NOTE 2 — LIQUIDITY

The Company is in the clinical stage and has not yet generated any revenues. As reflected in the accompanying consolidated financial statements, for the fiscal year ended June 30, 2019 the Company incurred a net loss of $30.4 million and net cash used in operating activities amounted to $15.3 million. As of June 30, 2019, the Company had an accumulated deficit of $126.9 million. As of June 30, 2019, the Company had cash and cash equivalents of $11.6 million and total liabilities of $10.5 million.

As discussed in Note 6, in January 2019 the Company closed an equity offering with two new investors (the “New Investors”) that resulted in cash proceeds of $25.0 million and the conversion to equity of the Fiscal 2018 Notes with an aggregate principal balance of $5.3 million plus accrued interest of $0.8 million. As discussed in Note 13, in July and August 2019 the Company received aggregate net proceeds of approximately $22.6 million from the issuance of approximately 82.9 million shares of Common Stock to the New Investors and other investors in a private placement.

As a result of the equity financings completed during 2019, management believes the Company’s existing cash balance of $11.6 million plus $22.6 million of additional net cash proceeds received in July and August 2019 is adequate to carry out planned activities at least through September 2020. The Company’s contractual obligations and other planned spending through September 2020 consist of (i) licensing obligations to Xoma Corporation of $8.5 million as discussed in Note 4, (ii) research and development spending on RZ358, AB101 and other clinical programs for $11.0 million, and (iii) approximately $10.4 million for spending on compensation, benefits, rent, other research costs, and public company costs for auditing and professional fees. The Company expects to continue to pursue equity and/or debt financings to provide funding for planned activities for the fiscal year ending June 30, 2021 and beyond. To the extent that additional funding is obtained during the remainder of the fiscal year ending June 30, 2020, the Company plans to accelerate timing to complete clinical trials and other research and development activities which would result in increased spending. However, the Company has the flexibility to delay clinical programs to ensure that adequate capital resources are available.

There are no assurances that the Company will be able to obtain additional financing through other sources, such as equity offerings and bank financings in the future. Even if these other financing sources are available, they may be on terms that are not acceptable to management and the Company’s stockholders.