NOTE 2 — LIQUIDITY

As a clinical stage business, the Company has not yet generated any revenues and had an accumulated deficit of $248.3 million as of March 31, 2023. For the nine months ended March 31, 2023, the Company incurred a net loss of $39.1 million and net cash used in operating activities amounted to $33.1 million. For the fiscal year ended June 30, 2022, the Company incurred a net loss of $41.1 million and net cash used in operating activities amounted to $39.6 million.  As of March 31, 2023, the Company’s capital resources consist of cash and cash equivalents of $33.7 million, short-term investments in marketable debt securities of $69.3 million and long-term investments in marketable debt securities of $26.2 million.

As of March 31, 2023, the Company has total liabilities of $6.9 million, including current liabilities of $4.4 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 ActiveSite License Agreement (as defined below), a $3.0 million milestone payment was paid in February 2023 upon dosing of the first patient in a Phase 2 clinical trial for RZ402.  Pursuant to the XOMA License Agreement (as defined below), a $5.0 million milestone payment will be due upon dosing of the first patient in a Phase 3 clinical trial for RZ358.  First patient dosing milestone RZ358 Phase 3 clinical trial is expected to occur within the next 12 months.

Management believes the Company’s existing 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 at least through May 2024.

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On March 10, 2023, Silicon Valley Bank (“SVB”) was shut down, followed on March 11, 2023 by Signature Bank and on May 1, 2023 by First Republic Bank whereby the Federal Deposit Insurance Corporation was appointed as receiver for each of those banks. Starting in January 2023, SVB Asset Management (“SAM”), a nonbank affiliate of SVB and a member of SVB Financial Group, provided investment services relating to the Company’s investment in marketable debt securities held in a segregated custodial account held by a third-party custodian, U.S. Bank. At the time of the closing of SVB, the Company had approximately $20.5 million in cash and certain cash equivalents in an Overnight Money Market Mutual Fund (“MMF”), for which SAM was the investment advisor of until April 13, 2023, when the MMF was liquidated and transferred to a similar investment under the control of a new investment advisor. The Company’s investment portfolio did not and currently does not contain any securities of SVB, and the Company did not have any deposit accounts with SVB. The Company does not believe it was or will be impacted by the closure of SVB and will continue to monitor the banking industry situation as it evolves.