Rezolute(RZLT) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended September 30, 2021 Item 1. Financial Statements The unaudited condensed consolidated financial statements for the quarter ended September 30, 2021, show increased net loss and operating expenses, decreased cash, and increased liabilities, partially offset by financing activities Unaudited Condensed Consolidated Balance Sheets As of September 30, 2021, total assets decreased to $38.8 million, primarily due to reduced cash, while total liabilities increased to $17.2 million, leading to a decline in shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $37,292 | $41,047 | | Total current assets | $38,345 | $41,993 | | Total assets | $38,760 | $42,609 | | Liabilities & Equity | | | | Total current liabilities | $2,598 | $1,968 | | Long term debt, net | $14,071 | $13,968 | | Total liabilities | $17,201 | $16,510 | | Total shareholders' equity | $21,559 | $26,099 | Unaudited Condensed Consolidated Statements of Operations For the three months ended September 30, 2021, net loss significantly increased to $7.8 million, driven by a doubling of operating expenses, particularly research and development Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Research and development | $5,774 | $2,344 | | General and administrative | $1,866 | $1,279 | | Total operating expenses | $7,640 | $3,623 | | Operating loss | ($7,640) | ($3,623) | | Net loss | ($7,836) | ($3,620) | | Net loss per share | ($0.92) | ($0.62) | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $6.3 million for the three months ended September 30, 2021, partially offset by $2.6 million from financing activities, resulting in a net cash decrease of $3.8 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | ($6,341) | ($3,551) | | Net Cash Provided by Financing Activities | $2,586 | $0 | | Net decrease in cash | ($3,755) | ($3,551) | | Cash at end of period | $37,292 | $6,404 | Notes to Unaudited Condensed Consolidated Financial Statements Key notes detail the company's liquidity, financing agreements, and subsequent events, including $51.7 million in net proceeds from October 2021 offerings and a $30 million loan agreement - The company is a clinical-stage biopharmaceutical firm focused on therapies for metabolic diseases related to chronic glucose imbalance[27] - Management believes existing cash of $37.3 million, combined with $51.7 million in net proceeds from October 2021 offerings, will fund planned activities into November 2022[44] - In October 2021, the company completed an underwritten public offering and a registered direct offering, raising total net proceeds of approximately $51.7 million[43][98][104] - The company has a $30.0 million Loan and Security Agreement, with $15.0 million drawn as of September 30, 2021. Access to the remaining $15.0 million is subject to meeting clinical and financing milestones[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased operating expenses due to clinical trials, with liquidity significantly strengthened by $51.7 million in October 2021 equity offerings, extending the cash runway into November 2022 Summary of Clinical Assets The company's lead asset, RZ358 for congenital hyperinsulinism, is in a Phase 2b study with results expected in Q1 2022, while RZ402 for diabetic macular edema initiated a Phase 1b study with completion planned by Q1 2022 - RZ358 (Congenital HI): The Phase 2b RIZE study is ongoing, with top-line results anticipated in Q1 of calendar year 2022. The drug has received Rare Pediatric Disease (RPD) designation from the FDA[114][115] - RZ402 (Diabetic Macular Edema): Following positive Phase 1a results, a Phase 1b MAD study was initiated in August 2021, with completion expected by Q1 of calendar year 2022. A Phase 2a study is planned for the second half of calendar year 2022 if results are favorable[116] Results of Operations For the three months ended September 30, 2021, R&D expenses increased by $3.4 million (146%) due to clinical trial costs, and G&A expenses rose by $0.6 million (46%) Comparison of Operating Expenses (in thousands) | Expense Category | Q1 FY2022 (ended Sep 30, 2021, in thousands) | Q1 FY2021 (ended Sep 30, 2020, in thousands) | Dollar Change (in thousands) | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $5,774 | $2,344 | +$3,430 | +146% | | General & Administrative | $1,866 | $1,279 | +$587 | +46% | - The increase in R&D costs was mainly due to the RZ402 MAD study initiated in August 2021 and ongoing costs for the RZ358 trial[138] Liquidity and Capital Resources As of September 30, 2021, the company had $37.3 million in cash, supplemented by $51.7 million from October 2021 financings, projecting a cash runway into November 2022, with access to further loan tranches contingent on milestones - The company's cash runway is projected to last into November 2022, following the receipt of $51.7 million in net proceeds from offerings completed in October 2021[149] - The company has multiple financing facilities available, including the remaining capacity on its $50.0 million EDA (approx. $48.5 million) and its $20.0 million LPC Purchase Agreement (approx. $18.8 million)[62][69][144][145] - The company has met the financing condition for the $7.5 million term B loan but has not yet achieved the required clinical milestones to draw the funds[147] Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required as the company is a smaller reporting company - As a smaller reporting company, Rezolute, Inc. is not required to provide quantitative and qualitative disclosures about market risk[158] Item 4. Controls and Procedures Management identified two material weaknesses in internal control over financial reporting as of June 30, 2021: inadequate segregation of duties and ineffective treasury controls, the latter of which was subsequently cured - Management identified two material weaknesses in internal control over financial reporting as of June 30, 2021[159] - The first material weakness is a lack of segregation of duties due to the company's small size[160] - The second material weakness involved ineffective controls over authorized shares, which caused a deficiency. This was cured on May 26, 2021, after shareholders approved an increase in authorized common stock from 10 million to 40 million shares[161][162] PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, and unregistered equity sales for the reporting period Item 1. Legal Proceedings The company reported no legal proceedings during the period - There were no legal proceedings to report[165] Item 1A. Risk Factors The company refers to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended June 30, 2021 - The report directs investors to the risk factors detailed in the company's 2021 Form 10-K[165] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities to report for the period - The company did not have any reportable issuances of unregistered equity securities during the quarter[166]