Rezolute, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. ​ TABLE OF CONTENTS ​ ​ Page Reports of Independent Registered Public Accounting Firms ( Grant Thornton, LLP ; Newport Beach, California ; PCAOB ID: 248 ) ( Plante & Moran, PLLC ; Cleveland, Ohio ; PCAOB ID: 166 ) ​ 32 ​ ​ ​ Financial Statements: ​ ​ ​ ​ ​ Consolidated balance sheets as of June 30, 2024 and 2023 ​ 34 ​ ​ ​ Consolidated statements of operations and comprehensive loss for the fiscal years ended June 30, 2024 and 2023 ​ 35 ​ ​ ​ Consolidated statements of shareholders’ equity for the fiscal years ended June 30, 2024 and 2023 ​ 36 ​ ​ ​ Consolidated statements of cash flows for the fiscal years ended June 30, 2024 and 2023 ​ 37 ​ ​ ​ Notes to consolidated financial statements ​ 39 ​ ​ ​ 31 ​ Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders Rezolute, Inc. and subsidiaries ​ Opinion on the financial statements 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 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 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. 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 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 Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. / s / GRANT THORNTON LLP We have served as the Company’s auditor since 2024. Newport Beach, California September 19, 2024 ​ ​ ​ ​ 32 ​ Table of Contents 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. 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 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. 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 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 September 14, 2023 33 ​ Table of Contents REZOLUTE, INC. Consolidated Balance Sheets June 30, 2024 and 2023 (In Thousands, Except Per Share Amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 70,396 ​ $ 16,036 Investments in marketable debt securities ​ ​ 56,478 ​ ​ 85,860 Prepaid expenses and other ​ ​ 1,779 ​ ​ 3,014 Total current assets ​ 128,653 ​ 104,910 ​ ​ ​ ​ ​ ​ ​ Long-term assets: ​ ​ ​ ​ ​ ​ Right-of-use assets ​ 1,880 ​ 2,054 Deposits and other ​ ​ 1,838 ​ ​ 148 Investments in marketable debt securities ​ ​ 263 ​ ​ 16,470 Property and equipment, net ​ 103 ​ 139 Total assets ​ $ 132,737 ​ $ 123,721 ​ ​ ​ ​ ​ ​ ​ Liabilities and Shareholders' Equity ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 4,901 ​ $ 3,269 Accrued liabilities: ​ ​ ​ ​ Accrued clinical and other ​ ​ 2,325 ​ ​ 507 Compensation and benefits ​ ​ 1,812 ​ ​ 883 Current portion of operating lease liabilities ​ ​ 568 ​ ​ 541 Total current liabilities ​ 9,606 ​ 5,200 ​ ​ ​ ​ ​ ​ ​ Long-term liabilities: ​ ​ ​ ​ ​ ​ Operating lease liabilities, net of current portion ​ 1,660 ​ 1,937 Embedded derivative liability ​ ​ 468 ​ ​ 412 Total liabilities ​ 11,734 ​ 7,549 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Notes 5, 10 and 11) ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders' equity: ​ ​ Preferred stock, $ 0.001 par value; 400 shares authorized; no shares issued ​ — ​ — Common stock, $ 0.001 par value; 100,000 shares authorized; issued and outstanding 53,246 and 36,827 shares as of June 30, 2024 and 2023 , respectively ​ 53 ​ 37 Additional paid-in capital ​ 450,473 ​ 377,471 Accumulated other comprehensive loss ​ ​ ( 79 ) ​ ​ ( 351 ) Accumulated deficit ​ ( 329,444 ) ​ ( 260,985 ) Total shareholders’ equity ​ 121,003 ​ 116,172 Total liabilities and shareholders’ equity ​ $ 132,737 ​ $ 123,721 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 34 ​ Table of Contents REZOLUTE, INC. Consolidated Statements of Operations and Comprehensive Loss For the Fiscal Years Ended June 30, 2024 and 2023 (In Thousands, Except Per Share Amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Operating expenses: ​ ​ ​ Research and development ​ $ 55,743 ​ $ 43,813 General and administrative ​ ​ 14,680 ​ 12,177 Total operating expenses ​ ​ 70,423 ​ 55,990 Operating loss ​ ​ ( 70,423 ) ​ ( 55,990 ) Non-operating income (expense): ​ ​ ​ Interest and other income, net ​ ​ ​ 4,870 ​ ​ 4,208 Loss from change in fair value of warrant derivative liability ​ ​ ​ ( 2,850 ) ​ ​ — Loss from change in fair value of embedded derivative liability ​ ​ ​ ( 56 ) ​ ​ ( 5 ) Total non-operating income, net ​ ​ 1,964 ​ 4,203 ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ ​ ( 68,459 ) ​ ​ ( 51,787 ) ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ Net unrealized gain (loss) on marketable debt securities ​ ​ ​ 272 ​ ​ ( 351 ) ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive loss ​ ​ $ ( 68,187 ) ​ $ ( 52,138 ) ​ ​ ​ ​ ​ ​ ​ ​ Net loss per common share: ​ ​ ​ ​ ​ ​ ​ Basic and diluted ​ ​ $ ( 1.33 ) ​ $ ( 1.01 ) ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding: ​ ​ ​ ​ ​ ​ Basic and diluted ​ ​ ​ 51,465 ​ 51,187 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 35 ​ Table of Contents REZOLUTE, INC. Consolidated Statements of Shareholders’ Equity For the Fiscal Years Ended June 30, 2024 and 2023 (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ Total ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Shareholders' ​ Shares Amount Capital Loss Deficit Equity Balances, June 30, 2022 ​ 33,582 ​ $ 34 ​ $ 358,635 ​ $ — ​ $ ( 209,198 ) ​ $ 149,471 Gross proceeds from issuance of common stock for cash in 2022 Private Placement ​ 3,245 ​ ​ 3 ​ ​ 12,327 ​ ​ — ​ ​ — ​ ​ 12,330 Underwriting commissions and other equity offering costs ​ — ​ ​ — ​ ​ ( 759 ) ​ ​ — ​ ​ — ​ ​ ( 759 ) Share-based compensation ​ — ​ ​ — ​ ​ 7,268 ​ ​ — ​ ​ — ​ ​ 7,268 Net change in accumulated other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ ( 351 ) ​ ​ — ​ ​ ( 351 ) Net loss — ​ — ​ — ​ — ​ ( 51,787 ) ​ ( 51,787 ) Balances, June 30, 2023 ​ 36,827 ​ ​ 37 ​ ​ 377,471 ​ ​ ( 351 ) ​ ​ ( 260,985 ) ​ ​ 116,172 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from issuance of equity securities in 2024 Underwritten Offering, net of underwriting discounts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock 13,037 ​ ​ 13 ​ ​ 49,004 ​ ​ — ​ ​ — ​ ​ 49,017 2024 Pre-Funded Warrants ​ — ​ ​ — ​ ​ 14,096 ​ ​ — ​ ​ — ​ ​ 14,096 Other equity offering costs ​ — ​ ​ — ​ ​ ( 548 ) ​ ​ — ​ ​ — ​ ​ ( 548 ) Issuance of common stock upon exercise of stock options ​ 82 ​ ​ — ​ ​ 246 ​ ​ — ​ ​ — ​ ​ 246 Share-based compensation ​ — ​ ​ — ​ ​ 7,360 ​ ​ — ​ ​ — ​ ​ 7,360 Cashless exercise of pre-funded warrants ​ 6,300 ​ ​ 6 ​ ​ ( 6 ) ​ ​ — ​ ​ — ​ ​ — Acquisition and retirement of treasury shares pursuant to Exchange Agreement ​ ( 3,000 ) ​ ​ ( 3 ) ​ ​ ( 5,697 ) ​ ​ — ​ ​ — ​ ​ ( 5,700 ) Reclassification of warrant derivative liability to equity ​ — ​ ​ — ​ ​ 8,547 ​ ​ — ​ ​ — ​ ​ 8,547 Net change in accumulated other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ 272 ​ ​ — ​ ​ 272 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 68,459 ) ​ ​ ( 68,459 ) Balances, June 30, 2024 ​ 53,246 ​ $ 53 ​ $ 450,473 ​ $ ( 79 ) ​ $ ( 329,444 ) ​ $ 121,003 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 36 ​ Table of Contents REZOLUTE, INC. Consolidated Statements of Cash Flows For the Fiscal Years Ended June 30, 2024 and 2023 (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ Net loss ​ $ ( 68,459 ) ​ $ ( 51,787 ) Share-based compensation expense ​ ​ 7,360 ​ ​ 7,268 Loss from change in fair value of warrant derivative liability ​ ​ 2,850 ​ ​ — Loss from change in fair value of embedded derivative liability ​ ​ 56 ​ ​ 5 Non-cash lease expense ​ ​ 526 ​ ​ 352 Accretion of discounts and amortization of premiums on marketable debt securities, net ​ ​ ( 2,837 ) ​ ​ ( 1,370 ) Depreciation expense ​ ​ 36 ​ ​ 30 Changes in operating assets and liabilities: ​ ​ Increase in prepaid expenses, deposits, and other assets ​ ( 129 ) ​ ( 1,320 ) Increase in accounts payable ​ 1,083 ​ 2,136 Increase in accrued liabilities ​ ​ 2,146 ​ ​ 205 Net Cash Used in Operating Activities ​ ( 57,368 ) ​ ( 44,481 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ Purchase of marketable debt securities ​ ​ ( 66,401 ) ​ ​ ( 107,311 ) Proceeds from maturities of marketable debt securities ​ ​ 115,100 ​ ​ 6,000 Purchase of property and equipment ​ ​ — ​ ( 153 ) Total Cash Provided by (Used in) Investing Activities ​ 48,699 ​ ( 101,464 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Proceeds from exercise of stock options ​ ​ 234 ​ ​ — Net cash payment pursuant to Exchange Agreement ​ ​ ( 3 ) ​ ​ — Proceeds from issuance of equity securities in 2024 Underwritten Offering, net of underwriting discounts ​ ​ ​ ​ ​ ​ Issuance of common stock ​ ​ 49,017 ​ ​ — Issuance of pre-funded warrants ​ ​ 14,096 ​ ​ — Gross proceeds from issuance of common stock in 2022 Private Placement ​ ​ — ​ ​ 12,330 Payment of commissions and other deferred offering costs ​ ( 315 ) ​ ​ ( 759 ) Net Cash Provided by Financing Activities ​ 63,029 ​ 11,571 ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash and cash equivalents ​ ​ 54,360 ​ ​ ( 134,374 ) Cash and cash equivalents at beginning of fiscal year ​ 16,036 ​ 150,410 Cash and cash equivalents at end of fiscal year ​ $ 70,396 ​ $ 16,036 ​ ​ ​ ​ ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 37 ​ Table of Contents ​ ​ REZOLUTE, INC. Consolidated Statements of Cash Flows, Continued For the Fiscal Years Ended June 30, 2024 and 2023 (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 SUPPLEMENTARY CASH FLOW INFORMATION: ​ ​ Cash paid for interest ​ $ — ​ $ — Cash paid for income taxes ​ ​ — ​ ​ — Cash paid for amounts included in the measurement of operating lease liabilities ​ ​ 728 ​ ​ 215 Operating lease liabilities incurred in exchange for right-of-use assets ​ ​ 352 ​ ​ 2,204 ​ ​ ​ ​ ​ ​ ​ NON-CASH INVESTING AND FINANCING ACTIVITIES: ​ ​ Acquisition of treasury shares in exchange for pre-funded warrant derivative liability ​ $ 5,697 ​ $ — Receivable from exercise of stock options ​ ​ 12 ​ ​ — Payables for offering costs charged to additional paid-in capital ​ ​ 548 ​ ​ — ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 38 ​ Table of Contents NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Rezolute, Inc. (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 The Company has two wholly owned subsidiaries consisting of Rezolute (Bio) Ireland Limited, and Rezolute Bio UK, Ltd. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Comprehensive income (loss) is defined as net income (loss) plus other comprehensive income (loss). Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are reported as separate components of shareholders’ equity instead of net income (loss). For the fiscal years ended June 30, 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. Since its inception, the Company has determined that its activities as a clinical stage biopharmaceutical company are classified as a single reportable operating segment. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts in the consolidated financial statements and the accompanying notes. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, determination 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. Risks and Uncertainties The Company's operations may be subject to significant risks and uncertainties including financial, operational, regulatory and other risks associated with a clinical stage company, including the potential risk of business failure discussed in Note 2. 39 ​ Table of Contents Cash and Cash Equivalents All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents. Cash and cash equivalents consist primarily of demand deposits with financial institutions, money market funds and corporate commercial paper purchased with a maturity of three months or less. Investments in Marketable Debt Securities Under the investment policy approved by the Company’s Board of Directors, eligible investments in fixed income debt securities must be denominated and payable in U.S. dollars, including eligible corporate bonds, corporate commercial paper, U.S. government obligations, and money market funds. This investment policy only permits investments in the debt securities of issuers that meet stringent credit quality ratings on the date of the investment. The investment policy also places restrictions on the length of maturities and concentrations by type and issuer. 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 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. Unrealized gains and losses due to subsequent changes in fair value of the investments are reported in shareholders’ equity as a component of accumulated other comprehensive income (loss). The 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 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. Leases The Company determines if an arrangement includes a lease as of the date an agreement is entered into. Operating leases are included in right-of-use (“ROU”) assets and operating lease liabilities in the Company's consolidated balance sheets. ROU assets and operating lease liabilities are initially recognized based on the present value of the future minimum lease payments at the commencement date of the lease. The Company generally uses its incremental borrowing rate based on the information available at the lease commencement date 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; these options are included in the calculation of ROU assets and operating lease liabilities when it is reasonably certain that the Company will exercise the options. Lease expense is recognized on a straight-line basis over the lease term. The Company has elected not to apply the recognition requirements for short-term leases. For lease agreements with lease and non-lease components, the Company generally accounts for them separately. 40 ​ Table of Contents Property and Equipment Property and equipment consist solely of office furniture and equipment that is recorded at cost. Depreciation expense is calculated using the straight-line method over the estimated useful lives of the assets which range from 3 to 5 years . Maintenance and repairs are expensed as incurred. Research and Development Costs Research and development costs are expensed as incurred. Intangible assets for in-licensing costs incurred under license agreements with third parties are charged to expense, unless the licensing rights have separate economic value in alternative future research and development projects or otherwise. Clinical Trial Accruals Clinical trial costs are a component of research and development expenses. The Company accrues and expenses clinical trial activities performed by third parties based upon estimates of the percentage of work completed over the life of the individual study in accordance with agreements established with clinical research organizations and clinical trial sites. The Company determines the estimates through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. Share-Based Compensation 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. The Company recognizes the impact of forfeitures in the period that the forfeiture occurs, rather than estimating the number of awards that are not expected to vest in accounting for share-based compensation. For stock options that are voluntarily surrendered by employees, all unrecognized compensation is immediately recognized in the period the options are cancelled. 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 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. 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 41 ​ Table of Contents 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. Income Taxes 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. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred income tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is 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 will be recognized as a component of income tax expense. 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. 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 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 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 Recently Adopted Accounting Standard. The following accounting standard was adopted in the fiscal year ended June 30, 2024: 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 42 ​ Table of Contents 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 The Company is in the clinical stage and has not yet generated any revenues. 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, 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 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. 43 ​ Table of Contents NOTE 3 — INVESTMENTS IN MARKETABLE DEBT SECURITIES Investments in marketable debt securities are classified as follows in the consolidated balance sheets as of June 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ 2024 2023 Short-term investments $ 56,478 ​ $ 85,860 Long-term investments ​ 263 ​ ​ 16,470 Total investments $ 56,741 ​ $ 102,330 ​ The Company only invests in liquid, high quality debt securities. 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Unrealized ​ ​ ​ ​ ​ ​ Amortized Cost Gains Losses Fair Value ​ Corporate commercial paper ​ $ 20,941 ​ $ — ​ $ ( 12 ) ​ $ 20,929 ​ Obligations of U.S. government agencies ​ ​ 2,001 ​ ​ — ​ ​ ( 4 ) ​ ​ 1,997 ​ U.S. Treasury obligations ​ ​ 2,727 ​ ​ — ​ ​ ( 7 ) ​ ​ 2,720 ​ Corporate notes and bonds ​ ​ 30,888 ​ ​ — ​ ​ ( 56 ) ​ ​ 30,832 ​ Asset-backed securities ​ ​ 263 ​ ​ — ​ ​ — ​ ​ 263 ​ Total ​ $ 56,820 ​ $ — ​ $ ( 79 ) ​ $ 56,741 ​ ​ ​ 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, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Unrealized ​ ​ ​ ​ ​ Amortized Cost Gains Losses Fair Value Corporate commercial paper ​ $ 41,670 ​ $ — ​ $ ( 73 ) ​ $ 41,597 Obligations of U.S. government agencies ​ ​ 26,565 ​ ​ — ​ ​ ( 170 ) ​ ​ 26,395 U.S. Treasury obligations ​ ​ 10,416 ​ ​ 2 ​ ​ ( 14 ) ​ ​ 10,404 Corporate notes and bonds ​ ​ 19,253 ​ ​ 1 ​ ​ ( 14 ) ​ ​ 19,240 Asset-backed securities ​ ​ 4,777 ​ ​ — ​ ​ ( 83 ) ​ ​ 4,694 Total ​ $ 102,681 ​ $ 3 ​ $ ( 354 ) ​ $ 102,330 ​ ​ ​ ​ 44 ​ Table of Contents ​ NOTE 4 — LEASES 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. Prior to occupancy, the landlord was required to make improvements to the facility that were completed in October 2022, triggering the commencement of the lease. The lease provided for a six-month rent abatement period beginning upon commencement of the lease term. In addition, the lease provided an allowance of approximately $ 0.1 million that was utilized by the Company for the purchase of furniture and equipment. The average base rent payable in cash over the 60-month lease term is approximately $ 48,000 per month. Upon commencement of the lease, the Company 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, 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Right-of-use assets ​ $ 1,880 ​ $ 2,054 ​ ​ ​ ​ ​ ​ ​ Operating lease liabilities: ​ ​ Current ​ $ 568 ​ $ 541 Long-term ​ 1,660 ​ 1,937 Total ​ $ 2,228 ​ $ 2,478 ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 484 ​ $ 453 ​ General and administrative ​ 196 ​ 154 ​ Total ​ $ 680 ​ $ 607 ​ ​ 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 %. 45 ​ Table of Contents Future Lease Payments Future payments under all operating lease agreements as of June 30, 2024 are as follows (in thousands): ​ ​ ​ ​ Fiscal year ending June 30, ​ 2025 ​ $ 748 2026 ​ ​ 770 2027 ​ ​ 750 Thereafter ​ ​ 224 Total lease payments ​ ​ 2,492 Less imputed interest ​ ( 264 ) Present value of operating lease liabilities ​ $ 2,228 ​ ​ NOTE 5 —LICENSE AGREEMENTS 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 or RZ358, now ersodetug) for all indications. 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 Phase 2b Clinical Trial for ersodetug. 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 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 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 In August 2017, the Company entered into a Development and License Agreement (the “ActiveSite License Agreement”) with ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) pursuant to which the Company acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Portfolio”). The Company is initially using the PKI Portfolio to develop an oral PKI therapeutic for diabetic macular edema (RZ402) and may use the PKI Portfolio to develop other therapeutics for different indications. The ActiveSite Development and License Agreement requires various milestone payments up to $ 46.5 million if all milestone events are achieved. The first milestone payment for $ 1.0 million was paid in December 2020 after clearance was received for an Initial Drug Application, or IND, filed with the U.S. Food and Drug Administration (“FDA”). The second milestone payment of $ 3.0 million was paid in February 2023 after dosing of the first patient in a Phase 2 clinical trial for RZ402. The next milestone payment of $ 5.0 million will be due upon the first dosing of a patient in a Phase 3 clinical trial. The Company is also required to pay royalties equal to 2.0 % of any sales of products that use the PKI Portfolio. There have been no events that would result in any royalty payments owed under the ActiveSite License Agreement to date. 46 ​ Table of Contents NOTE 6 — EMBEDDED DERIVATIVE LIABILITY On April 14, 2021, the Company entered into a $ 30.0 million Loan and Security Agreement (the “Loan Agreement”) with SLR Investment Corp. (“SLR”) and certain other lenders (collectively, the “Lenders”). The Lenders agreed to loan up to $ 30.0 million but the actual amount borrowed by the Company amounted to $ 15.0 million. 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. 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 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 non-operating gain or loss. ​ ​ ​ ​ NOTE 7 — SHAREHOLDERS’ EQUITY Pre-Funded Warrants 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ 2022 ​ Exchange ​ 2024 ​ ​ ​ PFWs ​ PFWs ​ PFWs ​ PFWs ​ Total Outstanding, June 30, 2023 1,661,461 (1) 12,921,055 (2) — ​ — ​ 14,582,516 Issuance of Exchange PFWs in March 2024 — ​ — ​ 3,000,000 (3) ​ ​ 3,000,000 Issuance of 2024 PFWs in June 2024 — ​ — ​ ​ ​ 3,750,000 (4) 3,750,000 Cashless exercise of PFWs: ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares surrendered for exercise price ( 8,571 ) ​ ( 3,494 ) ​ — ​ — ​ ( 12,065 ) Shares of common stock issued ( 1,529,890 ) ​ ( 4,770,190 ) ​ — ​ — ​ ( 6,300,080 ) Outstanding, June 30, 2024 123,000 ​ 8,147,371 ​ 3,000,000 ​ 3,750,000 ​ 15,020,371 47 ​ Table of Contents (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”). 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. 48 ​ Table of Contents 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 the Company’s stock option plans and the Inducement Grant (defined below) as of June 30, 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Number of Shares Description Authorized Outstanding Available ​ ​ ​ ​ ​ ​ ​ 2015 Plan 17 17 — 2016 Plan 123 123 — 2019 Plan 200 200 — 2021 Plan ​ 10,618 ​ 10,276 ​ 342 Inducement Grant ​ 275 ​ 275 ​ — Total 11,233 10,891 342 ​ The Company currently has one active stock option plan, the 2021 Equity Incentive Plan (the “2021 Equity Plan”). On March 31, 2021, the Company’s Board of Directors adopted the 2021 Equity Plan that will terminate on March 31, 2031. On May 26, 2021, the 2021 Equity plan was approved by the Company’s shareholders with authority to issue up to 1.2 million shares of common stock. Pursuant to the 2021 Equity Plan, no awards may be granted under the three legacy stock option plans shown in the table above, but all outstanding awards previously granted under those plans shall remain outstanding and subject to the terms of the respective plans. On June 16, 2022, the Company’s shareholders approved an amendment to the 2021 Equity Plan, increasing the number of shares of common stock to be issued under the plan up to 49 ​ Table of Contents 10.7 million shares of common stock. Stock options outstanding under these plans expire pursuant to their contractual provisions on various dates through 2034. 2022 Employee Stock Purchase Plan On June 16, 2022, the Company’s shareholders approved the adoption of the 2022 Employee Stock Purchase Plan (the “2022 ESPP”). The 2022 ESPP provides an opportunity for employees to purchase shares of the Company’s common stock through accumulated payroll deductions. 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. There have been no offering periods under the 2022 ESPP through June 30, 2024. Stock Options Outstanding 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ Shares Price (1) Term (2) ​ Shares Price (1) Term (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, beginning of fiscal year 8,745 ​ $ 4.56 ​ 8.8 ​ 8,506 ​ $ 5.24 9.7 Grants to employees ​ 2,642 ​ ​ 1.31 ​ ​ ​ 740 ​ ​ 2.00 ​ ​ Exercises ​ ( 82 ) (3) ​ 3.02 ​ ​ ​ — ​ ​ — ​ ​ Expired ​ ( 110 ) ​ ​ 6.11 ​ ​ ​ ( 116 ) ​ ​ 40.73 ​ ​ Forfeited ​ ( 304 ) ​ ​ 2.63 ​ ​ ​ ( 385 ) ​ ​ 3.75 ​ ​ Outstanding, end of fiscal year 10,891 (4) 3.82 8.1 ​ 8,745 ​ 4.56 8.8 Vested, end of fiscal year 4,892 (5) 5.39 7.7 ​ 2,676 ​ 6.57 8.4 (1) Represents the weighted average exercise price. (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 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. 50 ​ Table of Contents ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ Market price of common stock on grant date ​ $ 1.31 ​ $ 3.73 ​ Expected volatility ​ 99 % ​ 91 % Risk free interest rate ​ 4.2 % ​ 3.7 % Expected term (years) ​ 5.6 ​ ​ 6.0 ​ Dividend yield ​ 0 % ​ 0 % ​ Share-based compensation expense is included under the following captions in the consolidated statements of operations for the fiscal years ended June 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 3,379 ​ $ 3,243 ​ General and administrative ​ 3,981 ​ 4,025 ​ Total ​ $ 7,360 ​ $ 7,268 ​ ​ 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. 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 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 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. The Participating Warrants and other warrants are collectively referred to as the “Legacy Warrants.” ​ 51 ​ Table of Contents 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ Shares Price (1) Term (2) Shares Price (1) Term (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, beginning of fiscal year 888 $ 22.10 4.1 1,150 $ 22.83 4.2 Expirations ( 27 ) 78.60 ( 262 ) 25.32 Outstanding, end of fiscal year 861 20.28 3.2 888 22.10 4.1 (1) Represents the weighted average exercise price. (2) Represents the weighted average remaining contractual term for the number of years until the warrants expire. ​ NOTE 9 — INCOME TAXES Net Operating Loss Carryforwards The Company files income tax returns in the U.S. 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. Federal and state laws impose substantial restrictions on the utilization of federal net operation loss (“NOL”) carryforwards in the event of an ownership change for income tax purposes, as defined in Section 382 of the Internal Revenue Code (“IRC”). Pursuant to IRC Section 382, annual use of the Company’s NOL carryforwards is limited in the event that a cumulative change in ownership of more than 50% occurs within a three-year period. 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. As of June 30, 2024, the Company has U.S. federal net operating loss (“NOL”) carryforwards of approximately $ 171.7 million, of which approximately $ 33.4 million of NOL carryforwards will never be available for use due to the limitations under IRC section 382 discussed above. The remainder of the Company’s NOL carryforwards of $ 138.3 million consists of (i) $ 38.0 million that never expires and is currently available to offset taxable income, (ii) $ 9.6 million that is currently available to offset taxable income but if not utilized expires in 2031 through 2035, (iii) $ 11.7 million that become available through fiscal year 2038 and that expires by June 30, 2038 if not utilized, and (iv) $ 79.0 million that never expires. With respect to the $ 79.0 million of NOL carryforwards that never expire, this amount will become available in varying annual amounts for an aggregate approximately $ 13.2 million through fiscal year 2038 and $ 1.2 million annually thereafter. If the Company experiences future ownership changes that meet the aforementioned criteria under Section 382, further limitations will be imposed on the use of all NOL carryforwards existing through the date of such change. The Company also has Colorado and California NOL carryforwards that begin to expire in 2031 and are expected to be subject to similar limitations as those imposed under IRC Section 382. 52 ​ Table of Contents Income Tax Expense For the fiscal years ended June 30, 2024 and 2023, the reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate to the pre-tax loss before income taxes, and total income tax expense recognized in the consolidated financial statements is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Income tax benefit at statutory U.S. federal rate ​ $ 14,374 ​ $ 10,875 Income tax benefit attributable to U.S. states ​ 4,413 ​ 3,468 Impact of reduction in Colorado tax rate ​ ​ — ​ ​ ( 78 ) Non-taxable derivative loss ​ ​ ( 598 ) ​ ​ — Non-deductible expenses ​ ( 505 ) ​ ( 442 ) Stock option expirations ​ ( 16 ) ​ ( 921 ) NOL expirations ​ ​ ( 7,004 ) ​ ​ — Other ​ ​ 4 ​ ​ ( 399 ) Change in valuation allowance ​ ( 10,668 ) ​ ( 12,503 ) Total income tax expense ​ $ — ​ $ — ​ 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. Deferred Income Tax Assets and Liabilities As of June 30, 2024 and 2023, the income tax effects of temporary differences that give rise to significant deferred income tax assets and liabilities are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Deferred income tax assets: ​ ​ Net operating loss carryforwards ​ $ 38,942 ​ $ 40,537 Research and experimental costs ​ ​ 19,213 ​ ​ 9,454 Intangible assets ​ ​ 6,487 ​ ​ 5,595 Share-based compensation ​ 4,280 ​ 2,884 Operating lease liabilities ​ ​ 624 ​ ​ 694 Accrued expenses and other ​ 763 ​ 603 ​ ​ ​ ​ ​ ​ ​ Total deferred income tax assets ​ 70,309 ​ 59,767 Valuation allowance for deferred income tax assets ​ ( 69,783 ) ​ ( 59,192 ) ​ ​ ​ ​ ​ ​ ​ Deferred income tax assets, net of valuation allowance ​ ​ 526 ​ ​ 575 ​ ​ ​ ​ ​ ​ ​ Deferred income tax liability right-of-use assets ​ ​ ( 526 ) ​ ​ ( 575 ) ​ ​ ​ ​ ​ ​ ​ Net deferred income tax assets ​ $ — ​ $ — ​ 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. 53 ​ Table of Contents Unrecognized Tax Benefits The Company did not have any unrecognized tax benefits as of June 30, 2024 and 2023. The Company’s policy is to account for any interest expense and penalties for unrecognized tax benefits as part of the income tax provision. The Company does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months. ​ NOTE 10 — COMMITMENTS AND CONTINGENCIES Licensing Commitments Please refer to Note 5 for further discussion of commitments to make milestone payments and to pay royalties under license agreements with XOMA and ActiveSite. Employment Agreements As of June 30, 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 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. 401(k) Plan 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 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. Total contributions by the Company to the 401(k) Plan amounted to approximately $ 0.4 million and $ 0.3 million for the fiscal years ended June 30, 2024 and 2023, respectively. Legal Matters 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, 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 . Legal fees are expensed as incurred. 54 ​ Table of Contents NOTE 11 — RELATED PARTY TRANSACTIONS Related Party Licensing Agreement 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 ersodetug 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 2022 Private Placement 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 consisted of the following as of June 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 61,249 ​ $ 5,464 Demand deposits at a single financial institution ​ ​ 9,147 ​ ​ 6,091 Commercial paper ​ ​ — ​ ​ 4,481 ​ ​ ​ ​ ​ ​ ​ Total ​ $ 70,396 ​ $ 16,036 ​ The money market funds and commercial paper included in the table above were purchased with an original maturity of three months or less. These investments and the demand deposits are freely available for the Company’s immediate and general business use. Property and Equipment Property and equipment consisted of the following as of June 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Office furniture and equipment ​ $ 210 ​ $ 210 Less accumulated depreciation ​ ( 107 ) ​ ( 71 ) ​ ​ ​ ​ ​ ​ ​ Total ​ $ 103 ​ $ 139 ​ Depreciation expense related to property and equipment amounted to approximately $ 36,000 and $ 30,000 for the fiscal years ended June 30, 2024 and 2023, respectively. 55 ​ Table of Contents 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 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. ​ Presented below are the calculations of the numerators and the denominators for basic and diluted net loss per share for the fiscal years ended June 30, 2024 and 2023 (in thousands except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 Calculation of Numerators: ​ ​ ​ ​ ​ ​ Net loss for calculation of basic and diluted net loss per share ​ $ ( 68,459 ) ​ $ ( 51,787 ) ​ ​ ​ ​ ​ ​ ​ Calculation of Denominators: ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding ​ ​ 39,499 ​ ​ 36,605 Weighted average shares related to pre-funded warrants: ​ ​ ​ ​ ​ ​ 2021 PFWs ​ ​ 1,195 ​ ​ 1,661 2022 PFWs ​ ​ 10,245 ​ ​ 12,921 Exchange PFWs ​ ​ 393 ​ ​ — 2024 PFWs ​ ​ 133 (1) ​ — Weighted average shares for basic and diluted net loss per share ​ ​ 51,465 ​ ​ 51,187 ​ ​ ​ ​ ​ ​ ​ Net loss per share of common stock: ​ ​ ​ ​ ​ ​ Basic ​ $ ( 1.33 ) ​ $ ( 1.01 ) Diluted ​ $ ( 1.33 ) ​ $ ( 1.01 ) __________________ (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): ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ Stock options ​ 10,891 ​ 8,745 Legacy warrants ​ 861 ​ 888 Total ​ 11,752 ​ 9,633 ​ ​ ​ 56 ​ Table of Contents ​ NOTE 14 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS Fair Value Measurements Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1—Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. Level 2—Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at the measurement date. 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement of Assets as of June 30, 2024 ​ ​ Total ​ Level 1 ​ Level 2 ​ Level 3 Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 61,249 ​ $ 61,249 ​ $ — ​ $ — Marketable debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate commercial paper ​ ​ 20,929 ​ ​ — ​ ​ 20,929 ​ ​ — U.S. Government agencies ​ ​ 1,997 ​ ​ — ​ ​ 1,997 ​ ​ — U.S. Government treasuries ​ ​ 2,720 ​ ​ — ​ ​ 2,720 ​ ​ — Corporate notes and bonds ​ ​ 30,832 ​ ​ — ​ ​ 30,832 ​ ​ — Asset-backed securities ​ ​ 263 ​ ​ — ​ ​ 263 ​ ​ — Total ​ $ 117,990 ​ $ 61,249 ​ $ 56,741 ​ $ — ​ 57 ​ Table of Contents 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, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement of Assets as of June 30, 2023 ​ ​ Total ​ Level 1 ​ Level 2 ​ Level 3 Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 5,464 ​ $ 5,464 ​ $ — ​ $ — Corporate commercial paper ​ ​ 4,481 ​ ​ 4,481 ​ ​ — ​ ​ — Marketable debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate commercial paper ​ ​ 41,597 ​ ​ — ​ ​ 41,597 ​ ​ — U.S. Government agencies ​ ​ 26,394 ​ ​ — ​ ​ 26,394 ​ ​ — U.S. Government treasuries ​ ​ 10,404 ​ ​ 10,404 ​ ​ — ​ ​ — Corporate notes and bonds ​ ​ 19,240 ​ ​ — ​ ​ 19,240 ​ ​ — Asset-backed securities ​ ​ 4,694 ​ ​ — ​ ​ 4,694 ​ ​ — Total ​ $ 112,274 ​ $ 20,349 ​ $ 91,925 ​ $ — ​ Marketable debt securities classified as Level 2 within the valuation hierarchy generally consist of U.S. government agency securities, corporate bonds, and commercial paper. 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, 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ ​ Warrant ​ Embedded Warrant ​ Embedded Fair value, beginning of fiscal year ​ $ — ​ $ 412 ​ $ — ​ $ 407 Warrant liability incurred on March 8, 2024 ​ ​ 5,697 ​ ​ — ​ ​ — ​ ​ — Changes in fair value ​ ​ 2,850 ​ ​ 56 ​ ​ — ​ ​ 5 Reclassification of warrant derivative liability to equity on May 13, 2024 ​ ​ ( 8,547 ) ​ ​ — ​ ​ — ​ ​ — Fair value, end of fiscal year ​ $ — ​ $ 468 ​ $ — ​ $ 412 ​ 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 58 ​ Table of Contents 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. Significant Concentrations Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and investments in marketable debt securities. The Company maintains its cash in demand accounts at a high-quality financial institution. 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. government. 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. ​ ​ 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 59 ​ Table of Contents 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. ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None ​