Rezolute, Inc.

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 (“HI”). The Company’s primary clinical asset, ersodetug, is a potential treatment that the Company believes could be a treatment for all forms of HI, including congenital HI and tumor HI. The Company is currently enrolling in a Phase 3 clinical trial for a tumor HI indication (“upLIFT”). In December 2025, the Company reported its Phase 3 clinical trial in congenital HI (“sunRIZE”) did not meet its primary or key secondary endpoints. The Company will be meeting with the Food and Drug Administration (“FDA”) prior to the end of calendar Q1 2026 to discuss the study results and discuss a potential path forward.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and the rules and regulations of the SEC for interim financial information, including the instructions to Form 10-Q and Article 8 of Regulation S-X.

The condensed consolidated balance sheet as of June 30, 2025, has been derived from the Company’s audited consolidated financial statements. The unaudited interim financial statements should be read in conjunction with the 2025 Form 10-K, which contains the Company’s audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended June 30, 2025.

The Company’s Chief Executive Officer also serves as the Company’s chief operating decision maker (“CODM”) 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.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, the interim financial statements do not include all information and footnote disclosures necessary for a comprehensive presentation of financial position, results of operations, and cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) that are necessary for a fair financial statement presentation have been made. The interim results for the three and six months ended December 31, 2025, are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the fiscal year ending June 30, 2026.

Consolidation

The Company hastwo wholly owned subsidiaries consisting of Rezolute (Bio) Ireland Limited, and Rezolute Bio UK, Ltd. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

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 unaudited condensed 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 or impairment is required for marketable debt securities, the fair value of an embedded derivative liability, fair value of share-based compensation, 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.

Significant Accounting Policies

The Company’s significant accounting policies are described in Note 1 to the financial statements in Item 8 of the 2025 Form 10-K.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. The Company is required to adopt ASU 2023-09 in its annual financial statements for the fiscal year ended June 30, 2026, and for interim periods thereafter. The Company does not expect the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 is intended to enhance disclosures by requiring public entities to disclose specified information about certain costs and expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026. The Company is required to adopt ASU 2024-03 in its annual financial statements for the fiscal year ending June 30, 2028, and for interim periods thereafter. The Company does not expect the adoption of ASU 2024-03 will have a material impact on its consolidated financial statements.

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

Note 2 — Liquidity

The Company is in the clinical stage and has not yet generated any revenues. For the six months ended December 31, 2025, the Company incurred a net loss of $40.9 million and net cash used in operating activities amounted to $37.8 million. For the fiscal year ended June 30, 2025, the Company incurred a net loss of $74.4 million and net cash used in operating activities amounted to $69.1 million. As of December 31, 2025, the Company had an accumulated deficit of $444.8 million, and the Company’s capital resources consist of cash and cash equivalents of $11.9 million and short-term investments in marketable debt securities of $121.0 million.

As of December 31, 2025, the Company has total liabilities of $10.6 million, including current liabilities of $9.5 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 $25.0 million milestone payment will be due upon regulatory approval of ersodetug by any regulatory authority. The commitment to pay the $25.0 million for regulatory approval of ersodetug is not expected to be recognized as a liability within the next 12 months. Due to uncertainties in the timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the timing of future clinical and regulatory milestone payments to XOMA that may be required during the fiscal year ending June 30, 2027 and thereafter.

As discussed in Note 15, management approved a reduction in workforce on December 11, 2025 that resulted in the termination of employment of 29 employees on December 15, 2025. The Company accrued approximately $1.5 million of one-time severance benefits in December 2025. The $1.5 million was paid in full to the affected employees in January 2026 andno remaining liability related to the one-time severance benefits remain at the issuance date of the unaudited condensed consolidated financial statements.

Management believes the Company’s cash and cash equivalents and investments in marketable debt securities will be adequate to meet the Company’s contractual obligations and carry out ongoing clinical trials and other planned activities for at least 12 months from the issuance date of the unaudited condensed consolidated financial statements as of December 31, 2025.

Note 3 — Investments in Marketable Debt Securities

Investments in marketable debt securities are accounted for as available-for-sale investments at fair value. 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 exposure due to an adverse shift in interest rates, the Company generally invests in securities with expected maturities oftwo years or less while maintaining a weighted average maturity ofone year or less. As of December 31, 2025, investments in marketable debt securities with an aggregate fair value of $121.0 million are scheduled to mature during the 12-month period ending December 31, 2026. As of December 31, 2025, the Company didnot hold any long-term investments in marketable debt securities.

During the six months ended December 31, 2025, marketable debt securities for $70.1 million matured and approximately $115.7 million was invested in additional marketable debt securities. The Company did not sell any marketable debt securities prior to the scheduled maturity dates for the six months ended December 31, 2025.

Accrued interest receivable on all marketable debt securities amounted to $0.6 million and $0.7 million as of December 31, 2025 and June 30, 2025, respectively. Accrued interest receivable is included in other current assets in the accompanying unaudited condensed consolidated balance sheets.

For the six months ended December 31, 2025, the Company didnot recognize any allowance for credit losses or impairment related to investments in marketable debt securities. The following table summarizes the cumulative 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 December 31, 2025 and June 30, 2025 (in thousands):

Note 4 — Operating Leases

The carrying value of all right-of-use assets and operating lease liabilities is as follows (in thousands):

For the three and six months ended December 31, 2025 and 2024, operating lease expense is included under the following captions in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss (in thousands):

As of December 31, 2025, the weighted average remaining lease term under operating leases was 1.8 years, and the weighted average discount rate used to determine the operating lease liabilities was 7.1%. Future cash payments under all operating lease agreements as of December 31, 2025 are as follows (in thousands):

Note 5 — License Agreements

XOMA License Agreement

In December 2017, the Company entered into a license agreement that has been subsequently amended (“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.

To date the Company has paid a total of $12.0 million in milestone payments to XOMA. The most recent milestone payment of $5.0 became due in May 2025 upon dosing of the last patient in the Company’s Phase 3 clinical trial for ersodetug and was paid in June 2025. The next milestone payment of $25.0 million will be due upon regulatory approval for ersodetug by any regulatory authority. After the final regulatory milestone, 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.

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 initially focused on the development of RZ402 as a therapy for diabetic macular edema (“DME”). Following the completion of a Phase 2 clinical study for RZ402, the Company decided to pause the program to focus its resources on ersodetug. The Company is currently exploring the use of the PKI Portfolio to develop therapies for different indications. To date the company has paid a total of $4.0 million in milestone payments to ActiveSite. The most recent milestone payment of $3.0 million was 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 dosing of the first patient in a Phase 3 clinical trial. Upon the achievement of certain clinical and regulatory events and various sales-based milestones and alternative indication regulatory approvals under the ActiveSite License Agreement the company will be required to make additional milestone payments to ActiveSite up to $42.5 million. 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.

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. 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 the Loan Agreement was terminated 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 Agreement was not impacted by the 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 as of December 31, 2025 and June 30, 2025. Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of control transactions, and certain issuances of common stock whereby more than 35% of the Company’s shares are issued to parties other than its existing investors in a single transaction or series of related transactions. Fair value of this embedded derivative liability is reassessed at the end of each reporting period with changes in fair value recognized as a non-operating gain or loss.

Note 7 — Shareholders’ Equity

Quarterly Changes in Shareholders' Equity

The following table presents changes in shareholders’ equity for the three months ended December 31, 2025 and 2024 (in thousands, except number of shares):

Pre-Funded Warrants

Between October 2021 and April 2025, the Company issued fully vested pre-funded warrants (“PFWs”) exercisable to purchase an aggregate of 28,237,901 shares of common stock. As of December 31, 2025, all outstanding PFWs meet the requirements to be classified in shareholders’ equity under the captionadditional 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, 2025, the Company had an aggregate of 16,399,438 PFWs that were outstanding. The following table summarizes PFW activity for the six months ended December 31, 2025:

2025 Private Placement

In May 2025, the Company entered into a securities purchase agreement (the “2025 SPA”) with Handok, Inc. and two other investors relating to a private placement (the “2025 Private Placement”), pursuant to which 1,295,383 shares of common stock were issued at a purchase price of$3.25 per share. Closing of the 2025 Private Placement occurred in June 2025, resulting in net proceeds of$4.2 million.

2025 Underwritten Offering

On April 23, 2025, the Company entered into an underwriting agreement with Guggenheim Securities, LLC (the “2025 Underwriter”) for the planned issuance and sale of equity securities in an underwritten public offering (the “2025 Underwritten Offering”). The 2025 Underwritten Offering resulted in the issuance of (i)20,786,923 shares of common stock at a price of $3.25 per share for gross proceeds of approximately $67.6 million, (ii)4,153,846 shares of common stock pursuant to a 30-day option, which was fully exercised during closing, at a public offering price of $3.25 per share (the “2025 Underwriters’ Option”) for gross proceeds of $13.5 million, and (iii) pre-funded warrants to purchase 6,905,385 shares of common stock at a public offering price of $3.249 per pre-funded warrant (the “2025 PFWs”) for gross proceeds of approximately $22.4 million. Closing occurred on April 24, 2025, whereby the aggregate gross proceeds from the 2025 Underwritten Offering amounted to approximately $103.5 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 approximately $6.7 million, the net proceeds from the 2025 Underwritten Offering amounted to approximately $96.8 million.

2024 Private Placement

In June 2024, the Company entered into a securities purchase agreement (the “2024 SPA”) with Handok, Inc. and one other investor relating to a private placement (the “2024 Private Placement”), pursuant to which 1,500,000 shares of common stock were issued at a purchase price of$4.00 per share. Closing of the 2024 Private Placement occurred in July 2024, resulting in net proceeds of$6.0 million.

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 was acting as sales agent and was 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 was scheduled to terminate when all of the Placement Shares had been sold, or earlier upon the election of either the Company or the Agent.

In October 2025, the Company provided the Agent with notice of termination of the Sales Agreement. Accordingly, the Company had the maximum amount remaining for sale under the Sales Agreement of $50.0 million at the date of termination sinceno shares were ever issued under this agreement.

Note 8 — Share-Based Compensation and Warrants

Inducement Grants

In connection with the appointment of the Company’s Chief Commercial Officer in August 2025 the Board of Directors approved the grant of stock options exercisable for the purchase of 275,000 shares of the Company’s common stock at an exercise price of$6.55 per share. These stock options qualify as inducement grants pursuant to Nasdaq Listing Rule 5635(c)(4) whereby the underlying shares were not authorized under any of the Company’s stock option plans (“Inducement Awards”). The stock options are exercisable until August 2035 and vest for (i)one-fourth of the option shares on the one-year anniversary of the employee start date, and (ii)one thirty-sixth of the remaining option shares vest on the same day of each month thereafter until the stock options are 100% vested. The fair value of this Inducement Award of$1.3 million was computed using the Black-Scholes-Merton (“BSM”) option-pricing model.

Additionally, in connection with the hiring offour employees during the six months ended December 31, 2025, the Company issued additional Inducement Awards, consisting of stock options exercisable for the purchase of an aggregate of 370,000 shares of the Company’s common stock. These stock options are exercisable for aten-year term and vest for (i)one-fourth of the option shares on the one-year anniversary of each employee’s start date, and (ii)one thirty-sixth of the remaining option shares vest on the same day of each month thereafter until the stock options are 100% vested.

Equity Incentive Plans

Presented below is a summary of the number of shares authorized, outstanding, and available for future grants under the Company’s equity incentive plans as of December 31, 2025:

The Company currently hasone active stock option plan approved by shareholders which is the 2021 Plan. On November 19, 2025, the Company’s shareholders approved an amendment to the 2021 Plan, increasing the number of shares of common stock to be issued under the 2021 Plan up to approximately 21,950,000 shares of common stock, before accounting for reductions due to exercises. The 2021 Plan terminates on March 31, 2030. Pursuant to the 2021 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. Stock options outstanding under the plans presented above expire pursuant to their contractual provisions on various dates through 2035.

In addition, inducement awards are allowed for grants of options pursuant to Nasdaq Listing Rule 5635(c)(4) whereby the underlying shares are not authorized under any of the Company’s stock option plans. Through December 31, 2025, the Board of Directors has authorized a total of 1,500,000 shares for inducement awards. The Board of Directors has discretion to issue 757,500 shares for future inducement awards as of December 31, 2025.

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 the Company’s common stock through accumulated payroll deductions.

The 2022 ESPP has consecutive offering periods that begin approximately every 6 months commencing on the first trading day on or after July 1 and terminating on the last trading day of the offering period ending on December 31 and commencing on the first trading day on or after January 1 and terminating on the last trading day of the offering period ending on June 30. The 2022 ESPP reserves 500,000 shares for purchases. There have beenno offering periods under the 2022 ESPP through December 31, 2025.

Stock Options Outstanding

For the six months ended December 31, 2025, the following table summarizes the combined stock option activity under the Company’s equity incentive plans and Inducement Awards:

For the six months ended December 31, 2025, the aggregate fair value of stock options granted for approximately 2.2 million shares of common stock amounted to $14.8 million or approximately $6.67 per share as of the grant dates. Fair value of stock options 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. Unrecognized share-based compensation expense related to outstanding options is approximately $17.1 million as of December 31, 2025. This amount is expected to be recognized over a weighted average period of 2.1 years.

For the six months ended December 31, 2025, the fair value of stock options was estimated on the respective dates of grant, with the following weighted-average assumptions:

Restricted Stock Units (“RSUs”)

For the six months ended December 31, 2025, the following table sets forth a summary of the combined RSU activity under the Company’s 2021 Plan:

For the six months ended December 31, 2025, the aggregate fair value of RSUs granted for approximately 1.9 million shares of common stock amounted to $19.4 million or approximately $10.11 per share as of the grant dates. RSUs vest over a period ofone tofour years. Fair value is based on the closing market price for shares of the Company’s common stock on the date of grant and will result in the recognition of compensation cost ratably over the vesting period of the RSUs. Unrecognized share-based compensation expense related to RSUs is approximately $18.5 million as of December 31, 2025. This amount is expected to be recognized over a weighted average period of 2.4 years.

Share-Based Compensation Expense

Share-based compensation expense for the three and six months ended December 31, 2025 and 2024 is included under the following captions in the unaudited condensed consolidated statements of operations and comprehensive loss (in thousands):

The aggregate unrecognized share-based compensation expense related to stock options and RSUs is approximately $35.6 million as of December 31, 2025. This amount is expected to be recognized over a weighted average period of 2.2 years.

Pre-Funded Warrants

PFWs are outstanding for a total of approximately 8.2 million shares as of December 31, 2025. Please refer to Note 7 for additional information about outstanding PFWs.

Legacy Warrants

In connection with an equity financing in October 2020, the Company issued warrants entitling the holders to purchase an aggregate of 820,001 shares of common stock. These warrants are exercisable at $19.50 per share for a period ofseven 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 in conjunction with various debt and equity financings and for services. As of December 31, 2025, all of the warrants were vested. The Participating Warrants and other warrants are collectively referred to as the “Legacy Warrants.”

For the six months ended December 31, 2025, no Legacy Warrants were granted or exercised. The following table sets forth a summary of all Legacy Warrants for the six months ended December 31, 2025:

Note 9 — 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.

Amended Employment Agreement

On October 17, 2025, the Company entered into amendments to employment agreements with Nevan Elam, Brian Roberts, Daron Evans, and Sunil Karnawat. The amendments entitle each of the executive officers to a full gross-up payment (the “Gross-Up Payment”) for any excise tax imposed by Section 4999 of the Internal Revenue Code (the “IRC”) and other local, state and federal taxes imposed if an excess parachute payment is paid in connection with a future change of control event, as determined under Section 280G of the IRC. The determination of the amount of any Gross-Up Payment will be made by the Company in its sole discretion. Except for the provisions related to Gross-Up Payments, all other terms of the respective employment agreements were unchanged.

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. At each reporting period, the Company evaluates known claims to determine whether a potential loss or a potential range of loss is probable and reasonably estimable under ASC 450,Contingencies. As of December 31, 2025, there have been several law firms that have initiated investigations into the Company and have filed press releases seeking stockholders to engage them to file litigation against the Company for alleged securities law violations related to the Company’s Phase 3 sunRIZE trial not meeting its primary and key secondary endpoints. As of the issuance date of this Quarterly Report on Form 10-Q there have been no pending or threatened lawsuits against the Company including related to the Company’s Phase 3 sunRIZE trial that could reasonably be expected to have a material effect on the Company’s results of operations. Legal fees are expensed as incurred.

Note 10 — Related Party Transactions

Related Party Licensing Agreement

On September 15, 2020, the Company and Handok entered into an exclusive license agreement (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 the PKI Portfolio. 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 to the Company 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.

Note 11 — Income Taxes

Income tax expense during interim periods is based on applying an estimated annualized effective income tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. The computation of the annualized estimated effective tax rate for each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating results for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred income tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known, or as the tax environment changes.

For the three and six months ended December 31, 2025 and 2024, the Company did not recognize any income tax benefit due to a full valuation allowance on its deferred income tax assets. The Company did not have any material changes to its conclusions regarding valuation allowances for deferred income tax assets or uncertain tax positions for the three and six months ended December 31, 2025 and 2024.

Note 12 — 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 PFWs 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 because the exercise price is negligible and all of the PFWs are fully vested and exercisable. Accordingly, the weighted average number of shares outstanding for basic and diluted net loss per share for the three and six months ended December 31, 2025 and 2024 consists of the following:

For the three and six months ended December 31, 2025 and 2024, basic and diluted net loss per share are the same since all other common stock equivalents were anti-dilutive. As of December 31, 2025 and 2024, the following potential common stock equivalents were excluded from the computation of diluted net loss per share since the impact of inclusion was anti-dilutive:

Note 13 — 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.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy classification as of December 31, 2025 and June 30, 2025 (in thousands):

Marketable debt securities classified as Level 2 within the valuation hierarchy generally consist of corporate bonds, commercial paper, and U.S. government agency securities. 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 tables above, the Company did not have any other assets measured at fair value on a recurring basis as of December 31, 2025 and June 30, 2025.

The Company’s embedded derivative liability discussed in Note 6 is classified under Level 3 of the fair value hierarchy and is required to be measured and recorded at fair value on a recurring basis. Fair value 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 historical effective interest rate under the Loan Agreement.

The following table sets forth changes in the fair value of the Company’s embedded derivative liability for which fair value was determined on a recurring basis for the six months ended December 31, 2025 and 2024 (in thousands):

Except for the embedded derivative liability, the Company did not have any other liabilities measured at fair value on a recurring basis as of December 31, 2025 and June 30, 2025.

Due to the relatively short maturity of the respective instruments, the fair value of cash, accounts payable, and accrued liabilities approximated their carrying values as of December 31, 2025 and June 30, 2025.

The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the six months ended December 31, 2025 and 2024, 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, cash equivalents and investments in marketable debt securities. The Company maintains cash in demand deposit accounts at a high-quality financial institution. As of and for the six months ended December 31, 2025 and 2024, cash deposits have exceeded the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation.

As of December 31, 2025, the Company had an aggregate of $70.4 million invested in marketable debt securities of issuers in the banking and financial services industries. 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. To date, the Company has not experienced any credit losses or impairments of marketable debt securities due to credit rating agency downgrades.

Note 14 — Segment Disclosures

The Company has determined that it operates as asingle reportable segment which includes all of its activities as a clinical stage biopharmaceutical company. The CODM uses consolidated net loss as reported in the unaudited condensed consolidated statements of operations and comprehensive loss to assess performance, analyze budget to actual results, forecast future operating results and cash requirements, and allocate resources for its single reportable segment. The significant segment expenses regularly reviewed by the CODM consist of clinical and manufacturing costs of ersodetug, personnel expenses, and other segment expenses. The measure of the operating segment assets is reported on the unaudited condensed consolidated balance sheets as total assets and all of the Company's tangible assets are located in the United States.

The following table presents consolidated net loss summarized by the significant segment expenses regularly reviewed by the CODM for the three and six months ended December 31, 2025, and 2024 (in thousands):

Note 15 — Reduction in Workforce

On December 11, 2025, the Company announced that its Phase 3 sunRIZE clinical trial did not meet its primary or key secondary endpoints. Management approved a reduction in workforce of 29 employees on December 15, 2025 to reduce overall operating expenses and preserve capital to support the Company’s Phase 3 clinical trial in tumor HI and plan for future interactions with the FDA to review sunRIZE data. The Company incurred approximately $1.5 million of one-time severance expenses consisting of $0.9 million of research and development expense and $0.6 million in general and administrative expense for the three and six months ended December 31, 2025. All of the $1.5 million of one-time severance benefits is included as an accrued liability in the condensed consolidated balance sheet as of December 31, 2025 and is included in operating expenses in the condensed consolidated statement of operations for the three and six months ended December 31, 2025. The accrued liability of $1.5 million was paid in full to the affected employees in January 2026 andno remaining liability related to the one-time severance benefits remain at the issuance date of the unaudited condensed consolidated financial statements.