Rezolute(RZLT) - 2025 Q4 - Annual Report

PART I Item 1. Business Rezolute, Inc. is a late-stage rare disease company focused on treating hypoglycemia caused by hyperinsulinism (HI) with its lead clinical asset, ersodetug. The company is advancing ersodetug through Phase 3 studies for congenital HI (sunRIZE study, topline results expected Dec 2025) and tumor HI (upLIFT study, topline results expected H2 2026), both of which have received Breakthrough Therapy Designation from the FDA. The company protects its intellectual property, faces competition, and operates under significant government regulation, with R&D expenses increasing in FY2025 - Rezolute, Inc. is a late-stage rare disease company focused on significantly improving outcomes for individuals with hypoglycemia caused by hyperinsulinism (HI)[18] - Lead clinical asset, ersodetug, is an intravenously administered human monoclonal antibody that down-modulates insulin's binding, signaling, and action to counteract elevated insulin effects[19][20] - The sunRIZE Phase 3 study for congenital HI completed enrollment in May 2025, with topline results anticipated in December 2025[21] - Ersodetug received Orphan Drug Designation (U.S., EU), Rare Pediatric Disease Designation (U.S.), PRIME designation (EMA), ILAP designation (UK), and Breakthrough Therapy Designation (FDA) for congenital HI[27] - The upLIFT Phase 3 study for tumor HI initiated in mid-2025, with topline results anticipated in the second half of calendar 2026. The study design was modified to a single-arm open-label trial with as few as 16 participants[29][30] - Ersodetug received Breakthrough Therapy Designation by the FDA in May 2025 for tumor HI[28] Summary of Clinical Assets This section details the company's lead asset, ersodetug, and its development for congenital and tumor hyperinsulinism, with the sunRIZE Phase 3 study for congenital HI completing enrollment in May 2025 and results expected in December 2025, and the upLIFT Phase 3 study for tumor HI starting in mid-2025 with results expected in H2 2026, both indications having received significant regulatory designations - Ersodetug is a potential treatment for hypoglycemia caused by multiple forms of hyperinsulinism, acting by down-modulating insulin's effects[19][20] - sunRIZE Phase 3 study for congenital HI completed enrollment in May 2025, exceeding its target of 56 participants with 62 enrolled. Topline results are expected in December 2025[21][149] - Preliminary data from sunRIZE showed an average participant age of 3.4 years, with 35% under 2, 95% on standard treatments, and an average of 15 hypoglycemia events per week[23] - Ersodetug has received Orphan Drug, Rare Pediatric Disease, PRIME (EMA), ILAP (UK), and Breakthrough Therapy (FDA) designations for congenital HI[27] - upLIFT Phase 3 study for tumor HI initiated in mid-2025, with topline results expected in H2 2026. The FDA agreed to modify the study design to a single-arm open-label trial with as few as 16 participants[29][30][150] - The addressable market for congenital HI and tumor HI in the U.S. is estimated at over 1,500 patients each[26][37] Expanded Access Program ("EAP") The EAP provides ersodetug on a compassionate use basis for severe, unmanageable hypoglycemia across various HI indications, showing substantial improvement and good tolerability in 13 tumor HI patients and 5 congenital HI patients, many of whom were refractory to standard care - The EAP makes ersodetug available for compassionate use when therapeutic options have failed and an individual's hypoglycemia is unmanageable[38] - 13 tumor HI patients and 5 congenital HI patients have received ersodetug through the EAP, demonstrating substantial improvement in hypoglycemia and good tolerability[38][39][40] - Tumor HI patients in the EAP often required continuous intravenous dextrose and were hospitalized; ersodetug led to discontinuation or substantial reduction of IV dextrose and outpatient maintenance[38][39] Intellectual Property Rezolute protects its intellectual property through patents, trade secrets, and trademarks, holding an exclusive worldwide license from XOMA for ersodetug, with patents expiring between 2030 and 2036, and expects further data and marketing exclusivity - The company maintains and builds its patent portfolio through new filings, prosecution, and licensing, and protects know-how, trade secrets, and trademarks[42] - Holds a worldwide, exclusive license from XOMA for ersodetug, covering 38 issued patents (4 U.S.) and pending applications, with patents expiring between 2030 and 2036[44] - Expects further exclusivity for product candidates through data and marketing exclusivity under pharmaceutical regulatory laws, potentially up to 12 years from BLA approval[44] Competition Rezolute faces competition from pharmaceutical and biotechnology companies, academic institutions, and governmental agencies in talent acquisition and technology development, with several companies, including Amylyx Pharmaceuticals, Hanmi Pharmaceuticals, and Zealand Pharma, developing therapies for HI that could compete with ersodetug - Competition exists from pharmaceutical and biotechnology companies, academic institutions, governmental agencies, and private research organizations in personnel and technology[45] - Potential competitors for ersodetug in HI include Amylyx Pharmaceuticals, Hanmi Pharmaceuticals, and Zealand Pharma[45] Government Regulation The company's products require extensive regulatory approval from governmental agencies like the FDA and foreign authorities, involving rigorous preclinical testing and clinical trials, and is also subject to various federal, state, and local laws regarding manufacturing, safety, and hazardous substance handling - All potential products require regulatory approval by governmental agencies (e.g., FDA, EMA) prior to commercialization, involving rigorous preclinical testing and clinical trials[46] - The company is subject to federal, state, and local laws and regulations concerning safe working conditions, laboratory practices, animal use, and hazardous substance handling[47][48] Research and Development R&D expenses were $61.5 million in FY2025, an increase from $55.7 million in FY2024, primarily driven by increased clinical and manufacturing costs for ersodetug Research and Development Expenses | Fiscal Year Ended June 30 | 2025 (Millions) | 2024 (Millions) | | :------------------------ | :-------------- | :-------------- | | R&D Expenses | $61.5 | $55.7 | - The increase in R&D expenses was primarily due to a $11.8 million increase in ersodetug clinical and manufacturing costs, partially offset by a $7.0 million decrease in RZ402 costs[176] Human Capital Management As of June 30, 2025, Rezolute had 71 full-time employees, with 52 in R&D. The company prioritizes diversity and inclusion, and focuses on attracting, developing, and retaining talent through various programs and benefits, including equity compensation - As of June 30, 2025, the company had 71 full-time employees, with 52 in research and development and 19 in general and administrative functions, all located in the United States[50] - The company adopted an equity and inclusion policy on May 30, 2023, and leverages formal and informal programs to identify, foster, and retain top talent, offering benefits and equity compensation[51][52] Corporate Information Rezolute, Inc. was incorporated in Delaware in 2010, reincorporated in Nevada in 2021, and maintains its executive office in Redwood City, CA. The company files reports with the SEC, which are available on www.sec.gov - Incorporated in Delaware in 2010, reincorporated in Nevada in June 2021[54] - Maintains an executive office at 275 Shoreline Drive, Suite 500, Redwood City, CA 94065[54] - Files annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (SEC), available at www.sec.gov[54](index=54&type=chunk)[55] Item 1A. Risk Factors This section outlines significant risks that could adversely affect Rezolute's business, financial condition, and results of operations, including potential delays or failures in clinical trials and regulatory approvals, product liability exposure, the need for substantial additional capital, and challenges in intellectual property protection, as well as risks related to its history of losses, potential loss of 'smaller reporting company' status, and global economic conditions - Delays or termination of clinical trials could increase costs, delay revenue generation, and adversely affect commercial prospects[57][58] - Product candidates may produce serious adverse events, leading to trial interruptions, delays, or denial of regulatory approval[61] - The company has a history of losses ($74.4 million in FY2025, $68.5 million in FY2024) and will need substantial additional capital to fund operations and achieve profitability[87][174] - Product liability claims from clinical studies or commercial sales could result in substantial liabilities, reputational damage, and financial losses, potentially exceeding insurance coverage[91][92] - The company's intellectual property portfolio may not adequately protect product candidates, leading to direct competition, and patent litigation can be expensive and time-consuming[113][117] - Federal and state laws impose substantial restrictions on the utilization of net operating loss (NOL) carryforwards due to ownership changes, potentially limiting future profitability[93][345] Risks Related to Our Product Development and Commercialization Significant risks include delays or termination of clinical trials due to regulatory disagreements, enrollment issues, adverse events, or manufacturing problems; failure to meet safety or efficacy requirements will prevent regulatory approval and commercialization, and reliance on third parties for trials and manufacturing introduces additional risks - Clinical testing is expensive, time-consuming, and uncertain; delays can arise from regulatory disagreements, investigator/site activation, IRB/EC approvals, protocol changes, manufacturing issues, patient enrollment/retention, funding, and adverse effects[58][59] - Adverse events in clinical trials could force the company to stop development or prevent regulatory approval[61] - Failure to obtain regulatory approval for product candidates will prevent marketing and sales, hindering profitability[69] - Reliance on contract research organizations (CROs) and third-party suppliers for clinical trials and manufacturing means less control over timing, conduct, expense, and potential supply chain delays[78][79][80] Risks Related to Our Business The company has a history of net losses ($74.4 million in FY2025) and an accumulated deficit of $403.9 million, requiring substantial additional capital; other risks include product liability exposure, limitations on net operating loss (NOL) carryforwards, potential future loss of "smaller reporting company" status, and adverse effects from global economic conditions and foreign operations Key Financial Metrics | Fiscal Year Ended June 30 | 2025 (Millions) | 2024 (Millions) | | :------------------------ | :-------------- | :-------------- | | Net Losses | $(74.4) | $(68.5) | | Accumulated Deficit | $(403.9) | $(329.4) | | Cash Used in Operating Activities | $(69.1) | $(57.4) | - As of June 30, 2025, cash and cash equivalents were $94.1 million and investments in marketable debt securities were $73.8 million, expected to provide adequate capital for at least 12 months[87][188] - Product liability claims could result in substantial liabilities, reputational damage, and financial losses, potentially exceeding insurance coverage[91][92] - U.S. federal NOL carryforwards of $201.4 million are subject to significant limitations under IRC Section 382 due to ownership changes, with $33.4 million expiring without utilization[93][346] - If market capitalization increases, the company may no longer qualify as a "smaller reporting company," leading to enhanced disclosure requirements and increased compliance costs[97] - Operations outside the U.S. are subject to different local politics, business factors, and regulatory requirements, including data privacy laws like HIPAA and GDPR[98][100][101] Risks Related to Our Intellectual Property The company's success depends on its intellectual property, but current patent positions may not cover all necessary rights, and future licenses may not be available on reasonable terms; patents can be challenged, invalidated, or circumvented, and trade secrets are difficult to protect; litigation regarding intellectual property is expensive and could delay product commercialization - Current patent positions and license portfolio may not include all patent rights needed for full development and commercialization, and future necessary rights may not be available on commercially reasonable terms[107][108][110] - Patents may be challenged, deemed unenforceable, invalidated, or circumvented, and the coverage claimed in a patent application can be significantly reduced[114] - Reliance on trade secrets is risky as they are difficult to protect and may be independently discovered or disclosed despite confidentiality agreements[115] - Litigation regarding patents and other proprietary rights is expensive, time-consuming, and could cause delays in bringing product candidates to market[117][118] Risks Related to Our Common Stock The market price of common stock could decline due to the sale of a substantial number of shares (overhang) or changes in investor relations activities; changes in U.S. tax law, including the recent OBBBA, could also adversely affect the business - Offers or availability for sale of a substantial number of shares of common stock (overhang) could cause the price to decline and make additional financing more difficult[122][124] - Investor relations activities and supply and demand factors may affect the price of common stock[125] - Changes in U.S. tax law, including the recent enactment of the One Big Beautiful Bill Act (OBBBA), could adversely affect the business[126][127] Item 1B. Unresolved Staff Comments. As a smaller reporting company, Rezolute is not required to provide information on unresolved staff comments - The company is a smaller reporting company and is not required to provide information on unresolved staff comments[128] Item 1C. Cybersecurity. Rezolute has established processes for assessing, identifying, and managing cybersecurity risks, including physical, procedural, and technical safeguards, response plans, regular tests, and employee training; external consultants are engaged, and the Audit Committee provides oversight; no material cybersecurity incidents occurred in FY2025, and management does not believe there are currently any known risks likely to materially affect the business - Established processes for assessing, identifying, and managing cybersecurity risks, including safeguards, response plans, regular tests, and policy reviews[129] - Engages external risk management consultants and computer security firms to enhance cybersecurity oversight and provides periodic employee training[130] - The Audit Committee of the Board of Directors provides direct cybersecurity risk oversight[132] - No known risks from cybersecurity threats are reasonably likely to materially affect the business, and no cybersecurity incidents occurred in fiscal year 2025[133] Item 2. Properties. Rezolute leases two office facilities: a corporate headquarters in Redwood City, CA (9,300 sq ft, lease until Oct 2027) and an office in Bend, OR (5,000 sq ft, lease until Feb 2027); the company believes its current properties are sufficient for its needs - Leases a 9,300 square feet corporate headquarters facility in Redwood City, CA, with a lease term through October 2027[134] - Leases a 5,000 square feet office space in Bend, OR, with a lease term through February 2027[135] - Believes current physical properties are sufficient and adequate to meet current and projected requirements[135] Item 3. Legal Proceedings. For a discussion of the company's legal proceedings, refer to "Notes to Consolidated Financial Statements - Commitments and Contingencies" in Part II, Item 8 - For a discussion of the Company's legal proceedings, see "Notes to Consolidated Financial Statements - Commitments and Contingencies" in Part II. Item 8[136] Item 4. Mine Safety Disclosures. This item is not applicable to Rezolute, Inc - This item is not applicable[137] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Rezolute's common stock has traded on Nasdaq under the symbol "RZLT" since November 9, 2020; as of September 15, 2025, there were 246 holders of record; the company has never paid cash dividends and has no plans to do so in the foreseeable future, intending to reinvest all available funds into business development - Common stock has traded on Nasdaq under the symbol "RZLT" since November 9, 2020[140] - As of September 15, 2025, there were 246 holders of record of the company's common stock[141] - The company has never paid cash dividends and intends to employ all available funds in the development of its business, with no plans to pay cash dividends in the foreseeable future[143] - No recent sales of unregistered securities[144] Item 6. [Reserved] This item is reserved and contains no information - This item is reserved[146] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides an overview of Rezolute's financial condition and results of operations for the fiscal years ended June 30, 2025 and 2024; the company remains in a clinical stage with no meaningful revenue, focusing on advancing ersodetug through Phase 3 trials for congenital and tumor HI; it incurred net losses and relies on equity financings for liquidity, with management believing current resources are sufficient for at least 12 months, but additional long-term financing will be needed - The company's priorities for H2 2025 and H1 2026 are to complete the sunRIZE study (topline data Dec 2025), continue enrollment in the tumor HI study, and submit a Biologics License Application (BLA) for ersodetug in mid-2026, assuming supportive data[148] - The company has not generated any meaningful revenues since inception and expects to incur operating losses for the foreseeable future, requiring additional capital[155][156] Key Financial Metrics | Metric | FY2025 (Millions) | FY2024 (Millions) | | :----- | :---------------- | :---------------- | | Net loss | $(74.4) | $(68.5) | Cash Flow Summary | Cash Flow Type | FY2025 (Millions) | FY2024 (Millions) | | :------------- | :---------------- | :---------------- | | Operating activities | $(69.1) | $(57.4) | - The company raised $107.0 million in net proceeds from the issuance of equity securities in FY2025 and $62.6 million in FY2024[185] Executive Summary Rezolute's immediate priorities are to execute on two Phase 3 clinical trials for ersodetug: completing the sunRIZE study for congenital HI (topline data expected Dec 2025) and continuing enrollment in the upLIFT study for tumor HI (topline data expected H2 2026), with a goal to submit a Biologics License Application (BLA) in mid-2026 - Priorities for H2 2025 and H1 2026 include completing the sunRIZE study for congenital HI (topline data Dec 2025), continuing enrollment in the tumor HI study, and submitting a BLA for ersodetug in mid-2026[148] Clinical Development The company is focused on advancing ersodetug for all forms of HI; the pivotal Phase 3 sunRIZE study for congenital HI completed enrollment in May 2025, exceeding its target, with topline results expected in December 2025; the upLIFT study for tumor HI is enrolling in the U.S. and Europe, with its design modified to a single-arm open-label trial, and topline results expected in H2 2026 - Completed enrollment in the pivotal Phase 3 sunRIZE clinical study of ersodetug for congenital HI in May 2025, exceeding the target with 62 participants. Topline results are anticipated in December 2025[149] - The upLIFT study in tumor HI is currently enrolling in the U.S. and Europe. The FDA agreed to modifications to the study design, including removing the need for a double-blind randomized placebo-controlled trial, limiting it to a single-arm open-label portion with as few as 16 participants. Topline results are anticipated in the second half of 2026[150][151] Recent Developments Recent developments include the appointment of Sunil Karnawat as Chief Commercial Officer in August 2025, with a compensation package including salary, bonus, and equity grants; the company also completed a private placement in May 2025 ($4.2 million net proceeds) and an underwritten public offering in April 2025 ($96.8 million net proceeds) - Sunil Karnawat was appointed Chief Commercial Officer on August 18, 2025, with an annual base salary of $475,000, a signing bonus of $65,000, and eligibility for an annual performance bonus target of 40% of base salary[152] - Mr. Karnawat received an inducement grant of stock options to purchase 275,000 shares and 25,000 shares of RSUs[152] - Completed a private placement in May 2025, selling 1,295,383 shares of common stock for net proceeds of $4.2 million[153] - Completed an underwritten public offering in April 2025, issuing 20,786,923 common shares and 6,905,385 pre-funded warrants, generating $96.8 million in net proceeds after deducting offering costs[154] Factors Impacting our Results of Operations The company has not generated meaningful revenue since inception and expects continued operating losses due to the time required for clinical trials and regulatory approval; it anticipates needing additional capital from external sources to fund operations and product commercialization - The company has not generated any meaningful revenues since its inception and anticipates it will be some time before substantial revenues are generated, if ever, due to the time required for clinical trials and regulatory approval[155][156] - Expects to generate operating losses for the foreseeable future and will need additional capital from external sources, which may be costly or require unfavorable terms[156] Key Components of Consolidated Statements of Operations This section defines the key components of the consolidated statements of operations: Research and Development (R&D) expenses, General and Administrative (G&A) expenses, Interest and other income, and Loss from change in fair value of derivative liabilities; R&D includes clinical trial costs, personnel, licensing, and consultants; G&A covers administrative personnel, legal, auditing, and investor relations - Research and development (R&D) expenses primarily consist of clinical trial costs, compensation and benefits for R&D personnel, licensing costs, and consultants and outside services[157] - General and administrative (G&A) expenses primarily include compensation and benefits for administrative, finance, accounting, and executive functions, as well as travel, legal, auditing, and investor relations costs[160] - Interest and other income primarily consists of interest income earned on marketable debt securities and temporary cash investments[161] - Loss from change in fair value of derivative liabilities reflects adjustments to fair value for warrant and embedded derivative liabilities[162] Critical Accounting Policies and Significant Judgments and Estimates The preparation of financial statements requires significant judgments and estimates, particularly for marketable debt securities (fair value, credit losses), derivative liabilities (fair value), share-based compensation (fair value, vesting), and clinical trial accruals (work completion estimates) - Significant accounting estimates include determining allowances for credit losses on marketable debt securities, fair value of derivative liabilities, fair value of share-based compensation, and estimates related to clinical trial accrued liabilities[163][164][238] - Investments in marketable debt securities are accounted for as available-for-sale, recorded at fair value, with unrealized gains and losses reported in shareholders' equity. Credit losses are recognized if declines in fair value are credit-related[165][244] - Research and development costs are expensed as incurred, and clinical trial activities performed by third parties are accrued based on estimates of work completed[168][169][250] - Share-based compensation is measured at fair value using the Black-Scholes Merton option-pricing model for stock options and the closing market price for RSUs, recognized over the vesting period[170][252] - Warrant and embedded derivative liabilities are adjusted to fair value at each reporting period, with changes recognized as gains and losses in the consolidated statements of operations[172][256] Results of Operations Rezolute reported net losses of $74.4 million in FY2025, an increase from $68.5 million in FY2024; R&D expenses increased by 10% to $61.5 million, primarily due to ersodetug clinical and manufacturing costs; G&A expenses increased by 25% to $18.4 million, driven by compensation and professional fees; interest income increased, while derivative liability losses decreased significantly as warrants were reclassified to equity Consolidated Results of Operations | Metric | FY2025 (Thousands) | FY2024 (Thousands) | Change (Amount) | Change (%) | | :------------------------------------------ | :----------------- | :----------------- | :-------------- | :--------- | | Operating expenses: | | | | | | Research and development | $61,527 | $55,743 | $5,784 | 10% | | General and administrative | $18,367 | $14,680 | $3,687 | 25% | | Total operating expenses | $79,894 | $70,423 | $9,471 | 13% | | Operating loss | $(79,894) | $(70,423) | $(9,471) | 13% | | Non-operating income (expense): | | | | | | Interest and other income | $5,482 | $4,870 | $612 | 13% | | Loss from change in fair value of warrant derivative liability | $0 | $(2,850) | $2,850 | 100% | | Loss from change in fair value of embedded derivative liabilities | $0 | $(56) | $56 | 100% | | Total non-operating income (expense), net | $5,482 | $1,964 | $3,518 | 179% | | Net loss | $(74,412) | $(68,459) | $(5,953) | 9% | - No revenue was generated for the fiscal years ended June 30, 2025 and 2024, as the company is in a clinical stage[175] - R&D expenses increased by $5.8 million (10%) in FY2025, primarily due to an $11.8 million increase in ersodetug clinical and manufacturing costs, partially offset by a $7.0 million decrease in RZ402 costs[176] - Ersodetug program costs increased by $11.8 million, driven by $6.7 million in manufacturing costs, $3.2 million for the tumor HI Phase 3 study, and $1.9 million for the sunRIZE clinical trial[177] - G&A expenses increased by $3.7 million (25%) in FY2025, mainly due to a $1.8 million increase in G&A compensation and benefits (due to more employees and higher bonuses) and a $1.8 million increase in professional fees for pre-commercial planning[180] - Interest and other income increased by $0.6 million (13%) in FY2025 due to a higher average balance of investments in marketable debt securities[181] Liquidity and Capital Resources As of June 30, 2025, Rezolute had $167.9 million in total capital resources ($94.1 million cash, $73.8 million marketable debt securities) and $159.2 million in working capital; the company has incurred cumulative net losses of $403.9 million and relies on equity financings, having raised $107.0 million in FY2025; management believes current resources are sufficient for at least 12 months but will need additional financing for long-term obligations, including significant milestone payments for license agreements Capital Resources and Working Capital | Metric | June 30, 2025 (Thousands) | June 30, 2024 (Thousands) | | :-------------------------------- | :------------------------ | :------------------------ | | Cash and cash equivalents | $94,107 | $70,396 | | Investments in marketable debt securities | $73,751 | $56,478 | | Total Capital Resources | $167,858 | $126,874 | | Working Capital | $159,233 | $119,047 | | Cumulative Net Losses | $(403,856) | $(329,444) | - Primary source of liquidity has historically been from private placements and public offerings of equity securities, with net proceeds of $107.0 million in FY2025 and $62.6 million in FY2024[185] - Management believes current capital resources are adequate to meet contractual obligations and fund planned activities for at least 12 months from the issuance date of the consolidated financial statements[188][273] - Significant long-term contractual obligations include a $25.0 million regulatory milestone payment to XOMA upon ersodetug approval and additional clinical and regulatory milestone payments up to $25.0 million to ActiveSite[189][270] - Future commercialization of ersodetug and RZ402 could trigger additional milestone payments and royalties up to $202.5 million ($185.0 million to XOMA and $17.5 million to ActiveSite)[190] Cash Flow Summary | Cash Flow Type | FY2025 (Thousands) | FY2024 (Thousands) | Change (Thousands) | | :----------------------------- | :----------------- | :----------------- | :----------------- | | Operating activities | $(69,075) | $(57,368) | $(11,707) | | Investing activities | $(14,541) | $48,699 | $(63,240) | | Financing activities | $107,327 | $63,029 | $44,298 | Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements with unconsolidated organizations or financial partnerships during the fiscal years ended June 30, 2025 and 2024 - The company did not have any relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements during the fiscal years ended June 30, 2025 and 2024[205] Recently Issued Accounting Pronouncements This section refers to Note 1 of the consolidated financial statements for the impact of recently issued accounting pronouncements - Information regarding the impact of certain recently issued accounting pronouncements on the consolidated financial statements is provided in Note 1[206] Item 7A. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, Rezolute is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide the information under this item[207] Item 8. Financial Statements and Supplementary Data. This item presents the audited consolidated financial statements for Rezolute, Inc. and its subsidiaries for the fiscal years ended June 30, 2025 and 2024, including the Report of Independent Registered Public Accounting Firm, balance sheets, statements of operations and comprehensive loss, statements of shareholders' equity, statements of cash flows, and comprehensive notes to the financial statements; the financial statements are prepared in conformity with GAAP and received an unqualified opinion from Grant Thornton LLP - Includes the Report of Independent Registered Public Accounting Firm, consolidated balance sheets, statements of operations and comprehensive loss, statements of shareholders' equity, and statements of cash flows for the fiscal years ended June 30, 2025 and 2024[210] - The consolidated financial statements present fairly, in all material respects, the financial position and results of operations in conformity with accounting principles generally accepted in the United States of America[213] - No critical audit matters were identified by the independent registered public accounting firm[217] Report of Independent Registered Public Accounting Firm Grant Thornton LLP, the independent registered public accounting firm, issued an unqualified opinion on Rezolute's consolidated financial statements for the fiscal years ended June 30, 2025 and 2024, stating they present fairly the financial position and results of operations in conformity with GAAP; no critical audit matters were identified - Grant Thornton LLP provided an unqualified opinion on the consolidated financial statements for the fiscal years ended June 30, 2025 and 2024[213] - The audit was conducted in accordance with PCAOB standards, and no critical audit matters were identified[215][217] Consolidated Balance Sheets The consolidated balance sheets show total assets increased to $175.5 million in FY2025 from $132.7 million in FY2024, driven by increases in cash and marketable debt securities; total liabilities increased to $13.4 million from $11.7 million, while total shareholders' equity increased to $162.1 million from $121.0 million Consolidated Balance Sheet Summary | Asset/Liability/Equity | June 30, 2025 (Thousands) | June 30, 2024 (Thousands) | | :-------------------------------- | :------------------------ | :------------------------ | | Assets: | | | | Cash and cash equivalents | $94,107 | $70,396 | | Investments in marketable debt securities | $73,751 | $56,478 | | Total current assets | $171,145 | $128,653 | | Total assets | $175,490 | $132,737 | | Liabilities: | | | | Total current liabilities | $11,912 | $9,606 | | Total liabilities | $13,363 | $11,734 | | Shareholders' Equity: | | | | Additional paid-in capital | $565,903 | $450,473 | | Accumulated deficit | $(403,856) | $(329,444) | | Total shareholders' equity | $162,127 | $121,003 | - Total assets increased by $42.7 million, primarily due to increases in cash and cash equivalents ($23.7 million) and marketable debt securities ($17.3 million)[221] - Accumulated deficit increased by $74.4 million to $403.9 million, reflecting ongoing net losses[221] Consolidated Statements of Operations and Comprehensive Loss The company reported a net loss of $74.4 million in FY2025, an increase from $68.5 million in FY2024; operating expenses rose by 13% to $79.9 million, driven by R&D and G&A increases; interest and other income increased, while losses from derivative liabilities were zero in FY2025 compared to $2.9 million in FY2024; basic and diluted net loss per common share was $(0.98) in FY2025, an improvement from $(1.33) in FY2024 due to a higher weighted average share count Consolidated Statements of Operations Summary | Metric | FY2025 (Thousands) | FY2024 (Thousands) | | :------------------------------------------ | :----------------- | :----------------- | | Research and development | $61,527 | $55,743 | | General and administrative | $18,367 | $14,680 | | Total operating expenses | $79,894 | $70,423 | | Operating loss | $(79,894) | $(70,423) | | Interest and other income, net | $5,482 | $4,870 | | Loss from change in fair value of embedded derivative liability | $0 | $(56) | | Loss from change in fair value of warrant derivative liability | $0 | $(2,850) | | Net loss | $(74,412) | $(68,459) | | Comprehensive loss | $(74,340) | $(68,187) | | Net loss per common share: Basic and diluted | $(0.98) | $(1.33) | | Weighted average number of common shares outstanding: Basic and diluted | 75,999,290 | 51,466,150 | - Net loss increased by $5.9 million (9%) in FY2025 compared to FY2024[174][223] - Basic and diluted net loss per common share improved from $(1.33) in FY2024 to $(0.98) in FY2025, despite a higher net loss, due to a significant increase in weighted average shares outstanding[223] Consolidated Statements of Shareholders' Equity Total shareholders' equity increased to $162.1 million in FY2025 from $121.0 million in FY2024; this increase was primarily driven by $107.5 million in proceeds from equity issuances (underwritten offerings and private placements) and $7.1 million in share-based compensation, partially offset by a net loss of $74.4 million Shareholders' Equity Changes | Metric | June 30, 2024 (Thousands) | Equity Changes in FY2025 (Thousands) | June 30, 2025 (Thousands) | | :-------------------------------- | :------------------------ | :--------------------------- | :------------------------ | | Common Stock | $53 | $33 | $87 | | Additional Paid-in Capital | $450,473 | $115,430 | $565,903 | | Accumulated Other Comprehensive Loss | $(79) | $72 | $(7) | | Accumulated Deficit | $(329,444) | $(74,412) | $(403,856) | | Total Shareholders' Equity | $121,003 | $41,124 | $162,127 | - Proceeds from equity securities in the 2025 Underwritten Offering (net of underwriting discounts) contributed $76.194 million to additional paid-in capital[227] - Proceeds from 2025 Pre-Funded Warrants contributed $21.089 million to additional paid-in capital[227] - Gross proceeds from the 2024 and 2025 Private Placements contributed $6.0 million and $4.210 million, respectively[227] - Share-based compensation added $7.121 million to additional paid-in capital in FY2025[227] - Net loss of $74.412 million reduced accumulated deficit[227] Consolidated Statements of Cash Flows Net cash used in operating activities increased to $69.1 million in FY2025 from $57.4 million in FY2024, primarily due to higher net losses; net cash used in investing activities was $14.5 million in FY2025, a shift from $48.7 million provided in FY2024, reflecting increased purchases of marketable debt securities; net cash provided by financing activities significantly increased to $107.3 million in FY2025 from $63.0 million in FY2024, driven by proceeds from equity offerings Cash Flow Summary | Cash Flow Type | FY2025 (Thousands) | FY2024 (Thousands) | | :------------------------------------------ | :----------------- | :----------------- | | Net Cash Used in Operating Activities | $(69,075) | $(57,368) | | Net Cash Provided by (Used in) Investing Activities | $(14,541) | $48,699 | | Net Cash Provided by Financing Activities | $107,327 | $63,029 | | Net increase in cash and cash equivalents | $23,711 | $54,360 | | Cash and cash equivalents at end of fiscal year | $94,107 | $70,396 | - The increase in cash used in operating activities was mainly due to a higher net loss ($74.4 million in FY2025 vs. $68.5 million in FY2024)[197] - Investing activities shifted from providing cash to using cash, primarily due to increased purchases of marketable debt securities ($128.1 million in FY2025 vs. $66.4 million in FY2024)[202] - Financing activities were significantly boosted by proceeds from the 2025 Underwritten Offering ($97.3 million) and private placements ($10.2 million)[203] Notes to Consolidated Financial Statements This section provides detailed disclosures on the company's accounting policies, liquidity, investments, leases, license agreements, derivative liabilities, shareholders' equity, share-based compensation, income taxes, commitments, related party transactions, supplemental financial information, net loss per share, financial instruments, and segment disclosures; it also includes information on recently adopted and future accounting pronouncements and subsequent events - The company is a clinical stage biopharmaceutical company operating as a single reportable segment[233][237][392] - Management believes current capital resources are adequate for at least 12 months, but additional financing will be needed for long-term obligations[273][191] - Investments in marketable debt securities totaled $73.8 million as of June 30, 2025, all maturing within 12 months[274] - Lease obligations include a corporate headquarters in Redwood City, CA, and an office in Bend, OR, with total lease payments of $1.744 million through FY2028[281][286] - License agreements with XOMA and ActiveSite involve significant milestone payments, including $25.0 million to XOMA upon ersodetug regulatory approval and up to $25.0 million to ActiveSite for clinical/regulatory milestones[288][291] - As of June 30, 2025, the company had U.S. federal NOL carryforwards of $201.4 million, subject to IRC Section 382 limitations[346] NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Rezolute, Inc. is a clinical-stage rare disease company focused on hyperinsulinism; its financial statements are consolidated and prepared under GAAP, requiring significant estimates for areas like marketable debt securities, derivative liabilities, share-based compensation, and clinical trial accruals; the company operates as a single reportable segment; recently adopted ASU 2023-07 on segment reporting had no material impact, and ASU 2023-09 on income tax disclosures will be adopted in FY2026 - Rezolute, Inc. is a late-stage rare disease company focused on significantly improving outcomes for individuals with hypoglycemia caused by hyperinsulinism, with ersodetug as its primary clinical asset[233] - Consolidated financial statements are prepared in accordance with GAAP, requiring management judgments, estimates, and assumptions for various financial items[235][238] - The company operates as a single reportable operating segment, with its Chief Executive Officer serving as the chief operating decision maker[237][392] - Investments in marketable debt securities are classified as available-for-sale and recorded at fair value, with credit risk assessment for declines in fair value[244] - Research and development costs are expensed as incurred, and clinical trial activities performed by third parties are accrued based on estimates of work completed[250][251] - Share-based compensation is measured at fair value using the Black-Scholes-Merton model for stock options and the closing market price for RSUs[252] NOTE 2 — LIQUIDITY Rezolute is a clinical-stage company with no revenue, incurring a $74.4 million net loss in FY2025 and an accumulated deficit of $403.9 million; as of June 30, 2025, it had $167.9 million in cash and marketable debt securities, primarily from equity financings ($107.0 million in FY2025); management believes these resources are sufficient for at least 12 months, but significant future milestone payments under license agreements will require additional long-term financing - Incurred a net loss of $74.4 million and used $69.1 million in operating activities in FY2025, with an accumulated deficit of $403.9 million[268] - Total capital resources (cash, cash equivalents, and marketable debt securities) were $167.9 million as of June 30, 2025[268] - Primary source of liquidity has historically been from private placements and public offerings of equity securities, with $107.0 million net proceeds in FY2025[269] - Management believes the company's cash and cash equivalents and investments in marketable debt securities will be adequate to meet contractual obligations and carry out planned activities for at least 12 months[273] - A $25.0 million milestone payment to XOMA is due upon regulatory approval of ersodetug, not expected to be recognized as a liability within the next 12 months[270] NOTE 3 — INVESTMENTS IN MARKETABLE DEBT SECURITIES As of June 30, 2025, total investments in marketable debt securities were $73.8 million, all classified as short-term and maturing within 12 months; the company invests in liquid, high-quality debt securities with maturities generally two years or less; no sales prior to maturity or credit loss allowances were recognized in FY2025 or FY2024 Marketable Debt Securities Summary | Investment Type | June 30, 2025 (Thousands) | June 30, 2024 (Thousands) | | :------------------------------ | :------------------------ | :------------------------ | | Short-term investments | $73,751 | $56,478 | | Long-term investments | $0 | $263 | | Total investments | $73,751 | $56,741 | - All marketable debt securities ($73.8 million) as of June 30, 2025, are scheduled to mature during the 12-month period ending June 30, 2026[274] - No marketable debt securities were sold prior to maturity, and no allowance for credit losses or other-than-temporary impairment was recognized for the fiscal years ended June 30, 2025 and 2024[275][276] Marketable Debt Securities Details | Investment Type | Amortized Cost (Thousands) | Gross Unrealized Gains (Thousands) | Gross Unrealized Losses (Thousands) | Fair Value (Thousands) | | :------------------------------ | :------------------------- | :------------------------- | :-------------------------- | :--------------------- | | Corporate commercial paper | $16,595 | $1 | $(8) | $16,588 | | Obligations of U.S. government agencies | $5,447 | $0 | $(2) | $5,445 | | U.S. Treasury obligations | $1,485 | $0 | $(1) | $1,484 | | Corporate notes and bonds | $50,231 | $18 | $(15) | $50,234 | | Total | $73,758 | $19 | $(26) | $73,751 | NOTE 4 — LEASES Rezolute has operating leases for its Redwood City, CA headquarters (9,300 sq ft, $48,000/month average base rent, expires Nov 2027) and Bend, OR office (5,000 sq ft, $9,000/month average base rent, expires Feb 2027); total operating lease liabilities were $1.6 million as of June 30, 2025, with a weighted-average remaining lease term of 2.3 years; lease expense was $0.7 million in FY2025 - The lease for the Bend, Oregon office was extended to February 2027, with an average base rent of approximately $9,000 per month[280] - The corporate headquarters in Redwood City, California, has a lease through November 2027, with an average base rent of approximately $48,000 per month[281] Lease Liabilities and Right-of-Use Assets | Metric | June 30, 2025 (Thousands) | June 30, 2024 (Thousands) | | :-------------------------------- | :------------------------ | :------------------------ | | Right-of-use assets | $1,348 | $1,880 | | Current operating lease liabilities | $632 | $568 | | Long-term operating lease liabilities | $983 | $1,660 | | Total operating lease liabilities | $1,615 | $2,228 | Lease Expense | Expense Type | FY2025 (Thousands) | FY2024 (Thousands) | | :------------------------ | :----------------- | :----------------- | | Research and development | $489 | $484 | | General and administrative | $178 | $196 | | Total | $667 | $680 | - As of June 30, 2025, the weighted-average remaining lease term was 2.3 years, and the weighted-average discount rate used was 7.1%[285] Future Lease Payments | Fiscal Year Ending June 30 | Amount (Thousands) | | :------------------------- | :----------------- | | 2026 | $770 | | 2027 | $750 | | 2028 | $224 | | Total lease payments | $1,744 | | Less imputed interest | $(129) | | Present value of operating lease liabilities | $1,615 | NOTE 5 — LICENSE AGREEMENTS Rezolute has license agreements with XOMA and ActiveSite; under the XOMA License Agreement for ersodetug, milestone payments totaling $12.0 million have been made, with a $25.0 million payment due upon first regulatory approval; additional sales-based milestones up to $185.0 million and royalties are also due; under the ActiveSite License Agreement for the PKI Portfolio (including RZ402), $4.0 million in milestone payments have been made, with $5.0 million due upon first dosing in a Phase 3 trial, and up to $17.5 million for commercial success/alternative indications, plus 2.0% royalties on sales - The XOMA License Agreement grants an exclusive global license to develop and commercialize ersodetug. Milestone payments made to date include $2.0 million (Phase 2 last patient), $5.0 million (Phase 3 first patient), and $5.0 million (Phase 3 last patient dosed)[288] - A $25.0 million milestone payment to XOMA will be due upon the first regulatory approval of ersodetug by any regulatory authority[288] - Upon future commercialization of ersodetug, royalties based on net sales and additional milestone payments up to $185.0 million related to annual net sales targets will be required[288] - The ActiveSite License Agreement for the PKI Portfolio (RZ402) requires various milestone payments up to $46.5 million. $1.0 million was paid (IND clearance) and $3.0 million was paid (Phase 2 first patient)[291] - The next milestone payment to ActiveSite is $5.0 million upon the first dosing of a patient in a Phase 3 clinical trial[291] - The company is also required to pay royalties equal to 2.0% of any sales of products that use the PKI Portfolio and additional milestone payments up to $17.5 million for commercial success or alternative indication approvals[291] NOTE 6 — EMBEDDED DERIVATIVE LIABILITY The company accounts for an exit fee agreement from a terminated $30.0 million loan as an embedded derivative liability; this fee of 4.00% ($0.6 million) is triggered by certain "Exit Events" before April 13, 2031; the estimated fair value of this liability was $0.5 million as of June 30, 2025 and 2024 - An exit fee agreement from a terminated $30.0 million Loan and Security Agreement is accounted for as an embedded derivative liability[293] - The exit fee is 4.00% of the funded principal balance ($0.6 million) and is triggered by certain "Exit Events" occurring prior to April 13, 2031[293] - The estimated fair value of the embedded derivative liability was $0.5 million as of June 30, 2025 and 2024[293] NOTE 7 — SHAREHOLDERS' EQUITY Shareholders approved an increase in authorized common shares to 165.0 million in December 2024; the company issued fully vested pre-funded warrants (PFWs) for 28.2 million shares between Oct 2021 and Apr 2025, all classified as equity; recent equity financings include the 2025 Private Placement ($4.2 million net proceeds) and the 2025 Underwritten Offering ($96.8 million net proceeds); an Exchange Agreement in March 2024 involved purchasing 3.0 million common shares and issuing Exchange PFWs, which were reclassified from derivative liability to equity in May 2024 - On December 5, 2024, shareholders approved an increase in the authorized number of common shares from 100.0 million to 165.0 million shares[294] - Between October 2021 and April 2025, the company issued fully vested pre-funded warrants (PFWs) exercisable to purchase an aggregate of 28.2 million shares of common stock, all classified in shareholders' equity[295] Pre-Funded Warrants Activity | PFW Type | Outstanding, June 30, 2024 (Shares) | Issuance in FY2025 (Shares) | Cashless Exercise in FY2025 (Shares) | Outstanding, June 30, 2025 (Shares) | | :---------------- | :---------------------------------- | :-------------------------- | :----------------------------------- | :---------------------------------- | | 2021 PFWs | 123,000 | — | — | 123,000 | | 2022 PFWs | 8,147,371 | — | (2,526,318) | 5,621,053 | | Exchange PFWs | 3,000,000 | — | (3,000,000) | — | | 2024 PFWs | 3,750,000 | — | — | 3,750,000 | | 2025 PFWs | — | 6,905,385 | — | 6,905,385 | | Total | **15,020,3