedded derivative liability with an estimated fair value of $ 0.5 million and $ 0.4 million as of June 30, 2024 and 2023, respectively.

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.

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.

NOTE 7 — DERIVATIVE LIABILITY FOR AUTHORIZED SHARE DEFICIENCIES

As discussed in Note 8, the Company completed an underwritten offering in May 2022 that resulted in the issuance of 10,947,371 Class B pre-funded warrants (“Class B PFWs”) for gross proceeds of approximately $ 41.6 million or $ 3.80 per share.

Exercisability of the Class B PFWs was subject to the Company’s ability to obtain shareholder approval for an

REZOLUTE, INC.

Notes to Consolidated Financial Statements

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 approximately $ 41.6 million related to the Class B PFWs on the date of issuance was accounted for as a derivative liability beginning on May 4, 2022.

As discussed in Note 8, 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, 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 derivative 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 on the date of issuance since the fair value of the Class B PFWs exceeded the net proceeds received by the Company.

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

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

NOTE 7 — SHAREHOLDERS’ EQUITY

Changes in Authorized Capital 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, 2023 and 2022, the Company was authorized to issue 100.0 million shares of common stock and 0.4 million shares of preferred stock.

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 provided for a private placement of equity securities (the “2022 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 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.

2022 Private Placement

Pursuant to the 2022 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.

In July 2022 the Company entered into amended SPAs for the 2022 Private Placement resulting in gross proceeds of approximately $ 12.3 million in exchange for approximately 3.2 million shares of common stock.

The Company incurred

REZOLUTE, INC.

Notes to Consolidated Financial Statements

approximately $ 0.8 million for underwriting commissions and other offering costs resulting in net proceeds of $ 11.6 million.

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.

Between October 2021 and June 2024, the Company issued fully vested pre-funded warrants (“PFWs”) exercisable to purchase an aggregate of 21.3 million shares of common stock.

As of June 30, 2024 and 2023, all outstanding PFWs meet the requirements to be classified in shareholders’ equity under the caption additional paid-in capital .

The 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, 2023, none of the 2022 PFWs have been exercised.

Required Shareholder Approval

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

Accordingly, the Company did not have a sufficient number of shares of common stock available to permit exercise of any of the Class B PFWs.

Accordingly, the Class B PFWs were only 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, 2023, the 10.9 million Class B PFWs issued were fully exercisable and no shares underlying the Class B PFWs had been exercised.

Upon closing of the 2022 RDO on May 4, 2022, the Company accounted for the gross proceeds of $ 41.6 million received from the issuance of the Class B PFWs as a derivative liability.

As a result of subsequent reductions in the fair value of this derivative liability, the Company recognized a gain of $ 6.6 million through June 16, 2022 when Shareholder Approval was obtained.

Upon receipt of Shareholder Approval for the increase in authorized shares to 100.0 million shares, the Company reclassified the related Class B PFW derivative liability of $ 35.0 million 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.

As required by the registration rights agreements, the Company filed a registration statement in June 2022 that was declared effective on July 1, 2022 to register the shares issuable upon exercise of the Class B PFWs.

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

REZOLUTE, INC.

Notes to Consolidated Financial Statements

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 exercise prices of the PFWs are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting holders of common stock.

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

The PFWs are exercisable at any time, subject to the then effective ownership blocker percentage (the “OBP”) as elected by each of the holders of PFWs.

The OBP is a percentage designated by the holders whereby the PFWs cannot be exercised if, after giving effect thereto, the holder would beneficially own more than the designated OBP.

However, upon at least 61 days’ prior notice to the Company, any holder of PFWs may elect to increase or decrease the OBP to any other percentage not to exceed 19.99 %.

Assuming the holders comply with the respective OBP terms, all of the PFWs may be exercised at any time by paying the respective exercise price or electing to exercise on a cashless basis.

As of June 30, 2022, the Company had an aggregate of 14,582,516 PFWs that were outstanding.

No PFWs were issued or exercised for the fiscal year ended June 30, 2023.

The following table summarizes PFW activity for the fiscal year ended June 30, 2024:

Outstanding, June 30, 2023

Issuance of Exchange PFWs in March 2024

Issuance of 2024 PFWs in June 2024

Cashless exercise of PFWs:

Shares surrendered for exercise price

Shares of common stock issued

( 1,529,890 )

( 4,770,190 )

( 6,300,080 )

Outstanding, June 30, 2024

(1) In connection with an underwritten offering in October 2021, PFWs were issued to purchase 1,661,461 shares of common stock at an issuance price of $ 6.49 per share (the “2021 PFWs”).

The exercise price of the 2021 PFWs is $ 0.01 per share.

(2) In connection with a registered direct offering in May 2022, 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 (collectively, the “2022 PFWs”).

The exercise price of the 2022 PFWs is $ 0.001 per share.

The 2022 PFWs were classified within shareholders’ equity for the entirety of the fiscal years ended June 30, 2024 and 2023.

(3) As discussed below under the caption Exchange Agreement , the Company issued 3,000,000 Exchange PWFs on March 8, 2024.

The exercise price of the Exchange PFWs is $ 0.001 per share.

The Exchange PFWs were initially classified as a derivative liability until May 13, 2024 when the terms were amended to permit reclassification within shareholders’ equity.

(4) As discussed below under the caption 2024 Underwritten Offering , the Company issued 2024 PWFs for the purchase of 3,750,000 shares of common stock on June 24, 2024.

The exercise price of the 2024 PFWs is $ 0.001 per share.

2024 Underwritten Offering

On June 13, 2024, the Company entered into an underwriting agreement with Jefferies LLC and Cantor Fitzgerald & Co.

(the “Underwriters”) for the planned issuance and sale of equity securities in an underwritten public offering (the “2024 Underwritten Offering”).

The 2024 Underwritten Offering provided for the issuance of (i) 11,250,000 shares of common stock at a price of $ 4.00 per share for gross proceeds of $ 45.0 million, and (ii) pre-funded warrants to purchase 3,750,000 shares of common stock at a public offering price of $ 3.999 per pre-funded warrant (the “2024 PFWs”) for gross proceeds of $ 15.0 million.

The Company granted the 2024 Underwriters a 30-day option to purchase up to an additional 2,250,000 shares of its common stock in the 2024 Underwritten Offering at a public offering price of $ 4.00 per share, less underwriting commissions (the “2024 Underwriters’ Option”).

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

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 %.

Through June 30, 2023, 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.

Termination of EDA and Purchase Agreement

The Company 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.

The Company sold 138,388 shares of its common stock pursuant to the EDA for net proceeds of approximately $ 1.5 million.

From August 2021 through September 2021, LPC purchased 115,708 shares of common stock for gross proceeds of approximately $ 1.2 million.

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

In May 2022, the Company 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.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

The Underwriters’ Option was partially exercised for 1,786,589 shares of common stock for gross proceeds of $ 7.1 million.

Closing occurred on June 24, 2024, whereby the aggregate gross proceeds from the 2024 Underwritten Offering amounted to $ 67.1 million before deductions for underwriting commissions of 6.0 % of the gross proceeds and other offering costs of approximately $ 0.5 million.

After deducting total offering costs of $ 4.5 million, the net proceeds of the 2024 Underwritten Offering amounted to approximately $ 62.6 million.

Exchange Agreement

On March 8, 2024, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with certain of its stockholders (the “Exchanging Shareholders”), whereby the Company purchased 3,000,000 shares of common stock representing approximately 7 % of outstanding shares with an aggregate fair value of $ 5,700,000 (the “Retired Shares”) from the Exchanging Shareholders.

The Retired Shares were immediately cancelled whereby they will remain as authorized shares for future issuance in accordance with Nevada law.

Consideration for the acquisition of the Retired Shares consisted of (i) a cash payment to the Exchanging Shareholders of $ 3,000 , and (ii) the issuance of pre-funded warrants (the “Exchange PFWs”) to the Exchanging Shareholders with an estimated fair value of $ 5,697,000 .

The Exchange PFWs do not expire and are exercisable to purchase an aggregate of 3,000,000 shares of the Company’s outstanding common stock at an exercise price of $ 0.001 per share.

As required pursuant to the Exchange Agreement, the Company filed a registration statement in August 2024 to register the shares issuable upon the exercise of the Exchange PFWs.

The Exchange PFWs originally required approval by the Company’s shareholders if the exercise of the Exchange PFWs resulted in aggregate beneficial ownership by the holders in excess of 19.99 %.

Even though the Exchange PFWs only entitled the holders to purchase 7 % of the Company’s outstanding shares of common stock, the requirement to obtain shareholder approval for ownership in excess of 19.99 % resulted in the treatment of the exchange PFWs as a warrant derivative liability of $ 5.7 million as of the issuance date.

The fair value of this warrant derivative liability increased by approximately $ 2.9 million, for a total of approximately $ 8.5 million as of May 13, 2024 when the Exchange PFWs were amended to permit equity classification.

Accordingly, the derivative liability was reclassified to shareholders’ equity on May 13, 2024.

Jefferies Open Market Sales Agreement

On November 14, 2023, the Company and Jefferies LLC (the “Agent) entered into an open market sales agreement (the “Sales Agreement”) 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 is acting as sales agent and is required to use commercially reasonable efforts to sell all of the Placement Shares requested to be sold by the Company, consistent with the Agent’s normal trading and sales practices, on mutually agreed terms between the Agent and the Company.

The Sales Agreement will terminate when all of the Placement Shares have been sold, or earlier upon the election of either the Company or the Agent.

The Company has no obligation to sell any of the Placement Shares under the Sales Agreement.

The Company intends to use the net proceeds, if any, from amounts sold under the Sales Agreement for general corporate purposes, including working capital.

Under the terms of the Sales Agreement, 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 fiscal year ended June 30, 2024, the Company sold no shares of its common stock pursuant to the Sales Agreement.

Accordingly, the maximum amount remaining for sale under the Sales Agreement amounts to $ 50.0 million as of June 30, 2024.

2022 Private Placement

In May 2022, the Company entered into securities purchase agreements (the “2022 SPAs”) with Handok, Inc.

(“Handok”) and certain of its affiliates.

Handok is an affiliate of a member of the Company’s Board of Directors.

In July 2022, the Company entered into amended 2022 SPAs for a private placement of common stock.

The private placement resulted in gross proceeds of $ 12.3 million in exchange for the issuance of approximately 3.2 million shares of common stock.

The Company incurred approximately $ 0.8 million for underwriting commissions and other offering costs, resulting in net proceeds of $ 11.6 million.

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, 2023 (in thousands):

Plan Termination

Presented below is a summary of the number of shares authorized, outstanding, and available for future grants under the Company’s stock option plans and the Inducement Grant (defined below) as of June 30, 2024 (in thousands):

Number of Shares

February 2020

Inducement Grant

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

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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.

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 2034.

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

REZOLUTE, INC.

Notes to Consolidated Financial Statements

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 permits 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.

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Stock Options Outstanding

The following table sets forth a summary of the combined activity under all of the Company’s stock option plans for the fiscal years ended June 30, 2023 and 2022 (shares in thousands):

The following table sets forth a summary of the combined activity under all of the Company’s stock option plans, including Inducement Grant discussed below, for the fiscal years ended June 30, 2024 and 2023 (shares in thousands):

Outstanding, beginning of fiscal year

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

(3) The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during the year ended June 30, 2024, was $ 0.1 million.

(4) As of June 30, 2024, the intrinsic value of outstanding options was approximately $ 14.6 million.

(5) As of June 30, 2024, the aggregate intrinsic value of vested stock options was approximately $ 4.1 million.

For the fiscal year ended June 30, 2024, the aggregate fair value of stock options granted for approximately 2.6 million shares of common stock amounted to $ 2.6 million or approximately $ 1.02 per share as of the grant dates.

For the fiscal year ended June 30, 2023, the aggregate fair value of stock options granted for approximately 0.7 million shares of common stock amounted to $ 1.1 million or approximately $ 1.53 per share as of the grant dates.

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.

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

The Company uses the BSM option pricing model to determine the fair value of stock option awards granted.

The determination of the fair value of share-based awards utilizing the BSM model is affected by the share price and a number of assumptions as of the grant date, including expected volatility, expected term, risk-free interest rate and expected dividends.

The Company determined it does not have a sufficient share price history since up-listing to the Nasdaq Capital Market in November 2020.

As a result, the Company determined the expected volatility by using share price information of similar sized biotechnology entities whose share prices are publicly available.

Due to the lack of a meaningful history of exercise behavior of stock options, the expected term of the awards is determined by the simplified method that uses the midpoint between the vesting date and the end of the contractual term for each grant of stock options.

The risk-free interest rate assumption is based on observed interest rates appropriate for the expected terms of the awards.

The dividend yield assumption is based on past practices and the expectation that no dividends will be paid in the future.

The fair value of stock options was estimated on the dates of grant using the BSM option-pricing model, with the following weighted-average assumptions for the fiscal years ended June 30, 2024 and 2023:

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General and administrative

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Unrecognized share-based compensation expense for stock options that provide solely for time-based vesting as of June 30, 2023 was approximately $ 16.9 million.

Unrecognized share-based compensation expense for stock options as of June 30, 2024 was approximately $ 11.6 million.

This amount is expected to be recognized over a remaining weighted average period of 2.3 years.

As of June 30, 2023, unrecognized compensation of $ 0.1 million related to the remaining Hybrid Options is being recognized ratably over a weighted average period of 1.1 years.

Inducement Grant

In connection with the hiring of the Company’s Chief Financial Officer in January 2024, the Board of Directors granted a stock option for 275,000 shares of the Company’s common stock at an exercise price of $ 1.02 per share.

This stock option is considered an inducement grant (the “Inducement Grant”) pursuant to Nasdaq Listing Rule 5635(c)(4) whereby the underlying shares were not authorized under any of the Company’s stock option plans.

The Inducement Grant is exercisable until January 2029 and vests for (i) one-fourth of the option shares on the one-year anniversary of the grant date, and (ii) one thirty-sixth of the remaining option shares shall vest on the same day of each month thereafter until the Inducement Grant is 100 % vested.

The fair value of the Inducement Grant of $ 0.2 million was computed using the BSM option pricing model.

Pre-Funded Warrants

In connection with the 2021 RDO discussed in Note 8, 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 8.

In connection with the 2022 RDO discussed in Note 8, 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, 2023 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 8.

Other Warrants

PFWs are outstanding for a total of 15.0 million and 14.6 million shares as of June 30, 2024 and 2023, respectively.

Please refer to Note 7 for additional information about outstanding PFWs and Note 13 for treatment of PFWs in the calculation of earnings per share.

Legacy Warrants

In connection with an equity financing in October 2020, the Company issued 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 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 the holders are entitled to share in any dividends or distributions payable to holders of common stock on an as-converted basis (the “Participating Warrants”).

Additionally, 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, 2024 and 2023, all of the warrants were vested.

For the fiscal years ended June 30, 2023 and 2022, 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, 2023 and 2022 (shares in thousands):

The Participating Warrants and other warrants are collectively referred to as the “Legacy Warrants.”

For the fiscal years ended June 30, 2024 and 2023, no Legacy Warrants were granted or exercised .

The following table sets forth a summary of activity related to the Legacy Warrants for the fiscal years ended June 30, 2024 and 2023 (shares in thousands):

Outstanding, beginning of fiscal year

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

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

federal jurisdiction and in several states including, but not limited to, California, Colorado, and Oregon.

The Company’s federal and state tax returns for the 2021 fiscal year and forward are subject to examination by taxing authorities.

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During the fiscal year ended June 30, 2022, the Company completed an IRC Section 382 analysis and concluded that the Company’s NOL carryforwards are subject to limitations as a result of past ownership changes.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

As of June 30, 2024, the Company has U.S.

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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

Income tax benefit at statutory U.S.

Income tax benefit attributable to U.S.

Impact of reduction in Colorado tax rate

Non-taxable derivative gains

Non-taxable derivative loss

Non-deductible expenses

Stock option expirations

NOL expirations

Change in valuation allowance

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For the fiscal years ended June 30, 2024 and 2023, the Company did not recognize any current income tax expense or benefit due to a full valuation allowance on its net deferred income tax assets.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Deferred Income Tax Assets and Liabilities

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Net deferred income tax assets

For the fiscal year ended June 30, 2023, the valuation allowance increased by $ 12.5 million, primarily as a result of the increase in net operating losses and capitalization of research and experimental costs that was required beginning in the fiscal year ended June 30, 2023.

For the fiscal year ended June 30, 2024, the valuation allowance increased by $ 10.7 million, primarily as a result of the increase in net operating loss carryforwards and capitalization of research and experimental costs for income tax purposes.

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.

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As of June 30, 2024, the Company was subject to employment agreements with two officers of the Company and one employee of the Company that provide for aggregate annual base salaries of $ 1.4 million.

The agreements with the Chief Executive Officer and Chief Medical Officer provides that if either of individuals is terminated outside of a change in control event and without cause, (i) all of their stock options that are subject to ongoing vesting conditions over subsequent periods ranging from 12 to 18 months will immediately vest, and (ii) such stock options will remain exercisable for periods ranging from 6 to 12 months following the occurrence of the termination event.

In addition, if either or both of the executive officers are terminated solely due to a change of control event, all of their

REZOLUTE, INC.

Notes to Consolidated Financial Statements

respective unvested stock options will immediately vest and all outstanding stock options will remain exercisable for periods ranging from 6 to 12 months following the occurrence of the termination event.

The amendment to the Chief Medical Officer’s employment agreement provides that upon the occurrence of a termination event other than a change of control, the Company is required to (i) make severance payments equal to 12 months of salary, a pro-rata bonus, and health insurance coverage for 12 months following the termination date, and (ii) all unvested stock options subject to vest over the subsequent 12 month period after the termination event will become immediately exercisable and all outstanding stock options will remain exercisable for 6 months following the termination event.

The agreements with the Chief Executive Officer and Chief Medical Officer provides that if either of the individuals is terminated outside of a change in control event and without cause, (i) all of their stock options that are subject to ongoing vesting conditions over subsequent periods ranging from 12 to 18 months will immediately vest, and (ii) such stock options will remain exercisable for periods ranging from 6 to 12 months following the occurrence of the termination event.

In addition, if either of the executive officers are terminated solely due to a change of control event, all of their respective unvested stock options will immediately vest and all outstanding stock options will remain exercisable for periods ranging from 6 to 12 months following the occurrence of the termination event.

The Chief Medical Officer’s employment agreement, as amended, provides that upon the occurrence of a termination event other than a change of control, the Company is required to (i) make severance payments equal to 12 months of salary, a pro-rata bonus, and health insurance coverage for 12 months following the termination date, and (ii) all unvested stock options subject to vest over the subsequent 12 month period after the termination event will become immediately exercisable and all outstanding stock options will remain exercisable for 6 months following the termination event.

In addition, upon the occurrence of a termination solely due to a change of control event, the Company is required to (i) make severance payments equal to 18 months of salary, a pro-rata bonus, and health insurance coverage for 18 months following the termination event.

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 401(k) Plan covers all eligible employees who are entitled to participate beginning 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.

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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, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations.

As of June 30, 2024, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations or financial position.

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 .

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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.

Investors in Registered Direct Offerings

In connection with the 2021 Underwritten Offering discussed in Note 8, 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) 2021 PFWs exercisable for the purchase of 123,000 shares at $ 6.49 per 2021 PFW for a total issuance price of $ 0.8 million.

In connection with the 2022 RDO discussed in Note 8, 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.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Investors in 2022 Private Placement

Handok and certain of its affiliates were the sole investors in the 2022 Private Placement and the Registered Direct Offering discussed in Note 7.

Handok and certain of its affiliates were the sole investors in the 2022 Private Placement discussed in Note 7.

NOTE 12 - SUPPLEMENTAL FINANCIAL INFORMATION

Cash and cash equivalents

Cash and cash equivalents consist of the following as of June 30, 2023 and 2022 (in thousands):

Demand deposits at a single financial institution

Cash and cash equivalents consisted of the following as of June 30, 2024 and 2023 (in thousands):

Money market funds

Demand deposits at a single financial institution

Commercial paper

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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 for the fiscal year ended June 30, 2022, since the impact of accounting for the pre-funded warrants as derivative liabilities was dilutive, the numerator was adjusted to eliminate gains on changes in fair value of such pre-funded warrants, and the denominator was adjusted to include the related pre-funded warrant shares.

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, 2023 and 2022, all of such common stock equivalents were

REZOLUTE, INC.

Notes to Consolidated Financial Statements

antidilutive and exclude from the calculations.

Basic net loss per share is computed by dividing net loss by the weighted average number of outstanding shares of common stock and PWFs during periods when the PFWs are accounted for as equity instruments.

Common shares associated with PFWs that are accounted for as equity instruments are included in the computation of basic and diluted net loss per share since the exercise price is negligible and all of the PFWs are fully vested and exercisable.

For the calculation of diluted net loss per share for the fiscal year ended June 30, 2024, during the period when PFWs were accounted for as derivative liabilities, such PFWs were excluded from the calculation since the impact of PFWs was antidilutive.

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, Legacy Warrants, and other common stock equivalents computed using the treasury stock method.

For the fiscal years ended June 30, 2024 and 2023, all of such common stock equivalents were antidilutive and excluded 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.

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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

Net loss for calculation of basic and diluted net loss per share

Calculation of Denominators:

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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

Exchange PFWs

Weighted average shares for basic and 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 8 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 8 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 8 for the period when they became equity-classified on June 16, 2022 through June 30, 2022.

(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.

(6) Represents the number of PFWs that were outstanding for the entirety of the fiscal year ended June 30, 2023.

REZOLUTE, INC.

Notes to Consolidated Financial Statements

(1) Represents the weighted average number of shares related to the Exchange PFWs discussed in Note 7 for the period when they became equity-classified on May 13, 2024 through June 30, 2024.

As of June 30, 2024 and 2023, 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

Other warrants

Legacy warrants

NOTE 14 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS

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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.

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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.

Assets Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy classification of such fair values as of June 30, 2024.

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Money market funds

Marketable debt securities:

Corporate commercial paper

Government agencies

Government treasuries

Corporate notes and bonds

Asset-backed securities

Fair Value Measurement of Assets as of June 30, 2023

Cash and cash equivalents:

Money market funds

Corporate commercial paper

Marketable debt securities:

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Asset-backed securities

REZOLUTE, INC.

Notes to Consolidated Financial Statements

Marketable debt securities classified as Level 2 within the valuation hierarchy generally consist of U.S.

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The Company determines the fair value of marketable debt securities based upon valuations obtained from third-party pricing sources.

Except for the amounts shown in the table above, the Company did not have any other assets measured at fair value on a recurring basis as of June 30, 2023.

As of June 30, 2022, the Company did not have any assets required to be measured at fair value on a recurring basis.

The derivative liabilities for the authorized share deficiencies discussed in Note 7 were classified under Level 3.

These liabilities were required to be measured at fair value on a recurring basis from May 4, 2022 until June 16, 2022.

Key valuation assumptions are summarized in Note 7.

The embedded derivative liabilities discussed in Note 6 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 is determined using a discounted rate equal to the effective interest rate under the Loan Agreement and based on management’s assessment of the probability that an Exit Event will occur prior to April 13, 2031.

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, 2023 and 2022 (in thousands):

Fair value, beginning of period

Loss from change in fair value, net

Fair value, end of period

Except for embedded derivative liabilities, the Company did not have any other liabilities measured at fair value on a recurring basis as of June 30, 2023 and 2022.

Except for the amounts shown in the table above, the Company did not have any other assets measured at fair value on a recurring basis as of June 30, 2024 and 2023.

Liabilities Measured at Fair Value on a Recurring Basis

For the fiscal years ended June 30, 2024 and 2023, the Company’s liabilities that are required to be measured and recorded at fair value on a recurring basis consist of the embedded derivative liability discussed in Note 6 and the warrant derivative liability discussed in Note 7.

The warrant derivative liability is classified under Level 2 of the fair value hierarchy and the embedded derivative liability is classified under Level 3 of the fair value hierarchy.

Fair value of the warrant liability is predominantly based on the market price of the Company’s shares of common stock.

Fair value of the embedded derivative liability is determined based on management’s assessment of the probability and timing of occurrence for the Exit Events discussed in Note 6 using a discount rate equal to the effective interest rate under the Loan Agreement prior to termination.

The fair value of the Exchange PFWs was computed using the BSM option-pricing model.

Key inputs to this valuation model as of May 13, 2024 included the exercise price of $ 0.001 per share, the market price of the Company’s common stock of $ 2.85 per share, the risk-free interest rate of 5.5 %, an expected term of 1 -day, and historical volatility of 100 %.

Key inputs to this valuation model as of March 8, 2024 included the exercise price of $ 0.001 per share, the market price of the Company’s common stock of $ 1.90 per share, the risk-free interest rate of 5.5 %, an expected term of 1 -day, and historical volatility of 100 %.

The following table sets forth a summary of changes in the fair value of the Company’s liabilities for which fair value was determined on a recurring basis for the fiscal years ended June 30, 2024 and 2023 (in thousands):

Fair value, beginning of fiscal year

Warrant liability incurred on March 8, 2024

Changes in fair value

Reclassification of warrant derivative liability to equity on May 13, 2024

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, 2024 and 2023.

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.

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, 2024 and 2023, the Company did not have any transfers of its assets or liabilities between levels of the fair value hierarchy.

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The Company maintains its cash in demand accounts at a high-quality financial institution.

As of and for the fiscal years ended June 30, 2023 and 2022, cash deposits have exceeded the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation (“FDIC”).

As of June 30, 2023, the Company has an aggregate of $ 54.0 million invested in marketable debt securities of issuers in the banking and financial services industries, and an aggregate of $ 26.5 million invested in marketable debt securities of a single agency of the U.S.

As of and for the fiscal years ended June 30, 2024 and 2023, cash deposits have exceeded the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation.

As of June 30, 2024, the Company had an aggregate of $ 26.6 million invested in marketable debt securities of issuers in the banking and financial services industries.

As of June 30, 2023, the Company had an aggregate of $ 54.0 million invested in marketable debt securities of issuers in the banking and financial services industries, and an aggregate of $ 26.5 million invested in marketable debt securities of a single agency of the U.S.

While the Company’s investment policy requires investments in highly rated securities, a wide variety of broad economic factors and issuer-specific factors could result in credit agency downgrades below the Company’s minimum credit rating requirements that could result in losses regardless of whether the Company elects to sell the securities or hold them until maturity.

On March 10, 2023, Silicon Valley Bank (“SVB”) was shut down, followed on March 11, 2023 by Signature Bank and on May 1, 2023 by First Republic Bank whereby the FDIC was appointed as receiver for each of those banks.

Starting in January 2023, SVB Asset Management (“SAM”), a nonbank affiliate of SVB and a member of SVB Financial Group,

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Notes to Consolidated Financial Statements

provided investment services relating to the Company’s investment in marketable debt securities held in a segregated custodial account maintained by a third-party custodian, U.S.

At the time of the closing of SVB, the Company had approximately $ 20.5 million in cash and certain cash equivalents in an Overnight Money Market Mutual Fund (“MMF”), for which SAM served as the investment advisor until April 13, 2023, when the MMF was liquidated and transferred to a similar investment under the control of a new investment advisor.

The Company’s investment portfolio did not and currently does not contain any securities of SVB, and the Company did not have any deposit accounts with SVB.

The Company does not believe it was or will be impacted by the closure of SVB and will continue to monitor the banking industry situation as it evolves.

NOTE 15 — SUBSEQUENT EVENTS

2024 Private Placement

On June 25, 2024, the Company entered into a securities purchase agreement (the “2024 SPA”) with Handok and one other investor (the “2024 Purchasers”) relating to a private placement (the “2024 Private Placement”), pursuant to which the Company agreed to sell 1,500,000 shares of common stock at a purchase price of $ 4.00 per share for gross proceeds of $ 6.0 million.

Closing of the 2024 Private Placement occurred in July 2024, whereby the Company received net proceeds of $ 6.0 million after deduction of underwriting discounts and other offering costs.

As required pursuant to the 2024 SPA, the Company filed a registration statement with the U.S.

Securities and Exchange Commission (“SEC”) in August 2024 to register the shares of common stock issued in the 2024 Private Placement.

The Company entered into a registration rights agreement with the 2024 Purchasers whereby the Company was required to have the registration statement (the “2024 Private Placement Registration Statement”) declared effective within 60 days after the signing date of the 2024 SPA.

The 2024 Private Placement Registration Statement was declared effective by the SEC on August 14, 2024.

The Company will be obligated to pay certain liquidated damages to the 2024 Purchasers if the Company fails to maintain the effectiveness of the 2024 Private Placement Registration Statement.

Investments in Marketable Debt Securities

In July 2024, the Company utilized approximately $ 59.7 million of cash and cash equivalents to purchase investments in marketable debt securities with maturities that range from October 2024 through December 2025.

Exchange PFW Warrant Exercise

In July 2024, a holder of Exchange PFWs provided notice of cashless exercise of 610,404 Exchange PFWs, which resulted in the issuance of 610,273 shares of common stock.

Executive Compensation

On September 10, 2024, the Board of Directors approved an employment agreement, effective September 15, 2024, with the Company’s Chief Financial Officer that provides for an annual base salary of $ 460,000 , plus a calendar year target bonus of 40 %.

The agreement provides that if the Chief Financial Officer is terminated outside of a change in control event and without cause, (i) make severance payments equal to 12 months of base salary, a pro-rata bonus through the

termination date, and health insurance coverage for 12 months following the termination date, and (ii) all unvested stock options subject to vest over the subsequent 12 month period after the termination event will become immediately exercisable and all such stock options will remain exercisable for 6 months following the termination event.

In addition, upon the occurrence of a termination solely due to a change of control event, the Company is required to (i) make severance payments equal to 18 months of salary, a pro-rata bonus through the termination date, and health insurance coverage for 18 months following the termination event.

Effective September 15, 2024, the Board of Directors approved an increase from approximately $ 557,000 to $ 625,000 in the annual base compensation set forth in the employment agreement discussed in Note 10 for the Company’s Chief Executive Officer.

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