Part I [Business](index=5&type=section&id=Item%201.%20Business) Rezolute, Inc. is a clinical-stage biotechnology company focused on developing therapies for rare and metabolic diseases, with a pipeline including RZ358, RZ402, and AB101 - Rezolute is a clinical-stage biotechnology company developing therapies for rare and metabolic diseases[12](index=12&type=chunk) - The company faces competition for its key programs: RZ358 (from Zealand Pharma, Xeris Pharma, Hanmi), RZ402 (from KalVista, Verseon, Thrombogenics), and AB101 (from Sanofi, Novo Nordisk, Eli Lilly)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - As of June 30, 2019, the company had **19 full-time employees** and one contract employee[35](index=35&type=chunk) Product Pipeline Summary | Program | Indication | Development Stage | Key Milestone/Plan | | :--- | :--- | :--- | :--- | | **RZ358** | Congenital Hyperinsulinism (CHI) | Phase 2b | Anticipate dosing first patient in 2019. Orphan status in US & EU | | **RZ402** | Diabetic Macular Edema (DME) | Preclinical | Plan to file an IND in mid-2020 | | **AB101** | Type 1 & 2 Diabetes Mellitus | Phase 1 | Anticipate top-line results later in 2019; evaluate out-licensing | Research and Development Expenses | Fiscal Year | R&D Expense (USD) | | :--- | :--- | | 2019 | $19.1 million | | 2018 | $17.3 million | [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks across business operations, intellectual property, and common stock, including a history of net losses, capital needs, and potential clinical trial failures [Risks Related to Our Business](index=8&type=section&id=Risks%20Related%20to%20Our%20Business) The company has a history of significant net losses and an accumulated deficit, requiring substantial additional capital, and faces risks from clinical trial failures, third-party reliance, and material weaknesses in internal controls - The company has a history of losses, with net losses of **$30.4 million in FY2019** and **$29.9 million in FY2018**, and an accumulated deficit of **$126.9 million** as of June 30, 2019. It will need substantial additional capital to continue operations[39](index=39&type=chunk) - The company has never generated any revenue and expects to incur substantial operating losses for the foreseeable future[45](index=45&type=chunk) - The company relies on contract research organizations (CROs) and other third parties to conduct clinical trials, which reduces control over timing, conduct, and expense[42](index=42&type=chunk) - Material weaknesses in internal controls were identified in the fiscal 2019 audit, resulting from an inability to segregate duties, lack of controls to prevent employee override, and insufficient review of complex accounting issues and financial reporting[76](index=76&type=chunk)[77](index=77&type=chunk) [Risks Related to Our Intellectual Property](index=17&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's intellectual property position is at risk due to reliance on in-licensed compounds, potential infringement of third-party patents, and the possibility of costly litigation to defend its IP rights - The company's product candidates are developed using compounds in-licensed from third parties, such as a monoclonal antibody from Xoma Corporation and a kallikrein inhibitor portfolio from ActiveSite Pharmaceuticals, which require future milestone and royalty payments[82](index=82&type=chunk) - The company may not be aware of all third-party patents or applications that could impact its ability to commercialize its products, potentially leading to infringement claims and the need for licenses[84](index=84&type=chunk) - The pharmaceutical industry is characterized by extensive litigation over intellectual property. The company may face costly legal proceedings that could result in substantial monetary damages or prevent the commercialization of its products[89](index=89&type=chunk)[90](index=90&type=chunk) [Risks Related to Our Common Stock](index=19&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The company's common stock carries significant risks, including concentrated ownership by two shareholders, potential for substantial dilution, limited trading liquidity on the OTCQB, and 'penny stock' classification - Two stockholders, Handok, Inc. and Genexine, Inc. (H&G), collectively own approximately **64%** of the company's common stock, giving them significant control over stockholder matters and board decisions[95](index=95&type=chunk)[96](index=96&type=chunk) - As of July 31, 2019, there are an aggregate of **94.3 million shares** that may be issued upon exercise of outstanding stock options and warrants, which could cause substantial dilution to existing stockholders[97](index=97&type=chunk) - The common stock is traded on the OTCQB with a limited public market, which could make it difficult for investors to liquidate their shares[99](index=99&type=chunk) - The common stock may be considered a 'penny stock' (price less than $5.00), subjecting it to SEC rules that impose additional requirements on broker-dealers and can reduce trading activity[103](index=103&type=chunk) [Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This section is not required for smaller reporting companies - Not required for smaller reporting companies[105](index=105&type=chunk) [Properties](index=21&type=section&id=Item%202.%20Properties) In 2019, the company entered into two new leases: one for its headquarters in Redwood City, California, and another for ancillary office space in Bend, Oregon - Entered into a lease for new headquarters at 201 Redwood Shores Parkway, Redwood City, CA, for approximately **3,500 sq. ft.** at a monthly rent of **~$21,000**, expiring March 2022[106](index=106&type=chunk) - Entered into a lease for ancillary office space in Bend, Oregon, for approximately **1,500 sq. ft.** at a monthly rent of **~$2,700**, expiring February 2021[107](index=107&type=chunk) [Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no applicable legal proceedings - Not Applicable[108](index=108&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[109](index=109&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is quoted on the OTCQB under the symbol 'RZLT', with limited trading, and as of September 5, 2019, had 386 holders of record, with no plans for cash dividends - The company's common stock is quoted on the OTCQB market under the trading symbol 'RZLT'[112](index=112&type=chunk) - As of September 5, 2019, there were **386 holders of record** of the company's common stock[115](index=115&type=chunk) - The company has never paid cash dividends and does not plan to in the foreseeable future[116](index=116&type=chunk) Quarterly Common Stock Prices (Fiscal Years 2019 & 2018) | Fiscal Quarter | 2019 High (USD) | 2019 Low (USD) | 2018 High (USD) | 2018 Low (USD) | | :--- | :--- | :--- | :--- | :--- | | First Quarter | $0.51 | $0.30 | $1.20 | $0.86 | | Second Quarter | $0.40 | $0.09 | $1.18 | $0.65 | | Third Quarter | $0.38 | $0.09 | $0.99 | $0.45 | | Fourth Quarter | $0.36 | $0.12 | $0.63 | $0.36 | Equity Compensation Plan Information as of June 30, 2019 (shares in thousands) | Plan | Shares to be Issued Upon Exercise (thousands) | Weighted Average Exercise Price (USD) | Securities Available For Future Issuance (thousands) | | :--- | :--- | :--- | :--- | | **Approved by security holders:** | | | | | 2015 Non-Qualified Stock Option Plan | 2,695 | $2.01 | 4,155 | | 2016 Non-Qualified Stock Option Plan | 8,980 | $1.12 | 19,020 | | **Total** | **13,865** | **$1.60** | **23,175** | [Selected Financial Data](index=23&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not required as the company is a smaller reporting company - The company is a smaller reporting company and is not required to provide information under this item[120](index=120&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Result%20of%20Operations) The company has not generated revenue and expects continued losses, but recent financings provided sufficient capital to fund operations through September 2020, despite increased R&D expenses and a net loss of **$30.4 million** in FY2019 [Recent Developments](index=23&type=section&id=Recent%20Developments) In 2019, the company secured significant funding through private placements, including **$25.0 million** in January and an additional **$24.1 million** in July/August, supporting its development strategy for fiscal year 2020 - In January 2019, the company closed a **$25.0 million** private placement with Handok, Inc. and Genexine, Inc. (H&G)[123](index=123&type=chunk) - In July and August 2019, the company received an additional cash infusion of **$24.1 million** from H&G and other investors, with net proceeds of approximately **$22.6 million** after costs[123](index=123&type=chunk)[124](index=124&type=chunk) - Key objectives for fiscal year 2020 include: (i) initiating the Phase 2b clinical study for RZ358, (ii) completing toxicology studies for RZ402 to enable an IND filing, and (iii) completing the Phase 1 study for AB101 and exploring partnerships[125](index=125&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) For fiscal year 2019, the company reported a net loss of **$30.4 million**, primarily driven by a **$4.3 million** rise in interest expense, despite a **$2.8 million** decrease in total operating expenses Consolidated Statements of Operations Summary (in thousands) | | 2019 (thousands) | 2018 (thousands) | Change ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total operating expenses** | $25,944 | $28,734 | $(2,790) | -9.7% | | *Research and development* | $19,079 | $17,280 | $1,799 | 10.4% | | *General and administrative* | $6,820 | $9,100 | $(2,280) | -25.1% | | **Operating loss** | $(25,944) | $(28,734) | $2,790 | -9.7% | | **Total non-operating expense** | $(4,502) | $(1,128) | $(3,374) | 299.1% | | **Net loss** | **$(30,446)** | **$(29,862)** | **$(584)** | **2.0%** | - R&D expenses increased by **$1.8 million (10.4%)** in FY2019, primarily due to a **$7.8 million** increase in licensing costs related to the RZ358 agreement with Xoma, partially offset by a **$6.0 million** aggregate decrease in other R&D costs following a 2018 workforce reduction[150](index=150&type=chunk)[154](index=154&type=chunk) - G&A expenses decreased by **$2.3 million (25.1%)** in FY2019, mainly due to a **$2.4 million** decrease in compensation and benefits, which included a **$2.0 million** reduction in stock-based compensation expense[157](index=157&type=chunk) - Interest expense increased by **$4.3 million** to **$5.0 million** in FY2019, primarily due to the Fiscal 2018 Notes being outstanding for a longer period and the recognition of a **$2.2 million** beneficial conversion feature upon their conversion[161](index=161&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2019, the company had **$11.6 million** in cash, supplemented by **$22.6 million** from subsequent financings, which management believes is adequate to fund operations through September 2020, despite significant contractual obligations - As of June 30, 2019, the company had **$11.6 million** in cash and cash equivalents and working capital of **$3.8 million**[170](index=170&type=chunk) - In July and August 2019, the company received net proceeds of approximately **$22.6 million** from equity financings, which management believes is adequate to fund planned activities through September 2020[174](index=174&type=chunk)[175](index=175&type=chunk)[179](index=179&type=chunk) Cash Flow Summary (in thousands) | Activity | 2019 (thousands) | 2018 (thousands) | | :--- | :--- | :--- | | Net cash used in Operating activities | $(15,304) | $(14,113) | | Net cash provided by Investing activities | $231 | $1,732 | | Net cash provided by Financing activities | $25,000 | $9,540 | Contractual Obligations as of June 30, 2019 (in thousands) | Obligation | Total (thousands) | Due in 2020 (thousands) | Due in 2021 (thousands) | Due in 2022 (thousands) | | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $717 | $275 | $272 | $170 | | Payables to Xoma | $8,500 | $6,500 | $2,000 | - | | Convertible note payable | $10 | $10 | - | - | | Employment agreements | $2,524 | $2,524 | - | - | | **Total** | **$11,751** | **$9,309** | **$2,272** | **$170** | [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required as the company is a smaller reporting company - The company is a smaller reporting company and is not required to provide information under this item[199](index=199&type=chunk) [Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2019 and 2018, showing a significant increase in cash and assets due to financing activities, and a net loss of **$30.4 million** in 2019 [Consolidated Balance Sheets](index=41&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheet as of June 30, 2019, shows substantial improvement in financial position, with cash and equivalents increasing to **$11.6 million** and total assets to **$12.3 million**, leading to positive stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (thousands) | June 30, 2018 (thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $11,573 | $1,646 | | Total current assets | $12,144 | $2,008 | | Total assets | $12,252 | $2,503 | | Total current liabilities | $8,379 | $6,248 | | Total liabilities | $10,500 | $6,464 | | Total stockholders' equity (deficit) | $1,752 | $(3,961) | [Consolidated Statements of Operations](index=42&type=section&id=Consolidated%20Statements%20of%20Operations) For fiscal year 2019, the company reported a net loss of **$30.4 million**, or **($0.37)** per share, with no revenue, and increased non-operating expenses offsetting decreased operating expenses Consolidated Statement of Operations Highlights (in thousands, except per share data) | Account | Year Ended June 30, 2019 (thousands) | Year Ended June 30, 2018 (thousands) | | :--- | :--- | :--- | | Research and development | $19,079 | $17,280 | | General and administrative | $6,820 | $9,100 | | **Operating loss** | **$(25,944)** | **$(28,734)** | | **Net loss** | **$(30,446)** | **$(29,862)** | | Net loss per common share (USD) | $(0.37) | $(0.54) | [Consolidated Statements of Cash Flows](index=44&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For fiscal year 2019, net cash used in operating activities was **$15.3 million**, while net cash provided by financing activities was a substantial **$25.0 million**, resulting in a net increase of **$9.9 million** in cash Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Year Ended June 30, 2019 (thousands) | Year Ended June 30, 2018 (thousands) | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(15,304) | $(14,113) | | Net Cash Provided By Investing Activities | $231 | $1,732 | | Net Cash Provided by Financing Activities | $25,000 | $9,540 | | **Net increase (decrease) in cash** | **$9,927** | **$(2,841)** | | **Cash at end of fiscal year** | **$11,573** | **$1,646** | [Note 13 — Subsequent Events](index=65&type=section&id=Note%2013%20%E2%80%94%20SUBSEQUENT%20EVENTS) Subsequent to fiscal year-end, the company raised approximately **$22.6 million** in net proceeds from equity financings, leading to an early payment to Xoma and significant stock option grants to officers and employees - In July and August 2019, the company raised net proceeds of **$22.6 million** through private placements, including the exercise of a call option by H&G for **$20.0 million**[367](index=367&type=chunk) - On July 31, 2019, the Board of Directors granted stock options for an aggregate of approximately **34.0 million shares** of Common Stock to certain officers and employees at an exercise price of **$0.29 per share**[378](index=378&type=chunk) - In August 2019, the Board of Directors approved a reverse stock split, subject to stockholder approval, at a ratio between **20-to-1** and **100-to-1**[384](index=384&type=chunk) Unaudited Pro Forma Balance Sheet as of June 30, 2019 (in thousands) | | Historical (thousands) | Unaudited Pro Forma (thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash, cash equivalents and restricted cash | $11,573 | $30,789 | | Total assets | $12,252 | $31,468 | | **Liabilities and Stockholders' Equity** | | | | Total liabilities | $10,500 | $7,109 | | Total stockholders' equity | $1,752 | $24,359 | | Total liabilities and stockholders' equity | $12,252 | $31,468 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=69&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no disagreements with its accountants on accounting and financial disclosure - None[386](index=386&type=chunk) [Controls and Procedures](index=69&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were not effective as of June 30, 2019, due to identified material weaknesses - Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2019[387](index=387&type=chunk) - Management determined that the company's internal control over financial reporting was not effective as of June 30, 2019, due to material weaknesses[391](index=391&type=chunk) - Identified material weaknesses include: (1) inadequate segregation of duties, (2) lack of measures to prevent employees from overriding internal controls, (3) a single employee responsible for complex accounting without internal review, and (4) ineffective review controls over financial reporting[392](index=392&type=chunk) [Other Information](index=70&type=section&id=Item%209B.%20Other%20Information) This section is not applicable - Not applicable[395](index=395&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=71&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Following a change of control in February 2019, the Board consists of three non-independent members, with the full Board assuming committee functions, and the company has adopted a code of ethics - The Board of Directors consists of three members: Young-Jin Kim (Chairman), Young Chul Sung, Ph.D., and Nevan C. Elam (CEO)[399](index=399&type=chunk) - Subsequent to February 16, 2019, none of the current Board members are considered 'independent' under Nasdaq Listing Rules, and the full Board has assumed the functions of the Audit, Compensation, and Nominating committees[411](index=411&type=chunk)[414](index=414&type=chunk)[417](index=417&type=chunk) - The company has adopted a code of business conduct and ethics applicable to all employees, officers, and directors[409](index=409&type=chunk) [Executive Compensation](index=76&type=section&id=Item%2011.%20Executive%20Compensation) This section details the compensation for the three Named Executive Officers (NEOs) for fiscal year 2019, including salary, bonus, and stock option awards, along with outstanding equity and employment agreement terms Summary Compensation Table for Fiscal Year 2019 | Name and Position | Salary (USD) | Bonus (USD) | Stock Option Awards (USD) | All Other Compensation (USD) | Total (USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Nevan Elam, CEO | $453,333 | $258,750 | - | $20,163 | $732,246 | | Sankaram Mantripragada, CSO | $350,000 | $181,125 | - | $31,269 | $562,394 | | Keith Vendola, CFO | $330,000 | $8,044 | $395,723 | $1,605 | $735,372 | - As of June 30, 2019, CEO Nevan Elam had **6,590,000** outstanding stock options, CSO Sankaram Mantripragada had **3,195,000**, and CFO Keith Vendola had **1,000,000**[430](index=430&type=chunk) - Employment agreements for executive officers include severance benefits payable upon termination without 'Cause' or resignation for 'Good Reason', which can include multiples of base salary and accelerated vesting of stock options[440](index=440&type=chunk)[441](index=441&type=chunk)[442](index=442&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=79&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of September 5, 2019, Handok, Inc. and Genexine, Inc. each beneficially owned **31.1%** of the common stock, giving them significant control, while directors and executive officers as a group owned **4.6%** Beneficial Ownership as of September 5, 2019 | Name of Beneficial Owner | Position | Beneficial Ownership (shares) | Percent of Class | | :--- | :--- | :--- | :--- | | Handok, Inc. | Stockholder | 91,300,933 | 31.1% | | Genexine, Inc. | Stockholder | 91,300,933 | 31.1% | | Directors and executive officers as a group (5 people) | - | 14,050,979 | 4.6% | [Certain Relationships and Related Transactions, and Director Independence](index=80&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company discloses significant related party transactions, primarily with its controlling shareholders H&G, and notes that none of its current directors qualify as 'independent' under NASDAQ listing rules - In July 2019, controlling shareholders Handok, Inc. and Genexine, Inc. (H&G) purchased an aggregate of **69.0 million shares** for **$20.0 million**, increasing their collective ownership to **64%**[449](index=449&type=chunk) - The company engaged in transactions with former director Dr. David Welch, including the conversion of **$1.0 million** in convertible notes into approximately **5.3 million shares** of common stock and the modification of a warrant[450](index=450&type=chunk)[451](index=451&type=chunk)[452](index=452&type=chunk) - The company has determined that as of the date of the report, none of its directors qualify as 'independent' in accordance with NASDAQ Stock Market listing requirements[454](index=454&type=chunk) [Principal Accounting Fees and Services](index=82&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The company paid its principal accountant, Plante & Moran, PLLC, total audit fees of **$142,035** for fiscal year 2019 and **$180,489** for fiscal year 2018, with all services pre-approved by the board Accounting Fees | Fee Category | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Audit fees | $142,035 | $180,489 | | Audit-related fees | - | - | | Tax fees | - | - | | All other fees | - | - | | **Total** | **$142,035** | **$180,489** | Part IV [Exhibits and Financial Statement Schedules](index=83&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the exhibits filed with or incorporated by reference into the Form 10-K, including corporate governance documents, material contracts, and Sarbanes-Oxley certifications, with all financial statement schedules omitted - All financial statement schedules are omitted because they are not applicable, immaterial, or the required information is already presented in the financial statements and notes[460](index=460&type=chunk) - A list of exhibits is provided, including the Certificate of Incorporation, bylaws, license agreements with Xoma and ActiveSite, financing agreements with Lincoln Park and H&G, equity incentive plans, and Sarbanes-Oxley certifications[463](index=463&type=chunk)[464](index=464&type=chunk) [Form 10-K Summary](index=86&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is not applicable - Not applicable[466](index=466&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 17(a)(2)(B) of the Securities Act. ¨ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ Yes x No Securities registered pursuant to Section 12(b) of the A ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2018 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 000-54495 REZOLUTE, INC (Exact Name of Registrant as Specified in its Charter) Delaware 27-3440894 (State of other jurisdiction of incorpor ...