UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, ~~2017~~

2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1933

For the transition period fromto

Commission File Number:000-49908

CYTODYN INC.

~~CYTODYN INC.~~

(Exact name of registrant as specified in its charter)


~~Delaware~~		~~75-3056237~~
Delaware	83-1887078
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer or Identification No.)

1111 Main Street, Suite 660 Vancouver, Washington		98660
(Address of principal executive offices)		(Zip Code)

(360) 980-8524

(Registrant’s telephone number, including area code)~~(360) 980-8524~~

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
None.		None.		None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act): Yes ☐ No ☒

On December 31, ~~2017,~~2021, there were ~~169,861,458~~690,233,504 shares outstanding of the registrant’s $0.001 par value common stock.

Table of Contents

TABLE OF CONTENTS


		PAGE
PART I					3
	ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS	~~PAGE~~ 3
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	46
	ITEM 4. CONTROLS AND PROCEDURES	47
PART III				3	49
	I~~TEM~~ITEM 1. F~~INANCIAL~~ S~~TATEMENTS~~LEGAL PROCEEDINGS			3	49
I~~TEM~~ ~~2. MANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITIONAND~~ R~~ESULTS~~OF O~~PERATIONS~~	ITEM 1A. RISK FACTORS		19	49
I~~TEM~~ ~~3. QUANTITATIVEAND~~ Q~~UALITATIVE~~ D~~ISCLOSURES~~ A~~BOUT~~ M~~ARKET~~ R~~ISK~~	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		24	51
I~~TEM~~ ~~4. CONTROLSAND~~ P~~ROCEDURES~~	ITEM 3. DEFAULTS UPON SENIOR SECURITIES		24	51
	~~PART II~~ITEM 4. MINE SAFETY DISCLOSURES			25	51
I~~TEM~~ ~~1. LEGAL~~ P~~ROCEEDINGS~~	ITEM 5. OTHER INFORMATION		25	51
I~~TEM~~ ~~1A. RISK~~ F~~ACTORS~~			25
I~~TEM~~ ~~2. UNREGISTERED~~ S~~ALES~~OF E~~QUITY~~ S~~ECURITIESAND~~ USEOF P~~ROCEEDS~~ITEM 6. EXHIBITS			25
I~~TEM~~ ~~3. DEFAULTS~~ U~~PON~~ S~~ENIOR~~ S~~ECURITIES~~52			25
I~~TEM~~ ~~4. MINE~~ S~~AFETY~~ D~~ISCLOSURES~~			25
I~~TEM~~ ~~5. OTHER~~ I~~NFORMATION~~			25
I~~TEM~~ ~~6. EXHIBITS~~			26

Table of Contents

PART I. Financial Information

~~PART I~~

Item 1. Consolidated Financial Statements

CytoDyn Inc.

~~Item 1. Financial Statements.~~

~~CytoDyn Inc.~~

Consolidated Balance Sheets

(Unaudited)

   November 30, 2017 May 31, 2017
   (unaudited)
Assets

Current assets:

Cash
   $ 1,296,839 $ 1,775,583
Prepaid expenses
   294,364 207,314
Prepaid service fees
   3,143,385 4,138,041


Total current assets
   4,734,588 6,120,938
Furniture and equipment, net
   14,036 17,281
Intangibles, net
   1,742,181 1,917,219


Total assets
   $ 6,490,805 $ 8,055,438


Liabilities and Stockholders’ (Deficit) Equity

Current liabilities:

Accounts payable
   $ 9,716,970 $ 4,281,204
Accrued compensation
   926,542 637,190
Accrued license fees
   517,400 167,000
Accrued interest on convertible notes
   180,673 —
Convertible notes payable, net
   5,391,998 1,058,611


Total current liabilities
   16,733,583 6,144,005


Long-term liabilities:

Derivative liability
   2,547,733 3,014,667


Total long-term liabilities
   2,547,733 3,014,667


Total liabilities
   19,281,316 9,158,672
Commitments and Contingencies
   —   —
Stockholders’ (Deficit) Equity

Series B convertible preferred stock, $0.001 par value; 400,000 shares authorized, 92,100 shares issued and outstanding at November 30, 2017 and May 31, 2017, respectively
   92 92
Common stock, $0.001 par value; 375,000,000 and 350,000,000 shares authorized, 165,135,154 and 149,468,244 issued and outstanding at November 30, 2017 and May 31, 2017, respectively
   165,135 149,468
Additionalpaid-in capital
   132,609,936 121,736,921
Accumulated (deficit)
   (145,565,674 ) (122,989,715 )


Total stockholders’ (deficit)
   (12,790,511 ) (1,103,234 )


Total liabilities and stockholders’ (deficit) equity
   $ 6,490,805 $ 8,055,438

(In thousands, except par value)


	November 30, 2021		May 31, 2021
			(Revised) ⁽¹⁾
Assets
Current assets:
Cash	$	8,875	$	33,943
Accounts receivable		225		—
Inventories, net		88,557		93,479
Prepaid expenses		2,979		616
Prepaid service fees		1,174		1,543
Total current assets		101,810		129,581
Operating leases right-of-use asset		617		712
Property and equipment, net		119		134
Intangibles, net		1,153		1,653
Total assets	$	103,699	$	132,080
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	58,008	$	65,897
Accrued liabilities and compensation		6,654		19,073
Accrued interest on convertible notes		3,670		2,007
Accrued dividends on convertible preferred stock		3,481		2,647
Operating leases liabilities		149		175
Convertible notes payable, net		43,947		62,747
Total current liabilities		115,909		152,546
Long-term liabilities:
Operating leases liabilities		486		552
Total long-term liabilities		486		552
Total liabilities		116,395		153,098
Commitments and Contingencies (Note 10)
Stockholders’ (deficit) equity:
Preferred Stock, $0.001 par value; 5,000 shares authorized
Series D convertible preferred stock, $0.001 par value; 12 authorized; 9 issued and outstanding at November 30, 2021 and May 31, 2021		—		—
Series C convertible preferred stock, $0.001 par value; 8 authorized; 8 issued and outstanding at November 30, 2021 and May 31, 2021		—		—
Series B convertible preferred stock, $0.001 par value; 400 shares authorized, 19 and 79 shares issued and outstanding at November 30, 2021 and May 31, 2021, respectively		—		—
Common stock, $0.001 par value; 1,000,000 shares authorized, 685,861 and 626,123 issued and 685,418 and 625,680 outstanding at November 30, 2021 and May 31, 2021, respectively		686		626
Additional paid-in capital		589,971		512,796
Accumulated (deficit)		(603,353)		(534,440)
Treasury stock, $0.001 par value; 443 at November 30, 2021 and May 31, 2021		—		—
Total stockholders’ (deficit) equity		(12,696)		(21,018)
Total liabilities and stockholders' (deficit) equity	$	103,699	$	132,080

(1)	See Note 2, “—Correction of Immaterial Misstatements in Prior Period Financial Statements”.

See accompanying notes to consolidated financial statements.

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CytoDyn Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

   Three Months Ended November 30, Six Months Ended November 30,
   2017 2016 2017 2016
Operating expenses:

General and administrative
   $ 1,608,743 $ 1,679,925 $ 3,178,420 $ 3,259,988
Research and development
   9,077,172 4,383,636 17,225,348 8,069,109
Amortization and depreciation
   89,136 92,556 178,282 185,140


Total operating expenses
   10,775,051 6,156,117 20,582,050 11,514,237


Operating loss
   (10,775,051 ) (6,156,117 ) (20,582,050 ) (11,514,237 )
Interest income
   422 5,648 1,206 9,383
Change in fair value of derivative liability
   829,600 1,223,466 466,934 1,223,466
Interest expense:

Amortization of discount on convertible notes
   (728,843 ) —   (1,172,995 ) —
Amortization of debt issuance costs
   (168,429 ) —   (282,129 ) —
Interest related to derivative liability
   —   (540,333 ) (540,333 )
Inducement interest related to warrant exercise
   —   —   (826,252 ) —
Interest on convertible notes payable
   (105,384 ) —   (180,673 ) —


Total interest expense
   (1,002,656 ) (540,333 ) (2,462,049 ) (540,333 )


Loss before income taxes
   (10,947,685 ) (5,467,336 ) (22,575,959 ) (10,821,721 )
Provision for taxes on income
   —   —   —   —


Net loss
   $ (10,947,685 ) $ (5,467,336 ) $ (22,575,959 ) $ (10,821,721 )


Basic and diluted loss per share
   $ (0.07 ) $ (0.04 ) $ (0.15 ) $ (0.08 )


Basic and diluted weighted average common shares outstanding
   157,843,773 136,023,544 154,774,327 130,185,627


	Three months ended November 30,				Six months ended November 30,
	2021		2020		2021		2020
			(Revised) ⁽¹⁾				(Revised) ⁽¹⁾
Revenue:
Product revenue	$	225	$	—	$	266	$	—
Total revenue		225		—		266		—
Cost of goods sold:
Cost of goods sold		52		—		53		—
Total cost of goods sold		52		—		53		—
Gross margin		173		—		213		—
Operating expenses:
General and administrative		16,203		7,551		23,820		17,426
Research and development		9,040		16,446		22,824		31,738
Amortization and depreciation		252		506		528		1,011
Total operating expenses		25,495		24,503		47,172		50,175
Operating loss		(25,322)		(24,503)		(46,959)		(50,175)
Other income (expense):
Loss on extinguishment of convertible notes		(3,312)		(4,169)		(7,963)		(4,169)
Legal settlement		—		—		(1,941)		—
Interest expense:
Finance charges		(1,024)		(231)		(1,059)		(137)
Amortization of discount on convertible notes		(793)		(1,243)		(1,745)		(2,582)
Amortization of debt issuance costs		(23)		(15)		(51)		(19)
Inducement interest expense		(4,704)		(4,217)		(5,232)		(7,562)
Interest on convertible notes payable		(1,426)		(1,047)		(3,112)		(1,613)
Total interest expense		(7,970)		(6,753)		(11,199)		(11,913)
Loss before income taxes		(36,604)		(35,425)		(68,062)		(66,257)
Income tax benefit		—		—		—		—
Net loss	$	(36,604)	$	(35,425)	$	(68,062)	$	(66,257)
Basic and diluted loss per share	$	(0.06)	$	(0.06)	$	(0.11)	$	(0.12)
Basic and diluted weighted average common shares outstanding		662,600		577,945		647,517		566,677

(1)	See Note 2, “—Correction of Immaterial Misstatements in Prior Period Financial Statements”.

See accompanying notes to consolidated financial statements.

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CytoDyn Inc.

Consolidated ~~Statements~~Statement of ~~Cash Flows~~Changes in Stockholders’ (Deficit) Equity

(Unaudited)

(In thousands)

   Six Months Ended November 30,
   2017 2016
Cash flows from operating activities:

Net loss
   $ (22,575,959 ) $ (10,821,721 )
Adjustments to reconcile net loss to net cash used by operating activities:

Amortization and depreciation
   178,282 185,140
Amortization of debt issuance costs
   282,129 —
Amortization of discount on convertible notes
   1,172,995 —
Inducement interest related to warrant exercise
   826,252 —
Interest expense associated with derivative liability
   —   540,333
Change in fair value of derivative liability
   (466,934 ) (1,223,466 )
Stock-based compensation
   529,617 687,634
Changes in current assets and liabilities:

(Increase) decrease in prepaid expenses
   907,606 (2,899,658 )
(Decrease) increase in accounts payable and accrued expenses
   6,256,192 2,760,563


Net cash used in operating activities
   (12,889,820 ) (10,771,175 )


Cash flows from investing activities:

Furniture and equipment purchases
   —   (3,480 )


Net cash used in investing activities
   —   (3,480 )


Cash flows from financing activities:

Proceeds from sale of common stock and warrants
   7,050,651 10,729,500
Proceeds from warrant exercises
   1,647,500 397,880
Proceeds from convertible notes payable
   4,888,500 —
Payment of offering costs
   (1,175,575 ) (1,183,264 )


Net cash provided by financing activities
   12,411,076 9,944,116


Net change in cash
   (478,744 ) (830,539 )
Cash, beginning of period
   1,775,583 9,641,776


Cash, end of period
   $ 1,296,839 $ 8,811,237


Non-cash investing and financing transactions:

Financing costs associated with placement agent warrants
   $ 70,383 $ —


Debt discount associated with convertible notes payable
   $ 1,574,628 $ —


Derivative liability associated with warrants
   $ —   $ 5,179,200


	Preferred stock			Common stock			Treasury stock			Additional		Accumulated		Total stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		(deficit) equity
										(Revised) ⁽¹⁾		(Revised) ⁽¹⁾		(Revised) ⁽¹⁾
Balance May 31, 2021	96	$	—	626,123	$	626	443	$	—	$	512,796	$	(534,440)	$	(21,018)
First Quarter Fiscal Year Ended May 31, 2022
Issuance of stock for convertible note repayment	—		—	11,816		12	—		—		18,483		—		18,495
Issuance of legal settlement warrants	—		—	—		—	—		—		1,744		—		1,744
Exercise of stock options	—		—	300		—	—		—		189		—		189
Stock issued for incentive compensation and tendered for income tax	—		—	1,014		1	—		—		(1)		—		—
Stock issued for private offering ($1.00 per share)	—		—	2,872		3	—		—		2,869		—		2,872
Private warrant exchange	—		—	1,327		1	—		—		774		—		775
Exercise of warrants	—		—	668		1	—		—		502		—		503
Inducement interest expense related to private warrant exchange	—		—	—		—	—		—		528		—		528
Dividends accrued on Series C and D preferred stock	—		—	—		—	—		—		—		(420)		(420)
Stock-based compensation	—		—	—		—	—		—		2,597		—		2,597
Net Loss August 31, 2021	—		—	—		—	—		—		—		(31,458)		(31,458)
Balance August 31, 2021	96		—	644,120		644	443		—		540,481		(566,318)		(25,193)
Second Quarter Fiscal Year Ended May 31, 2022
Issuance of stock for convertible note repayment	—		—	8,162		8	—		—		11,505		—		11,513
Exercise of stock options	—		—	210		—	—		—		200		—		200
Private warrant exchange	—		—	6,593		7	—		—		4,608		—		4,615
Stock issued for private offering ($1.00 - $1.80 per share)	—		—	25,178		25	—		—		27,282		—		27,307
Issuance costs related to stock issued for private offering	—		—	—		—	—		—		(1,418)		—		(1,418)
Conversion of Series B convertible preferred stock to common stock	(60)		—	600		1	—		—		—		—		1
Exercise of warrants	—		—	963		1	—		—		532		—		533
Inducement interest expense related to private warrant exchange	—		—	—		—	—		—		4,704		—		4,704
Dividend declared and paid in common stock on Series B preferred stock ($0.25 per share)	—		—	35		—	—		—		17		(17)		—
Dividends accrued on Series C and D preferred stock	—		—	—		—	—		—		—		(414)		(414)
Stock-based compensation	—		—	—		—	—		—		2,060		—		2,060
Net Loss November 30, 2021	—		—	—		—	—		—		—		(36,604)		(36,604)
Balance November 30, 2021	36	$	—	685,861	$	686	443	$	—	$	589,971	$	(603,353)	$	(12,696)

(1)	See Note 2, “—Correction of Immaterial Misstatements in Prior Period Financial Statements”.

See accompanying notes to consolidated financial statements.

Table of Contents


	Preferred stock			Common stock			Treasury stock			Additional		Accumulated		Total stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		(deficit) equity
										(Revised) ⁽¹⁾		(Revised) ⁽¹⁾		(Revised) ⁽¹⁾
Balance May 31, 2020	109	$	—	519,261	$	519	286	$	—	$	372,301	$	(375,301)	$	(2,481)
First Quarter Fiscal Year Ended May 31, 2021
Issuance of stock for convertible note repayment	—		—	2,119		2	—		—		9,535		—		9,537
Issuance of legal settlement warrants	—		—	4,000		4	—		—		(4)		—		—
Exercise of stock options	—		—	100		—	—		—		39		—		39
Stock issued for incentive compensation and tendered for income tax	—		—	323		—	156		—		828		—		828
Conversion of Series B preferred stock to common stock	(5)		—	50		—	—		—		—		—		—
Private warrant exchange	—		—	16,544		17	—		—		7,787		—		7,804
Exercise of warrants	—		—	27,928		28	—		—		13,441		—		13,469
Inducement interest expense related to private warrant exchange	—		—	—		—	—		—		3,345		—		3,345
Offering costs related to private warrant exchange	—		—	—		—	—		—		(364)		—		(364)
Dividend declared and paid on Series B preferred stock ($0.25 per share)	—		—	—		—	—		—		—		(243)		(243)
Dividends accrued on Series C and D preferred stock	—		—	—		—	—		—		—		(420)		(420)
Stock-based compensation	—		—	—		—	—		—		2,086		—		2,086
Net Loss August 31, 2020	—		—	—		—	—		—		—		(30,832)		(30,832)
Balance August 31, 2020	104		—	570,325		570	442		—		408,994		(406,796)		2,768
Second Quarter Fiscal Year Ended May 31, 2021
Issuance of stock for convertible note repayment	—		—	4,293		4	—		—		11,549		—		11,553
Exercise of stock options	—		—	10		—	—		—		10		—		10
Stock issued for private offering ($1.50 per share)	—		—	667		1	—		—		999		—		1,000
Private warrant exchange	—		—	12,480		13	—				4,583				4,596
Exercise of warrants	—		—	2,504		2	—				1,737				1,739
Inducement interest expense related to private warrant exchange	—		—	—		—	—		—		4,217		—		4,217
Dividends accrued on Series C and D preferred stock	—		—	—		—	—		—		—		(415)		(415)
Stock-based compensation	—		—	—		—	—		—		3,423		—		3,423
Net Loss November 30, 2020	—		—	—		—	—		—		—		(35,425)		(35,425)
Balance November 30, 2020	104	$	—	590,279	$	590	442	$	—	$	435,512	$	(442,636)	$	(6,534)

(1)	See Note 2, “—Correction of Immaterial Misstatements in Prior Period Financial Statements”.

See accompanying notes to consolidated financial statements.

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CytoDyn Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six months ended November 30,
	2021		2020
			(Revised) ⁽¹⁾
Cash flows from operating activities:
Net loss	$	(68,062)	$	(66,257)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation		528		1,011
Amortization of debt issuance costs		51		19
Amortization of discount on convertible notes		1,745		2,582
Non-cash warrant issuance cost for legal settlement		1,744		—
Inducement interest expense		5,232		7,562
Inventory reserve and write-offs		3,357		4,835
Stock-based compensation		4,657		7,115
Loss on extinguishment of convertible notes		7,963		4,169
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(225)		—
Decrease (increase) in inventories, net		1,565		(84,759)
(Increase) decrease in prepaid expenses		(1,994)		1,072
(Decrease) increase in accounts payable and accrued expenses		(17,193)		61,532
Net cash used in operating activities		(60,632)		(61,119)
Cash flows from investing activities:
Furniture and equipment purchases		(13)		(77)
Net cash used in investing activities		(13)		(77)
Cash flows from financing activities:
Proceeds from warrant transactions, net of offering costs		5,390		12,035
Proceeds from sale of common stock and warrants, net of issuance costs		28,761		1,000
Proceeds from warrant exercises		1,036		15,209
Payment on convertible notes		—		(950)
Release of restricted cash held in trust for warrant tender offer		—		(10)
Proceeds from stock option exercises		390		48
Payment of payroll withholdings related to tender of common stock for income tax withholding		—		(778)
Proceeds from convertible notes payable, net		—		50,000
Dividend declared and paid on Series B preferred stock		—		(243)
Net cash provided by financing activities		35,577		76,311
Net change in cash		(25,068)		15,115
Cash and restricted cash, beginning of period		33,943		14,292
Cash and restricted cash, end of period	$	8,875	$	29,407
Cash and restricted cash consisted of the following:
Cash	$	8,875	$	29,407
Restricted cash		—		—
Total cash and restricted cash	$	8,875	$	29,407
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	57	$	138
Non-cash investing and financing transactions:
Issuance of common stock for principal and interest of convertible notes	$	22,045	$	16,922
Accrued dividends on convertible Series C and D preferred stock	$	834	$	835
Dividend declared and paid in common stock on Series B preferred stock	$	17	$	—

(1)	See Note 2, “—Correction of Immaterial Misstatements in Prior Period Financial Statements”.

See accompanying notes to consolidated financial statements.

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CYTODYN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF NOVEMBER 30, ~~2017~~2021

(UNAUDITED)

Note ~~1 –~~1. Organization

CytoDyn Inc. (the “Company”) was originally incorporated under the laws of Colorado on May 2, 2002 under the name RexRay Corporation ~~(its previous name)~~ and, effective August 27, 2015, reincorporated under the laws of Delaware. ~~We are~~The Company is a ~~clinical-stage~~late-stage biotechnology company developing innovative treatments for multiple therapeutic indications based on leronlimab, a novel humanized monoclonal antibody targeting the CCR5 receptor. Leronlimab is in a class of therapeutic monoclonal antibodies designed to address unmet medical needs for which the Company is focused on developing treatments in the ~~clinical development and potential commercialization~~areas of ~~humanized monoclonal antibodies to treat Human Immunodeficiency Virus~~human immunodeficiency virus (“HIV”) ~~infection. Our lead product candidate, PRO 140,~~, cancer, immunology, and novel coronavirus disease (“COVID-19”).

Leronlimab belongs to a class of HIV therapies known as entry ~~inhibitors. These therapies~~inhibitors which block HIV from entering ~~into~~ and infecting ~~certain~~specific cells. For cancer and immunology, the CCR5 receptor also appears to be implicated in human metastasis and in immune-mediated illnesses such as triple-negative breast cancer, other metastatic solid tumor cancers, and non-alcoholic steatohepatitis (“NASH”). For COVID-19, the Company believes leronlimab may be shown to provide therapeutic benefit by enhancing the immune response and also mitigating the “cytokine storm” that leads to morbidity and mortality in patients experiencing this syndrome.

~~The Company is developing a class of therapeutic monoclonal antibodies to address unmet medical needs in the areas of HIV and graft versus host disease.~~

Note ~~2 –~~2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying ~~consolidated financial statements are~~ unaudited interim Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiary, CytoDyn Operations Inc., and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) ~~and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the~~for interim financial ~~results for these periods. The consolidated financial statements and notes thereto are presented as prescribed by Form10-Q.~~ ~~Accordingly, certain~~ information, and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements, ~~for the fiscal years ended May 31, 2017~~summary of significant accounting policies and ~~2016 and notes thereto~~footnotes included in the ~~Company’s~~ Annual Report on Form10-K, as amended by Amendment No. 1 filed with the SEC on September 28, 2021, for the ~~fiscal~~ year ended May 31, ~~2017, filed with~~2021 (the “2021 Form 10-K”). Accordingly, certain disclosures required by U.S. GAAP and normally included in Annual Reports on Form 10-K have been condensed or omitted from this report; however, except as disclosed herein, there has been no material change in the ~~Securities~~information disclosed in the notes to Consolidated Financial Statements included in the 2021 Form 10-K. All intercompany transactions and ~~Exchange Commission on July 20, 2017.~~balances have been eliminated.

It is the opinion of management that all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is identical to its comprehensive income or loss. Operating results for the ~~three and six months ended November 30, 2017~~periods presented are not necessarily indicative of ~~the~~expected results ~~that may be expected~~ for the ~~entire~~full year. ~~In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three andsix-month~~ periods ended November 30, 2017 and November 30, 2016, (b) the financial position at November 30, 2017 and (c) cash flows for the six month periods ended November 30, 2017 and November 30, 2016.

~~Principles of Consolidation~~

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, AGTI and CVM, both of which are dormant entities. All intercompany transactions and balances are eliminated in consolidation.

Reclassifications

Certain prior year and prior quarter amounts shown in the accompanying ~~consolidated financial statements~~Consolidated Financial Statements have been reclassified to conform to the ~~2017~~current period presentation. These reclassifications did not have any effect on ~~total current assets, total assets, total current liabilities, total liabilities, total~~the Company’s financial position, results of operations, stockholders’ (deficit) equity, or net ~~loss or loss per share.~~cash flows as previously reported.

Going Concern

The consolidated accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying ~~consolidated financial statements,~~Consolidated Financial Statements, the Company had losses for all periods presented. The Company

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incurred a net loss of ~~$22,575,959~~approximately $68.1 million for the six months ended November 30, ~~2017~~2021 and has an accumulated deficit of ~~$145,565,674~~approximately $603.4 million as of November 30, ~~2017.~~2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The ~~consolidated financial statements~~Consolidated Financial Statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain additional operating capital, complete development of its product ~~candidates,~~candidate, leronlimab, obtain ~~U.S. Food & Drug Administration (“FDA”)~~ approval to commercialize leronlimab from regulatory agencies, continue to outsource manufacturing of ~~the product candidates,~~leronlimab, and ultimately achieve ~~initial~~substantial revenues and attain profitability. The Company ~~is currently engaging~~continues to engage in significant research and development activities related to ~~these product candidates,~~leronlimab for multiple indications and expects to incur significant research and development expenses in the future primarily related to its clinical trials. These research and development activities are subject to significant risks and uncertainties. The Company intends to finance its future development activities and its working capital needs largely from the sale of equity and debt securities, combined with additional funding from other traditional sources. There can be no assurance, however, that the Company will be successful in these endeavors.

Use of Estimates

The preparation of the ~~consolidated financial statements~~Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and ~~assumptions~~judgments that affect the reported amounts of assets, ~~and~~ liabilities, ~~and~~ the disclosure of contingent assets and liabilities at the date of ~~consolidated financial statements~~Consolidated Financial Statements, and the reported amounts of ~~revenues~~revenue and expenses during the reporting period. Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the recent coronavirus disease could have on our significant accounting estimates and assumptions. The Company’s estimates are based on historical experience and on various market and other relevant, appropriate assumptions. Significant estimates include, but are not limited to, those relating to stock-based compensation, capitalization of pre-launch inventories, reserve for excess and obsolete inventories, revenue recognition, research and development expenses, determination of right of use assets under lease transactions and related lease obligations, commitments and contingencies, and the assumptions used to value warrants, warrant modifications and useful lives for property and equipment and related depreciation calculations. Actual results could differ from ~~those~~these estimates.

Correction of Immaterial Misstatements in Prior Period Financial Statements

During the preparation of the quarterly financial statements as of and for the period ended November 30, 2021, the Company identified an error in how non-cash inducement interest expense was calculated in previous reporting periods dating back to fiscal year 2018. The original inducement expense model was designed to calculate non-cash inducement interest expense specific to inducements that modified the warrant term (e.g., extension of the term or modification of exercise price) without settling the instrument. However, starting in fiscal year 2018, inducements were primarily structured to result in a settlement of the warrant, not merely a modification of a warrant that would remain outstanding for some period. The error was identified when the model started to calculate a gain on substantially all inducements, which was inconsistent with the economics of the arrangements. The error resulted in an understatement of non-cash inducement interest expense and additional paid-in capital.

The Company assessed the materiality of the misstatement in accordance with Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections, as well as SEC Staff Accounting Bulletins No. 99, Materiality, and No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and concluded that the misstatement was not material to the Company’s consolidated financial position for the prior periods and, accordingly, that amendments of previously filed reports were not required. However, the Company determined that the impact of the corrections would be too significant to record in the quarter ended November 30, 2021. As such, the revisions for the correction are reflected in the accompanying balance sheet as of May 31, 2021, the statements of operations for the six months ended November 30, 2021 and the three and six months ended November 30, 2020, changes in stockholders’ (deficit) equity for the three months ended August 31, 2021 and 2020 and November 30, 2020, and cash flows for the six months ended November 30, 2021 and 2020. Financial reporting periods that are affected but not presented herein will be revised, as applicable, in future

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periods and filings. The errors had no impact on operating loss, cash, net cash used in or provided by operating, financing, and investing activities, assets, liabilities, commitments and contingencies, total stockholders’ (deficit) equity, number of shares issued and outstanding, basic and diluted weighted average common shares outstanding, and number of shares available for future issuance for any period presented.

The following tables present a summary of the impact by financial statement line item of the corrections:


	As of and For the Year Ended May 31, 2019
(in thousands)	As Previously Reported		Adjustments		As Revised
Inducement interest expense	$	(196)	$	(4,532)	$	(4,728)
Total interest expense	$	(3,313)	$	(4,532)	$	(7,845)
Loss before income taxes	$	(59,014)	$	(4,532)	$	(63,546)
Income tax benefit	$	2,827	$	—	$	2,827
Net loss	$	(56,187)	$	(4,532)	$	(60,719)
Basic and diluted loss per share	$	(0.21)	$	(0.02)	$	(0.23)
Additional paid-in capital ⁽¹⁾	$	220,120	$	5,057	$	225,177
Accumulated (deficit) ⁽¹⁾	$	(229,363)	$	(5,057)	$	(234,420)
^{(1) Includes adjustment of}^$525^{for the fiscal year ended May 31, 2018.}


	As of and For the Year Ended May 31, 2020
(in thousands, except per share amount)	As Previously Reported		Adjustments		As Revised
Inducement interest expense	$	(7,904)	$	(15,533)	$	(23,437)
Total interest expense	$	(18,219)	$	(15,533)	$	(33,752)
Loss before income taxes	$	(124,403)	$	(15,533)	$	(139,936)
Net loss	$	(124,403)	$	(15,533)	$	(139,936)
Basic and diluted loss per share	$	(0.30)	$	(0.04)	$	(0.34)
Additional paid-in capital ⁽¹⁾	$	351,711	$	20,590	$	372,301
Accumulated (deficit) ⁽¹⁾	$	(354,711)	$	(20,590)	$	(375,301)
^{(1) Includes adjustments of}^$4,532^and^$525^{for the fiscal years ended May 31, 2019 and 2018, respectively.}


	Three months ended November 30, 2020						Six months ended November 30, 2020
(in thousands, except per share amount)	As Previously Reported		Adjustments		As Revised		As Previously Reported		Adjustments		As Revised
Inducement interest expense	$	(3,758)	$	(459)	$	(4,217)	$	(7,103)	$	(459)	$	(7,562)
Total interest expense	$	(6,294)	$	(459)	$	(6,753)	$	(11,454)	$	(459)	$	(11,913)
Loss before income taxes	$	(34,966)	$	(459)	$	(35,425)	$	(65,798)	$	(459)	$	(66,257)
Net loss	$	(34,966)	$	(459)	$	(35,425)	$	(65,798)	$	(459)	$	(66,257)
Basic and diluted loss per share	$	(0.06)	$	—	$	(0.06)	$	(0.12)	$	—	$	(0.12)


	Three months ended February 28, 2021						Nine months ended February 28, 2021
(in thousands, except per share amount)	As Previously Reported		Adjustments		As Revised		As Previously Reported		Adjustments		As Revised
Inducement interest expense	$	(4,139)	$	(1,221)	$	(5,360)	$	(11,242)	$	(1,680)	$	(12,922)
Total interest expense	$	(5,576)	$	(1,221)	$	(6,797)	$	(17,031)	$	(1,680)	$	(18,711)
Loss before income taxes	$	(43,985)	$	(1,221)	$	(45,206)	$	(109,783)	$	(1,680)	$	(111,463)
Net loss	$	(43,985)	$	(1,221)	$	(45,206)	$	(109,783)	$	(1,680)	$	(111,463)
Basic and diluted loss per share	$	(0.08)	$	—	$	(0.08)	$	(0.18)	$	—	$	(0.18)

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	As of and For the Year Ended May 31, 2021
(in thousands, except per share amount)	As Previously Reported		Adjustments		As Revised
Inducement interest expense	$	(11,366)	$	(2,556)	$	(13,922)
Total interest expense	$	(19,556)	$	(2,556)	$	(22,112)
Loss before income taxes	$	(154,674)	$	(2,556)	$	(157,230)
Net loss	$	(154,674)	$	(2,556)	$	(157,230)
Basic and diluted loss per share	$	(0.27)	$	—	$	(0.27)
Additional paid-in capital ⁽¹⁾	$	489,650	$	23,146	$	512,796
Accumulated (deficit) ⁽¹⁾	$	(511,294)	$	(23,146)	$	(534,440)
^{(1) Includes adjustments of}^$15,533^,^$4,532^{, and}^$525^{for the fiscal years ended May 31, 2020, 2019 and 2018, respectively.}


	As of and For the Three months ended August 31, 2021
(in thousands, except per share amount)	As Previously Reported		Adjustments		As Revised
Inducement interest expense	$	(9)	$	(519)	$	(528)
Total interest expense	$	(2,710)	$	(519)	$	(3,229)
Loss before income taxes	$	(30,939)	$	(519)	$	(31,458)
Net loss	$	(30,939)	$	(519)	$	(31,458)
Basic and diluted loss per share	$	(0.05)	$	—	$	(0.05)
Additional paid-in capital	$	516,816	$	23,665	$	540,481
Accumulated (deficit)	$	(542,653)	$	(23,665)	$	(566,318)


	As Previously Reported						Adjustments						As Revised
(in thousands)	Additional paid-in capital		Accumulated (deficit)		Total stockholders' (deficit) equity		Additional paid-in capital		Accumulated (deficit)		Total stockholders' (deficit) equity		Additional paid-in capital		Accumulated (deficit)		Total stockholders' (deficit) equity
First Quarter Fiscal Year Ended May 31, 2021
Inducement interest expense related to private warrant exchange	$	3,345	$	—	$	3,345	$	—	$	—	$	—	$	3,345	$	—	$	3,345
Net Loss August 31, 2020		—		(30,832)		(30,832)		—		—		—		—		(30,832)		(30,832)
Balance August 31, 2020	$	388,404	$	(386,206)	$	2,768	$	20,590	$	(20,590)	$	—	$	408,994	$	(406,796)	$	2,768

Second Quarter Fiscal Year Ended May 31, 2021
Inducement interest expense related to private warrant exchange	$	3,758	$	—	$	3,758	$	459	$	—	$	459	$	4,217	$	—	$	4,217
Net Loss November 30, 2020		—		(34,966)		(34,966)		—		(459)		(459)		—		(35,425)		(35,425)
Balance November 30, 2020	$	414,463	$	(421,587)	$	(6,534)	$	21,049	$	(21,049)	$	—	$	435,512	$	(442,636)	$	(6,534)

Third Quarter Fiscal Year Ended May 31, 2021
Inducement interest expense related to private warrant exchange	$	4,139	$	—	$	4,139	$	1,221	$	—	$	1,221	$	5,360	$	—	$	5,360
Net Loss February 28, 2021		—		(43,985)		(43,985)		—		(1,221)		(1,221)		—		(45,206)		(45,206)
Balance February 28, 2021	$	449,759	$	(465,983)	$	(15,795)	$	22,270	$	(22,270)	$	—	$	472,029	$	(488,253)	$	(15,795)

Fiscal Year Ended May 31, 2021
Inducement interest expense related to private warrant exchange	$	11,366	$	—	$	11,366	$	2,556	$	—	$	2,556	$	13,922	$	—	$	13,922
Net Loss May 31, 2021		—		(154,674)		(154,674)		—		(2,556)		(2,556)		—		(157,230)		(157,230)
Balance May 31, 2021	$	489,650	$	(511,294)	$	(21,018)	$	23,146	$	(23,146)	$	—	$	512,796	$	(534,440)	$	(21,018)

First Quarter Fiscal Year Ended May 31, 2022
Inducement interest expense related to private warrant exchange	$	9	$	—	$	9	$	519	$	—	$	519	$	528	$	—	$	528
Net Loss August 31, 2021		—		(30,939)		(30,939)		—		(519)		(519)		—		(31,458)		(31,458)
Balance August 31, 2021	$	516,816	$	(542,653)	$	(25,193)	$	23,665	$	(23,665)	$	—	$	540,481	$	(566,318)	$	(25,193)

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Cash

Cash is maintained at federally insured financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. Balances in excess of federally insured limits atas of November 30, ~~2017~~2021 and May 31, ~~2017~~2021 approximated ~~$1.2~~$8.6 million and ~~$1.5~~$33.7 million, respectively.

Identified Intangible Assets

The Company follows the provisions of ~~FASB~~ ASC ~~Topic~~ 350, Intangibles-Goodwill and Other, which establishes accounting standards for the impairment of long-lived assets such as intangible assets subject to amortization. The Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying value, the asset is considered impaired. Impairment losses are measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset. ~~There were no impairment charges for~~During the three and six months ended November 30, ~~2017~~2021 and ~~2016.~~2020, there were 0 impairment charges. The value of the Company’s patents would be significantly impaired by any adverse developments as they relate to the clinical trials pursuant to the patents acquired as discussed in ~~Notes 7~~Note 8.

Revenue Recognition

The Company accounts for and 9.recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company’s revenue is generated solely through the sale of leronlimab. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Contracts with customers are generally in the form of a written purchase order, that outlines the promised goods and the agreed upon price. Such orders are often accompanied by a master supply or distribution agreement that establishes the terms and conditions, rights of the parties, delivery terms, and pricing. The Company assesses collectability based on a number of factors, including creditworthiness of the customer.

For the Company’s sole contract to date, the customer submits purchase orders for the purchase of a specified quantity of leronlimab vials; therefore, the delivery of the ordered quantity per the purchase order is accounted for as one performance obligation. The Company does not offer discounts or rebates.

The transaction price is determined based on the agreed upon rates per vial in the purchase order or master supply agreement applied to the quantity of leronlimab vials that was requested by the customer in the purchase order. As the Company’s contracts include only one performance obligation, the delivery of the product to the customer, all of the transaction price is allocated to the one performance obligation. Therefore, upon delivery of the product quantity equal to the quantity requested in the purchase order, there are no remaining performance obligations. The Company’s shipping and handling activities are considered a fulfillment cost. The Company has elected to exclude all sales and value added taxes from the measurement of the transaction price. The Company has not adjusted the transaction price for significant financing since the time period between the transfer of goods and payment is less than one year.

The Company recognizes revenue at a point in time when control of the products is transferred to the customer. Management applies judgment in evaluating when a customer obtains control of the promised good which is generally when the product is delivered to the customer. The Company’s customer contract includes a standard assurance warranty to guarantee that its products comply with agreed specifications. The Company grants a conditional right of return of product in the customer’s inventory upon an adverse regulatory ruling. The Company continually evaluates the probability of such occurrence and if necessary, will defer revenue recognized based on its estimate of the right of return, which takes into account the probability that an adverse ruling will occur and its estimate of product in the customer’s inventory.

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Disaggregation of Revenue

The Company’s revenues are derived solely from the sale of leronlimab vials. The Company believes the disaggregation of revenues, as seen on the Consolidated Statement of Operations, is an appropriate level of detail for its primary activity.

Contract Assets and Liabilities

The Company’s performance obligations for its contracts with customers are satisfied at a point in time through the delivery of leronlimab vials to its customer. Accordingly, the Company did not have any contract assets or liabilities as of November 30, 2021. The Company did not have revenue during the six months ended November 30, 2020 and did not have any contract assets or liabilities as of that date. For all periods presented, the Company did not recognize revenue from amounts that were previously included in a contract liability balance. In addition, for all periods presented, there was no revenue recognized in a reporting period from performance obligations satisfied in previous periods.

Performance Obligations

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under the Company’s contract, each unit of product delivered to the customer represents a separate performance obligation; therefore, future deliveries of the product are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

Research and Development

Research and development costs are expensed as incurred. Clinical trial costs incurred through third parties are expensed as the contracted work is performed. ~~Where contingent~~Contingent milestone payments that are due to third parties under research and development collaboration arrangements or other contractual agreements ~~the milestone payment obligations~~ are expensed when the milestone conditions are probable and the amount of payment is reasonably estimable. See Notes 9 and 10.

~~Pre-launch~~Inventory

~~The~~Previously Expensed Inventory

To date, the Company ~~mayscale-up~~has recorded revenue related to sales of vials for emergency purposes only, solely to treat critically ill COVID-19 patients in the Philippines under a Compassionate Special Permit. Cost of goods sold has been minimal because the vials sold were expensed in prior periods as research and ~~make commercial quantities of its product candidate~~development expense, as they were manufactured prior to the ~~date~~Company’s capitalization of pre-launch inventories as described below. Accordingly, all inventory amounts as of November 30, 2021 represent pre-launch inventories, and do not include any inventories previously expensed as research and development expense.

Capitalized Pre-launch Inventories

The Company values inventory at the lower of cost or net realizable value using the average cost method. Inventories consist of raw materials, bulk drug substance, and drug product in unlabeled vials to be used for commercialization of the Company’s biologic, leronlimab, which is in the regulatory approval process. The consumption of raw materials during production is classified as work-in-progress until saleable. Once it ~~anticipates~~is determined to be in saleable condition, following regulatory approval, inventory is classified as finished goods. Inventory is evaluated for recoverability by considering the likelihood that ~~such product~~revenue will ~~receive final FDA approval. Thescale-up~~ ~~and commercial production~~be obtained from the future sale of~~pre-launch~~ ~~inventories involves~~ the ~~risk that such products may not be approved for marketing by~~related inventory, in light of the ~~FDA on a timely basis, or ever. This risk notwithstanding, the Company mayscale-up~~ ~~and buildpre-launch~~ ~~inventories of product that have not yet received final governmental approval when the Company believes that such action is appropriate in relation to the commercial value~~status of the product ~~launch opportunity.~~ within the regulatory approval process.

The ~~determination~~Company evaluates its inventory levels on a quarterly basis and writes down inventory that has become obsolete or has a cost in excess of its expected net realizable value, and inventory quantities in excess of expected requirements. In assessing the lower of cost or net realizable value for pre-launch inventory, the Company relies on

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independent analyses provided by third parties knowledgeable about the range of likely commercial prices comparable to current comparable commercial product.

The Company capitalizes inventories procured or produced in preparation for product launches sufficient to support estimated initial market demand. Typically, capitalization of such inventory begins when the results of clinical trials have reached a status sufficient to support regulatory approval, uncertainties regarding ultimate regulatory approval have been significantly reduced, and the Company has determined it is probable that these capitalized costs will provide future economic benefit in excess of capitalized costs. The material factors considered by the Company in evaluating these uncertainties include the receipt and analysis of positive Phase 3 clinical trial results for the underlying product candidate, results from meetings with the relevant regulatory authorities prior to the filing of regulatory applications, and status of the Company’s regulatory applications. The Company closely monitors the status of the product within the regulatory review and approval process, including all relevant communications with regulatory authorities. If the Company is aware of any specific material risks or contingencies other than the normal regulatory review and approval process or if there are any specific issues identified relating to safety, efficacy, manufacturing, marketing or labeling, the related inventory may no longer qualify for capitalization.

Anticipated future sales, shelf lives, and expected approval date are considered when evaluating realizability of capitalized inventory. The shelf-life of a product is determined as part of the regulatory approval process; however, in assessing whether to capitalize ~~is made once~~pre-launch inventory, the Company ~~(or its third party development partners) has filed a Biologics License Application that has been acknowledged by~~considers the ~~FDA as containing sufficient information~~product stability data of all of the pre-approval inventory procured or produced to ~~allow~~date to determine whether there is adequate shelf life. As inventories approach their shelf-life expiration, the ~~FDA~~Company may perform additional stability testing to ~~conduct its review~~determine if the inventory is still viable, which can result in an ~~efficient and timely manner and management is reasonably~~extension of its shelf-life. Further, in addition to performing additional stability testing, certain ~~that all regulatory and legal requirements will~~raw materials inventory may be ~~satisfied. This determination is based on the particular facts and circumstances relating~~sold in its then current condition prior to ~~the expected FDA approval of the drug product being considered. As of November 30, 2017 and May 31, 2017, the Company did not havepre-launch~~ ~~inventory that qualified for capitalization pursuant to U.S. GAAP ASC 330 “Inventory.”~~reaching expiration.

Fair Value of Financial Instruments

AtThe Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued liabilities, short-term and long-term lease liabilities, and short-term and long-term debt. As of November 30, ~~2017 and May 31, 2017,~~2021, the carrying value of the Company’s cash, accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to the short-term maturity of the instruments. Short-term and long-term debt are reported at amortized cost in the Consolidated Balance Sheets which approximate fair value. The remaining financial instruments are reported in the Consolidated Balance Sheets at amounts that approximate current fair values.

From time to time, the Company ~~carries~~may have derivative financial instruments which are recorded at fair value, as required by U.S. GAAP.

Derivative financial instruments consist of financial instruments that contain a notional amount and one or more underlying variables (e.g., interest rate, security price, variable conversion rate or other variables), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. The Company follows the provisions of ~~FASB~~ ASC 815, ~~“Derivatives~~Derivatives and ~~Hedging” (“ASC 815”),~~Hedging, as ~~their~~its instruments are typically recorded as a derivative ~~liability,~~liabilities, at fair value, and ~~FASB~~ ASC 480, ~~“Distinguishing~~Distinguishing Liabilities from ~~Equity” (ASC 480),~~Equity, as it relates to warrant ~~liability,~~liabilities, with changes in fair value reflected in ~~income.~~

~~Fair Value Hierarchy~~the Consolidated Statement of Operations.

The fair value hierarchy specifies three levels of inputs that may be used to measure fair value ~~are~~ as follows:

~~Level 1. Quoted prices in active markets for identical assets or liabilities.~~

● Level 1. Quoted prices in active markets for identical assets or liabilities.
● Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.
● Level 3. Unobservable inputs to the valuation methodology which are significant to the measurement of the fair value of assets or liabilities. These Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that cannot be corroborated with observable market data.

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The Company did not have any assets or liabilities quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include~~non-binding~~ ~~market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.~~

~~Level 3. Unobservable inputs to the valuation methodology are significant to the measurement of the fair value of assets or liabilities. These Level 3 inputs also includenon-binding~~ ~~market consensus prices ornon-binding~~ ~~broker quotes that the Company was unable to corroborate with observable market data.~~

~~Liability~~ measured at fair value ~~on a recurring basis by level within~~using the fair value hierarchy as of November 30, ~~2017~~2021 and May 31, ~~2017 is as follows:~~2021.

   Fair Value Measurement at    Fair Value Measurement at
   November 30, 2017 (1)    May 31, 2017 (1)
   Using       Using
   Level 3    Total    Level 3    Total
Liability:

Derivative liability
   $ 2,547,733    $ 2,547,733    $ 3,014,667    $ 3,014,667








Total liability
   $ 2,547,733    $ 2,547,733    $ 3,014,667    $ 3,014,667

~~(1)~~

~~The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of November 30, 2017 and May 31, 2017.~~

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurements. These instruments are not quoted on an active market, so the Company uses a Binomial Lattice Model to estimate the value of the derivative liability. A Binomial Lattice Model was used because management believes it reflects all the assumptions that market participants would likely consider in negotiating the transfer of the warrant. The Company’s derivative liability is classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation model. The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended November 30, 2017 and the year ended May 31, 2017:

Investor warrants issued with registered direct equity offering
   $ 4,360,000
Placement agent warrants issued with registered direct equity offering
   819,200
Fair value adjustments
   (2,164,533 )


Balance at May 31, 2017
   3,014,667


Fair value adjustments
   (466,934 )


Balance at November 30, 2017
   $ 2,547,733

Stock-Based Compensation

U.S. GAAP requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award (requisite service period) or when designated milestones have been achieved.

The Company accounts for stock-based awards established by the fair market value of the instrument using the Black-Scholes option pricing model utilizing certain weighted average assumptions including stock price volatility, expected term and risk-free interest rates, as of the grant date. ~~The risk-free interest rate assumption is based upon observed interest rates appropriate~~In accordance with U.S. GAAP, for the expected term of the stock-based award. The expected volatility is based on the historical volatility of the Company’s common stock on monthly intervals. The computation of the expected option term is based on the “simplified method,” as the Company issuances are considered “plain vanilla” options. For stock-based awards with defined vesting, the Company recognizes compensation expense over the requisite service ~~period or~~periods, when designated milestones have been ~~achieved.~~achieved or when pre-defined performance conditions are met. The Company estimates forfeitures at the time of grant and ~~revised,~~revises its estimates, if necessary, in subsequent periods if actual forfeitures differ from ~~those~~such estimates. Based on limited historical experience of forfeitures, the Company estimated future unvested forfeitures at 0% for all periods presented.

~~Common Stock~~

On March 18, 2016, at a special meeting of stockholders, a proposal was approved to increase the total number of authorized shares of common stock of the Company from 200,000,000 to 250,000,000. On August 24, 2016, at the 2016 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 250,000,000 to 350,000,000. On August 24, 2017, at the 2017 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 350,000,000 to 375,000,000. Subsequent to each stockholders’ meeting, an amendment to the Company’s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to each authorized share increase.

~~Preferred Stock~~

~~The Company’s Board of Directors is authorized to issue up to 5,000,000 shares of preferred stock without stockholder approval. As of November 30, 2017,~~ Historically, the Company has ~~authorized~~issued restricted common stock units subject to vesting to executives or third parties as compensation for services rendered. Such stock awards are valued at fair market value on the ~~issuance of 400,000 shares of Series B convertible preferred stock, of which 92,100 shares were outstanding. The remaining preferred shares authorized have no specified rights.~~

~~Debt Discount~~

During the six months ended November 30, 2017 and the year ended May 31, 2017, the Company incurred approximately $1.6 million and $92,000 of debt discount related to the issuance of short-term convertible notes issued with detachable warrants, as described in Note 4. The discount is amortized over the lifeeffective date of the ~~convertible promissory notes. During the six months ended November 30, 2017, the Company recorded approximately $1.2 million of related amortization.~~

~~Debt Issuance Cost~~

During the six months ended November 30, 2017, the Company incurred direct costs associated with the issuance of short-term convertible notes, as described in Note 4, and recorded approximately $0.4 million of debt issuance costs and recognized approximately $0.3 million of related amortization.

~~Registered Direct Offering Costs~~

During the six months ended November 30, 2017 and the year ended May 31, 2017, the Company incurred approximately $0.4 million and $1.8 million in direct incremental costs associated with the sale of equity securities, as described in Note 11. The offering costs were recorded as a component of equity when the proceeds were received.

~~Stock for Services~~Company’s obligation.

The Company ~~periodically~~also issues stock options or warrants to directors, employees, consultants and advisors for various services. The Black-Scholes option pricing model, as described more fully above, is ~~utilized~~used to measure the fair value of the equity instruments on the date of issuance. The Company recognizes the compensation expense associated with the equity instruments over the requisite service or vesting period.

Debt

The Company has historically issued promissory notes at a discount and has incurred direct debt issuance costs. Debt discount and issuance costs are netted against the debt and amortized over the life of the convertible promissory note in accordance with ASC 470-35, Debt Subsequent Measurement.

Offering Costs

The Company periodically incurs direct incremental costs associated with the sale of equity securities as fully described in Note 7. The costs are recorded as a component of equity upon receipt of the proceeds.

Loss per Common Share

Basic loss per share is computed by dividing the net loss adjusted for preferred stock dividends by the weighted average number of ~~shares of~~ common ~~stock~~shares outstanding during the period. Diluted loss per share would include the weighted average ~~number of~~common shares ~~of common stock~~ outstanding and potentially dilutive common stock equivalents. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share. ~~For this reason, common stock options and warrants to purchase 87,551,801 and 64,415,987~~

The table below shows the number of shares of common stock issuable upon the exercise, vesting or conversion of outstanding options, warrants, unvested restricted stock units (including those subject to performance conditions), convertible notes, and convertible preferred stock (including undeclared dividends) that were not included in the computation of basic and diluted weighted average number of shares of common stock outstanding for the three and six months ended November 30, ~~2017~~2021 and November 30, ~~2016, respectively. Additionally,~~2020:


	Three and six months ended November 30,
(in thousands)	2021	2020
Stock options, warrants & unvested restricted stock units	73,223	82,796
Convertible notes payable	12,000	12,000
Convertible preferred stock	34,089	31,490

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Income Taxes

The Company computes its quarterly taxes under the effective tax rate method based on applying an anticipated annual effective rate to its year-to-date income, except for discrete items. Income taxes for discrete items are computed and recorded in the period that the specific transaction occurs.

The Company’s net tax expense for the three and six months ended November 30, 2021 and November 30, 2020, was 0. The Company’s effective tax rate of 0% differed from the statutory rate of 21% because the Company has a full valuation allowance as of November 30, ~~2017, shares of Series B convertible preferred stock in the aggregate of 92,100 shares can potentially convert into 921,000 shares of common stock.~~

~~Income Taxes~~

~~Deferred taxes are provided on the asset~~2021 and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Future tax benefits for net operating loss carry forwards are recognized to the extent that realization of these benefits is considered more likely than not. Deferred tax assets are reduced by a valuation allowance when, in the opinion ofMay 31, 2021, as management does not consider it is more likely than not that ~~some portion or all of~~ the benefits from the net deferred ~~tax assets~~taxes will ~~not~~ be realized.

~~The Company follows the provisions of FASB ASC740-10~~ ~~“Uncertainty in Income Taxes” (“ASC740-10”).~~ A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits for all periods presented. The Company has not recognized interest expense or penalties as a result of the implementation of ASC~~740-10.~~ If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefit in interest expense and penalties in operating expenses and penalties in operating expenses.

~~Note 3 – Recent~~Recently Adopted Accounting Pronouncements

Recent accounting pronouncements, other than below, issued by the FASB (including its EITF), the AICPA and the SEC did not or are not believed by management to have a material effect on the Company’s present or future financial statements.

In ~~July 2017,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. ~~2017-11,~~2019-12, ~~Earnings Per Share~~Simplifying the Accounting for Income Taxes (Topic ~~260), Distinguishing Liabilities from Equity (Topic 480), Derivatives~~740). The standard improves areas of U.S. GAAP by removing certain exceptions permitted by ASC 740 and ~~Hedging (Topic 815).~~clarifying existing guidance to facilitate consistent application. The ~~amendments in Part I~~Company adopted ASU 2019-12 on June 1, 2021. The adoption of ~~this Update change~~ASU 2019-12 did not impact the ~~classification analysis~~Company’s statement of ~~certain equity-linked~~ financial ~~instruments (or embedded features) with down round features. When determining whether certain~~condition, results of operations, cash flows, or financial ~~instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether~~statement disclosures.

In August 2020, the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic~~470-20,~~ ~~Debt—~~FASB issued ASU No. 2020-06, Debt with Conversion and Other ~~Options)~~Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), ~~including related EPS~~ which simplifies the accounting for convertible instruments. The guidance ~~(in Topic 260). The amendments in Part II~~removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update areNo. 2020-06 is effective for ~~fiscal years, and interim periods within those~~ fiscal years beginning after December 15, ~~2018.~~2021, including interim periods within those fiscal years. Early adoption is permitted ~~for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of~~no earlier than the fiscal year ~~that includes that interim period. Management is currently assessing the impact the adoption of ASU2017-11~~ ~~will have on the Company’s Consolidated Financial Statements.~~

~~In May 2017, the FASB issued ASU2017-09,~~~~Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting.~~The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, ~~2017. Early adoption is permitted, including adoption in any interim period,~~2020. The Company adopted ASU No. 2020-06 on June 1, 2021 and it was effective for ~~public business entities for reporting periods for which financial statements have not yet been issued. Management is currently assessing~~ the ~~impact the~~fiscal year beginning June 1, 2021. The adoption of ASU~~2017-09~~ No. 2020-06 did not affect the Company’s statement of financial condition, results of operations, cash flows or financial statement disclosures.

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Note 3. Inventories

The Company’s pre-launch inventories consist of raw materials purchased for commercial production and work-in-progress inventory related to the substantially completed commercial production of pre-launch inventories of leronlimab to support the Company’s expected approval of the product as a combination therapy for HIV patients in the United States. Work-in-progress consists of bulk drug substance, which is the manufactured drug stored in bulk storage, and drug product, which is the manufactured drug in unlabeled vials.

Inventories, net of reserves, as of November 30, 2021 and May 31, 2021 are presented below:


(in thousands)	November 30, 2021		May 31, 2021
Raw materials	$	22,536	$	28,085
Work-in-progress		66,021		65,394
Total	$	88,557	$	93,479

The Company believes that material uncertainties related to the ultimate regulatory approval of leronlimab for commercial sale have been significantly reduced based on positive data from its Phase 3 clinical trial for leronlimab as a combination therapy with HAART for highly treatment-experienced HIV patients, as well as information gathered from meetings with the U.S. Food and Drug Administration (“FDA”) related to its Biologic License Application (“BLA”) for this indication. The Company submitted the last 2 portions of the BLA (clinical and manufacturing) with the FDA in April 2020 and May 2020. In July 2020, the Company received a Refusal to File letter from the FDA regarding its BLA submission requesting additional information. In August and September 2020, the FDA provided written responses to

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the Company’s questions and met telephonically with key Company personnel and its clinical research organization concerning its BLA to expedite the resubmission of its BLA.

The deficiencies cited by the FDA in its July 2020 Refusal to File letter consisted of administrative deficiencies, omissions, corrections to data presentation, and related analyses and clarifications of manufacturing processes.

The Company is working with new consultants to cure the BLA deficiencies and resubmit the BLA in order to enable the FDA to perform their substantive review. The Company commenced its resubmission of the BLA in July 2021. In November 2021 it resubmitted the non-clinical and manufacturing sections of the BLA, and currently expects to complete the resubmission process with the resubmission of the clinical section of the BLA in the first calendar quarter of 2022. The Company anticipates that when the FDA completes their review, leronlimab will ~~have~~be approved and market acceptance of leronlimab as a treatment for HIV will be forthcoming, enabling us to realize the amount of pre-launch inventory on-hand prior to shelf-life expiration. Accordingly, management believes the Company will realize future economic benefit in excess of the carrying value of its pre-launch inventory.

The expiration of remaining shelf-life of the Company’s inventories consists of the following as of November 30, 2021 (in thousands):


Expiration period ending November 30,	Remaining shelf-life	Raw materials		Work-in-progress bulk drug product		Work-in-progress finished drug product in vials		Total inventories
2022	0 to 12 months	$	21,014	$	-	$	-	$	21,014
2023	13 to 24 months		1,078		-		-		1,078
2024	25 to 36 months		1,902		-		29,143		31,045
2025	37 to 48 months		192		-		24,315		24,507
2026	49 to 60 months		695		-		-		695
Thereafter	61 or more months		157		12,563		-		12,720
Total inventories			25,038		12,563		53,458		91,059
Inventories reserved			(2,502)		-		-		(2,502)
Total inventories, net		$	22,536	$	12,563	$	53,458	$	88,557

When the remaining shelf-life of drug product inventory is less than 12 months, it is likely that it will not be accepted by potential customers. However, as inventories approach their shelf-life expiration, the Company may perform additional stability testing to determine if the inventory is still viable, which can result in an extension of its shelf-life. Further, in addition to performing additional stability testing, certain raw materials inventory may be sold in its then current condition prior to reaching expiration. If the Company determines it is not likely shelf-life will be able to be extended or the inventory cannot be sold prior to expiration, the Company will write-down the inventory to its net realizable value. During the three and six months ended November 30, 2021, the Company reserved for inventory write-downs of approximately $0.7 million and $1.8 million, respectively, which were related to current and future estimated obsolescence of raw materials. During the three and six months ended November 30, 2020, the Company did not reserve for any write-down of inventory. These expenses are included in research and development expense.

In addition, during the three and six months ended November 30, 2021, the Company wrote-off inventory which had not been previously reserved for of approximately $1.0 million and $1.5 million, respectively, which related to expired raw materials not previously reserved for and untested vialed drug product used for clinical purposes. During the three and six months ended November 30, 2020, the Company recognized inventory write-offs of approximately $4.8 million, which related to abnormal spoilage and manufacturing errors committed by the contract manufacturer during the manufacturing process. These expenses are included in research and development expense.

Note 4. Accounts Payable and Accrued Liabilities

As of November 30, 2021 and May 31, 2021, the accounts payable balance was approximately $58.0 million and $65.9 million, respectively. As of November 30, 2021 and May 31, 2021, 2 of the Company’s vendors accounted

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for approximately 63% and 20% and 72% and 14%, respectively, of the total balance of accounts payable and accrued liabilities.

The components of accrued liabilities were as follows as of November 30, 2021 and May 31, 2021:


	As of
(in thousands)	November 30, 2021		May 31, 2021
Accrued compensation and related expense	$	796	$	4,005
Accrued legal settlement and fees		1,401		11,008
Accrued other liabilities		4,457		4,060
Total accrued liabilities	$	6,654	$	19,073

As of November 30, 2021, the approximately $1.4 million of accrued legal settlement and fees related entirely to accrued legal fees. As of May 31, 2021, the approximately $11.0 million of accrued legal settlement and fees was comprised of approximately $10.6 million related to legal settlements, and the remaining amount related to accrued legal fees.

Note 5. Convertible Instruments and Accrued Interest

Convertible Preferred Stock

Series D Convertible Preferred Stock

As of November 30, 2021, the Company had authorized 11,737 shares of Series D Convertible Preferred Stock, $0.001 par value per share (“Series D Preferred Stock”), of which 8,452 shares were outstanding. The Series D Certificate of Designation provides, among other things, that holders of Series D Preferred Stock shall be entitled to receive, when and as declared by the Company’s Board of Directors (the “Board”) and out of any assets at the time legally available therefor, cumulative dividends at the rate of ten percent (10%) per share per annum of the stated value of the Series D Preferred Stock, which is $1,000 per share (the “Series D Stated Value”). Any dividends paid by the Company will first be paid to the holders of Series D Preferred Stock prior and in preference to any payment or distribution to holders of common stock. Dividends on the ~~Company’s Consolidated Financial Statements.~~Series D Preferred Stock are cumulative, and will accrue and be compounded annually, whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally available therefor. There are no sinking fund provisions applicable to the Series D Preferred Stock. The Series D Preferred Stock does not have redemption rights. Dividends, if declared by the Board, are payable to holders in arrears on December 31 of each year. Subject to the provisions of applicable Delaware law, the holder may elect to be paid in cash or in restricted shares of common stock at the rate of $0.50 per share. As of November 30, 2021 and May 31, 2021, the accrued dividends were approximately $1.5 million, or approximately 3.0 million shares of common stock, and approximately $1.1 million, or approximately 2.2 million shares of common stock, respectively.

~~Note 4 –~~In the event of any liquidation, dissolution or winding up of the Company, the holders of Series D Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the Series C Convertible ~~Instruments~~

Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”), and in preference to any payment or distribution to any holders of the Series B Convertible Preferred Stock,

~~During fiscal 2010,~~ $0.001 par value per share (“Series B Preferred Stock”), or common stock, an amount per share equal to the Series D Stated Value plus the amount of any accrued and unpaid dividends. If, at any time while the Series D Preferred Stock is outstanding, the Company effects any reorganization, merger or consolidation of the Company, sale of substantially all of its assets, or other specified transaction (each, as defined in the Series D Certificate of Designation, a “Fundamental Transaction”), a holder of the Series D Preferred Stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series D Preferred Stock immediately prior to the Fundamental Transaction. Each share of Series D Preferred Stock is convertible at any time at the holder’s option into that number of fully paid and nonassessable shares of common stock determined by dividing the Series D Stated Value by the conversion price of $0.80 (subject to adjustment as set forth in the Series D Certificate of Designation). No fractional shares will be issued upon the conversion of the Series D Preferred Stock.

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Except as otherwise provided in the Series D Certificate of Designation or as otherwise required by law, the Series D Preferred Stock has no voting rights.

Series C Convertible Preferred Stock

As of November 30, 2021, the Company had authorized 8,203 shares of Series C Convertible Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”), of which 8,203 shares were outstanding. The Series C Certificate of Designation provides, among other things, that holders of Series C Preferred Stock shall be entitled to receive, when and as declared by the Board and out of any assets at the time legally available therefor, cumulative dividends at the rate of ten percent (10%) per share per annum of the stated value of the Series C Preferred Stock, which is $1,000 per share (the “Series C Stated Value”). Any dividends paid by the Company will be paid to the holders of Series C Preferred Stock prior and in preference to any payment or distribution to holders of common stock. Dividends on the Series C Preferred Stock are cumulative, and will accrue and be compounded annually, whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally available therefor. There are no sinking fund provisions applicable to the Series C Preferred Stock. The Series C Preferred Stock does not have redemption rights. Dividends, if declared by the Board, are payable to holders in arrears on December 31 of each year. Subject to the provisions of applicable Delaware law, the holder may elect to be paid in cash or in restricted shares of common stock at the rate of $0.50 per share. As of November 30, 2021 and May 31, 2021, the accrued dividends were approximately $1.9 million, or approximately 3.9 million shares of common stock, and approximately $1.5 million, or approximately 3.0 million shares of common stock, respectively.

In the event of any liquidation, dissolution or winding up of the Company, the holders of Series C Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the Series D Preferred Stock and in preference to any payment or distribution to any holders of the Series B Preferred Stock or common stock, an amount per share equal to the Series C Stated Value plus the amount of any accrued and unpaid dividends. If, at any time while the Series C Preferred Stock is outstanding, the Company effects a reorganization, merger or consolidation of the Company, sale of substantially all of its assets, or other specified transaction (each, as defined in the Series C Certificate of Designation, a “Fundamental Transaction”), a holder of the Series C Preferred Stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series C Preferred Stock immediately prior to the Fundamental Transaction. Each share of Series C Preferred Stock is convertible at any time at the holder’s option into that number of fully paid and nonassessable shares of common stock determined by dividing the Series C Stated Value by the conversion price of $0.50 (subject to adjustment as set forth in the Series C Certificate of Designation). No fractional shares will be issued upon the conversion of the Series C Preferred Stock. Except as otherwise provided in the Series C Certificate of Designation or as otherwise required by law, the Series C Preferred Stock has no voting rights.

Series B Convertible Preferred Stock

As of November 30, 2021, the Company had authorized 400,000 shares of Series B ~~Convertible~~ Preferred Stock, ~~par value $0.001 (“Series B”) at $5.00 per share for cash proceeds totaling $2,009,000,~~ of which ~~92,100~~19,000 shares ~~remain outstanding at November 30, 2017.~~were outstanding. Each share of the Series B Preferred Stock is convertible into ~~ten~~10 (10) shares of the Company’s common stock including any accrued dividends, with an effective fixed conversion price of $.50 per share. The holders of the Series B can only convert their shares to common shares provided the Company has sufficient authorized common shares at the time of conversion. Accordingly, the conversion option was contingent upon the Company increasing its authorized common shares, which occurred in April 2010, when the Company’s stockholders approved an increase in the authorized shares of common stock to 100,000,000. At the commitment date, which occurred upon such stockholder approval, the conversion option related to the Series B was beneficial. The intrinsic value of the conversion option at the commitment date resulted in a constructive dividend to the Series B holders of approximately $6 million. The constructive dividend increased and decreased additional~~paid-in~~ ~~capital by identical amounts. The Series B has liquidation preferences over the common shares at $5.00 per share plus any accrued dividends.~~stock. Dividends are payable to the Series B ~~holders~~Preferred stockholders when and as declared by the ~~board of directors~~Board at the rate of ~~$.25~~$0.25 per share per annum. Such dividends are cumulative and accrue whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally ~~available.~~available therefor. At the option of the Company, dividends on the Series B Preferred Stock may be paid in cash or shares of the Company’s common stock, valued at $0.50 per share. The holders of the Series B Preferred Stock can only convert their shares to shares of common stock if the Company has sufficient authorized shares of common stock at the time of conversion. The Series B Preferred Stock has liquidation preferences over the common shares at $5.00 per share, plus any accrued and unpaid dividends. Except as provided by law, the Series B holders have no voting rights. As of November 30, 2021 and May 31, 2021, the undeclared dividends totaled $7,316 or 14,631 shares of common stock, and approximately $17,800, or approximately 35,500 shares of common stock, respectively.

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~~Short-Term~~ Convertible Notes and Accrued Interest

The following schedule sets forth the outstanding balances associated with each convertible note and related accrued interest as of November 30, 2021 and May 31, 2021:


	As of November 30, 2021									As of May 31, 2021
(in thousands)	November 2020 Note		April 2, 2021 Note			April 23, 2021 Note		Total		November 2020 Note		April 2, 2021 Note		April 23, 2021 Note		Total
Convertible notes payable outstanding principal	$	-	$	19,500		$	28,500	$	48,000	$	13,500	$	28,500	$	28,500	$	70,500
Less: Unamortized debt discount and issuance costs		-		(1,613)			(2,440)		(4,053)		(1,204)		(3,232)		(3,317)		(7,753)
Convertible notes payable, net		-		17,887	-		26,060		43,947		12,296		25,268		25,183		62,747
Accrued interest on convertible notes		-		1,866			1,804		3,670		1,258		447		302		2,007
Outstanding convertible notes payable, net and accrued interest	$	-	$	19,753		$	27,864	$	47,617	$	13,554	$	25,715	$	25,485	$	64,754

The following schedule sets forth a rollforward of the outstanding balance of convertible notes, including accrued interest, from May 31, 2021 to November 30, 2021:


(in thousands)	November 2020 Note		April 2, 2021 Note		April 23, 2021 Note		Total
Outstanding balance May 31, 2021	$	13,554	$	25,715	$	25,485	$	64,754
Consideration received		-		-		-		-
Amortization of issuance discount and costs		98		821		877		1,796
Interest expense accrued		192		1,419		1,502		3,113
Cash repayments		-		-		-		-
Conversions		-		-		-		-
Fair market value of shares exchanged for repayment		(18,495)		(11,514)		-		(30,009)
Debt extinguishment loss		4,651		3,312		-		7,963
Outstanding balance November 30, 2021	$	-	$	19,753	$	27,864	$	47,617

Long-term Convertible Note—November 2020 Note

On November 10, 2020, the Company entered into a securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a two-year term to an institutional accredited investor in the initial principal amount of $28.5 million (the “November 2020 Note”). The Company received consideration of $25.0 million, reflecting an original issue discount of $3.4 million and issuance costs of $0.1 million.

Interest accrued on the outstanding balance of the November 2020 Note at an annual rate of 10%. The November 2020 Note was secured by all the assets of the Company, excluding the Company’s intellectual property. The outstanding balance of the November 2020 Note was convertible into shares of common stock at an initial conversion price of $10.00 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the November 2020 Note.

In addition, the Company was obligated to make monthly payments to reduce the outstanding balance of the November 2020 Note. During the year ended May 31, ~~2017,~~2021 and subsequent to the issuance of the November 2020 Note, the Company ~~issued $1.15 million~~and the institutional investor entered into separately negotiated agreements whereby portions of ~~unsecured convertible promissory~~the November 2020 Note were partitioned into new notes, and the November 2020 Note was reduced by the balance of the new notes. The new notes were exchanged concurrently with issuance for shares of the Company’s common stock. Please refer to Note 5, Convertible Instruments, in the Company’s 2021 Form 10-K for additional discussion.

On June 11, 2021, June 21, 2021 and June 30, 2021, in partial satisfaction of the June 2021 debt redemption amount on the November 2020 Note, the Company and the investor entered into separately negotiated exchange

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agreements, pursuant to which the November 2020 Note was partitioned into new notes (the ~~“Notes”~~“June 2021 Partitioned Notes”), with a ~~maturity date~~principal balance equal to $6.0 million. The Company and the holder of ~~January 31, 2018,~~the November 2020 Note agreed to defer the remaining $1.5 million June 2021 debt redemption amount. The outstanding balance of the November 2020 Note was reduced by the June 2021 Partitioned Notes, and ~~related warrants~~the Company and the investor exchanged the June 2021 Partitioned Notes for approximately 4.2 million shares of the Company’s common stock.

On July 14, 2021 and July 27, 2021, in partial satisfaction of the July 2021 debt reduction amount, the Company and the November 2020 Note holder entered into exchange agreements, pursuant to ~~investors for cash. The~~which the November 2020 Note was partitioned into new notes (the “July 2021 Partitioned Notes”) with a principal amount equal to $4.0 million. The Company and the holder of the ~~Notes, including any accrued but unpaid interest thereon, is convertible at~~November 2020 Note agreed to defer the ~~election~~remaining $3.5 million July 2021 debt redemption amount. The outstanding balance of the ~~holder at any time into~~November 2020 Note was reduced by the July 2021 Partitioned Notes. The Company and the investor exchanged the July 2021 Partitioned Notes for approximately 3.3 million shares of common ~~shares at any time prior~~stock.

On August 4, 2021, August 16, 2021 and August 30, 2021, in partial satisfaction of the August 2021 debt reduction amount, the Company and the November 2020 Note holder entered into exchange agreements, pursuant to ~~maturity at a conversion price of $0.75 per share. The Notes bear simple interest at~~which the ~~annual rate of 7%. Principal~~remaining principal and accrued ~~interest, to the extent not previously paid or converted, is due and payable on the maturity date. At the commitment date, the conversion price was greater than the fair value~~balance of the November 2020 Note was partitioned into new notes (the “August 2021 Partitioned Notes”) with a principal amount equal to approximately $4.9 million. The Company and the holder of the November 2020 Note agreed to defer the remaining approximately $2.6 million August 2021 debt reduction amount. The Company and the investor exchanged the August 2021 Partitioned Notes for approximately 4.4 million shares of common stock. ~~Accordingly,~~Following the redemption, the November 2020 Note was fully satisfied and there is no ~~beneficial conversion feature was recorded. The Company incurred approximately $92,000~~outstanding balance as of ~~debt discount related to the detachable warrants issued with the 2017 Notes, which is being amortized over the term of the notes.~~November 30, 2021.

~~On June 14, 2017, the Company’s Board of Directors approved a modification in the warrant terms issued in~~In connection with the ~~Notes. The warrant coverage was increased from 25% to 50%~~June 2021 Partitioned Notes, July 2021 Partitioned Notes, and ~~the exercise price of the warrant was reduced from $1.35 to $1.00 per share. On June 19, 2017, in connection with the new terms,~~August 2021 Partitioned Notes, the Company ~~issued an incremental 383,333 warrant shares to these previous Note holders.~~

~~During~~analyzed the restructured notes for potential requirement of debt extinguishment accounting under ASC 470-50-40-10, Debt Modifications and Extinguishments. The Company concluded that debt extinguishment accounting treatment was necessary and, accordingly, recorded aggregate debt extinguishment loss of approximately $4.7 million for the six months ended November 30, ~~2017,~~2021, as the difference between the fair market value of the shares issued and the carrying value of the debt retired, which included the amortization of the relative debt discount and issuance costs.

Amortization of debt discounts and issuance costs associated with the November 2020 Note during the three and six months ended November 30, 2021 amounted to 0 and approximately $0.1 million, respectively, recorded as interest expense.

Long-term Convertible Note—April 2, 2021 Note

On April 2, 2021, the Company entered into a securities purchase agreement pursuant to which the Company issued ~~approximately $4.89~~a secured convertible promissory note with a two-year term with the holder of the November 2020 Note in the initial principal amount of $28.5 million ~~in aggregate principal~~(the “April 2, 2021 Note”). The Company received consideration of ~~additional Notes~~$25.0 million, reflecting an original issue discount of $3.4 million and ~~related warrants, as described above. At~~issuance costs of $0.1 million. The April 2, 2021 Note is secured by all the ~~commitment dates,~~assets of the Company, ~~determined that~~excluding the Company’s intellectual property.

Interest accrues on the outstanding balance of the April 2, 2021 Note at an annual rate of 10%. Upon the occurrence of an event of default, interest will accrue at the lesser of 22% per annum or the maximum rate permitted by applicable law. In addition, upon any event of default, the investor may accelerate the outstanding balance payable under the April 2, 2021 Note; upon such acceleration, the outstanding balance will increase automatically by 15%, 10% or 5%, depending on the nature of the event of default. The events of default are listed in Section 4 of the April 2, 2021 Note filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 8, 2021 and incorporated by reference.

Pursuant to the terms of the securities purchase agreement and the April 2, 2021 Note, the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $50.0 million. In the event of any such approval, the outstanding principal balance of the April 2, 2021 Note will increase automatically by 5% upon the issuance of such additional debt.

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The investor may convert all or any part the outstanding balance of the April 2, 2021 Note into shares of common stock at an initial conversion price of $10.00 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the April 2, 2021 Note. In addition to standard anti-dilution adjustments, the conversion ~~feature related~~price of the April 2, 2021 Note is subject to ~~these Notes~~full-ratchet anti-dilution protection, pursuant to which the conversion price will be ~~beneficial~~automatically reduced to equal the effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered under the Securities Act of 1933, as amended (the “Securities Act”). The April 2, 2021 Note provides for liquidated damages upon failure to deliver common stock within specified timeframes and requires the Company to maintain a share reservation of 6.0 million shares of common stock.

The investor may redeem any portion of the April 2, 2021 Note, at any time beginning six months after the issue date, upon three trading days’ notice, subject to a maximum monthly redemption amount of $3.5 million. The April 2, 2021 Note requires the Company to satisfy its redemption obligations in cash within three trading days of the Company’s receipt of such notice. The Company may prepay the outstanding balance of the April 2, 2021 Note, in part or in full, plus a 15% premium, at any time upon 15 trading days’ notice.

In addition, beginning in May 2021 and for each of the following five months, the Company is obligated to reduce the outstanding balance of the April 2, 2021 Note by $7.5 million per month. Payments under the November 2020 Note and the April 23, 2021 Note described below may be applied toward the payment of each monthly debt reduction amount. These payments are not subject to the ~~investors. As a result,~~15% prepayment premium, which would otherwise be triggered if the Company were to make payments against such notes exceeding the allowed maximum monthly redemption amount.

The embedded conversion feature in the April 2, 2021 Note was analyzed under ASC 815, Derivatives and Hedging, to determine if it achieved equity classification or required bifurcation as a derivative instrument. The embedded conversion feature was considered indexed to the Company’s own stock and met the conditions for equity classification. Accordingly, the embedded conversion feature did not require bifurcation from the host instrument. The Company determined there was no beneficial conversion feature since the ~~intrinsic~~effective conversion rate was greater than the market value of the ~~beneficial conversion feature utilizing~~Company’s common stock upon issuance. Certain default put provisions were considered not to be clearly and closely related to the ~~fair~~host instrument, but the Company concluded that the value of these default put provisions was de minimis. The Company evaluates the value of the ~~underlying common stock on~~default put provisions each reporting period to determine if the ~~commitment dates~~value becomes material to the financial statements.

In September 2021, the Company and the ~~effective conversion price after discounting~~holder of the April 2, 2021 Note agreed to defer the September 2021 debt redemption amount of $7.5 million.

On October 5, 2021 and October 21, 2021, in partial satisfaction of the October 2021 debt reduction amount, the Company and the April 2, 2021 Note holder entered into exchange agreements, pursuant to which the April 2, 2021 Note was partitioned into new notes (the “October 2021 Partitioned Notes”) with a principal amount equal to $5.0 million. The Company and the holder of the April 2, 2021 Note agreed to defer the remaining October 2021 debt redemption amount of $2.5 million. The outstanding balance of the April 2, 2021 Note was reduced by the October 2021 Partitioned Notes. The Company and the investor exchanged the October 2021 Partitioned Notes for ~~the fair value~~approximately 3.9 million shares of common stock.

On November 2, 2021 and November 16, 2021, in partial satisfaction of the ~~related warrants.~~November 2021 debt reduction amount, the Company and the April 2, 2021 Note holder entered into exchange agreements, pursuant to which the remaining principal and accrued balance of the April 2, 2021 Note was partitioned into new notes (the “November 2021 Partitioned Notes”) with a principal amount equal to approximately $4.0 million. The Company and the holder of the April 2, 2021 Note agreed to defer the remaining approximately $3.5 million November 2021 debt reduction amount. The Company and the investor exchanged the November 2021 Partitioned Notes for approximately 4.2 million shares of common stock.

In connection with the ~~sale~~October 2021 and November 2021 Partitioned Notes, the Company analyzed the restructured notes for potential requirement of debt extinguishment accounting under ASC 470-50-40-10, Debt

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Modifications and Extinguishments. The Company concluded debt extinguishment accounting treatment to be necessary and accordingly recorded aggregate debt extinguishment loss of approximately $3.3 million for the three months ended November 30, 2021, as the difference between the fair market value of the ~~Notes~~shares issued and the carrying value of the debt retired, which included the amortization of the relative debt discount and issuance costs.

Amortization of debt discounts and issuance costs associated with the April 2, 2021 Note during the three and six months ended November 30, 2021 was approximately $0.4 million and $0.8 million, respectively. The unamortized discount and issuance costs balance for the April 2, 2021 Note is approximately $1.6 million as of November 30, 2021. The accrued interest balance for the April 2, 2021 Note is approximately $1.9 million as of November 30, 2021, which included approximately $1.4 million of interest expense for the six months ended November 30, ~~2017, and year ended May 31, 2017, detachable~~2021. The carrying value on the April 2, 2021 Note, including accrued interest, as of November 30, 2021, was approximately $19.8 million.

The Company filed a Registration Statement on Form S-3 (Registration No. 333-258944) with the SEC on August 19, 2021, which was declared effective on October 6, 2021, registering a number of shares of common stock ~~warrants~~sufficient to convert the entire principal balance of the April 2, 2021 Note and the April 23, 2021 Note.

Long-term Convertible Note—April 23, 2021 Note

On April 23, 2021, the Company entered into a securities purchase agreement pursuant to which the Company issued a ~~total~~secured convertible promissory note with a two-year term to an institutional accredited investor affiliated with the holder of ~~4,025,656~~the November 2020 and April 2, 2021 Notes in the initial principal amount of $28.5 million (the “April 23, 2021 Note”). The Company received consideration of $25.0 million, reflecting an original issue discount of $3.4 million and issuance costs of $0.1 million. The April 23, 2021 Note is secured by all the assets of the Company, excluding the Company’s intellectual property.

Interest accrues on the outstanding balance of the April 23, 2021 Note at an annual rate of 10%. Upon the occurrence of an event of default, interest will accrue at the lesser of 22% per annum or the maximum rate permitted by applicable law. In addition, upon any event of default, the investor may accelerate the outstanding balance payable under the April 23, 2021 Note; upon such acceleration, the outstanding balance will increase automatically by 15%, 10% or 5%, depending on the nature of the event of default. The events of default are listed in Section 4 of the April 23, 2021 Note filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 29, 2021 and incorporated by reference.

The investor may convert all or any part the outstanding balance of the April 23, 2021 Note into shares of common ~~shares, with~~stock at an ~~exercise~~initial conversion price of ~~$1.00~~$10.00 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the April 23, 2021 Note. In addition to standard anti-dilution adjustments, the conversion price of the April 23, 2021 Note is subject to full-ratchet anti-dilution protection, pursuant to which the conversion price will be automatically reduced to equal the effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered under the Securities Act. The April 23, 2021 Note provides for liquidated damages upon failure to deliver common stock within specified timeframes and requires the Company to maintain a ~~five-year term were issued~~share reservation of 6.0 million shares of common stock.

The investor may redeem any portion of the April 23, 2021 Note, at any time beginning six months after the issue date, upon three trading days’ notice, subject to a maximum monthly redemption amount of $7.0 million. The April 23, 2021 Note requires the Company to satisfy its redemption obligations in cash within three trading days of the Company’s receipt of such notice. The Company may prepay the outstanding balance of the April 23, 2021 Note, in part or in full, plus a 15% premium, at any time upon 15 trading days’ notice.

Pursuant to the terms of the securities purchase agreement and the April 23, 2021 Note, ~~holders.~~the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $75.0 million. In the event of any such approval, the outstanding principal balance of the April 23, 2021 Note will increase automatically by 5% upon the issuance of such additional debt.

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The embedded conversion feature in the April 23, 2021 Note was analyzed under ASC 815, Derivatives and Hedging, to determine if it achieved equity classification or required bifurcation as a derivative instrument. The embedded conversion feature was considered indexed to the Company’s own stock and met the conditions for equity classification. Accordingly, the embedded conversion feature does not require bifurcation from the host instrument. The Company determined there was no beneficial conversion feature since the ~~fair~~effective conversion rate was greater than the market value of the ~~warrants at issuance using~~Company’s common stock upon issuance. Certain default put provisions were not considered to be clearly and closely related to the ~~Black-Scholes option pricing model utilizing certain weighted average assumptions, such as expected stock price volatility, expected term~~host instrument, but the Company concluded that the value of ~~the warrants, risk-free interest rates and expected dividend yield at the grant date.~~


	~~2017~~
~~Expected dividend yield~~		0%
~~Stock price volatility~~		~~69.5 - 69.80~~	%
~~Expected term~~		~~5 year~~
~~Risk-free interest rate~~		~~1.75 - 1.83~~	%
~~Grant-date fair value~~	$	~~0.28 - $0.39~~

these default put provisions was de minimis. The ~~fair~~Company evaluates the value of the ~~warrants, coupled~~default put provisions each reporting period to determine if the value becomes material to the financial statements.

Amortization of debt discounts and issuance costs associated with the ~~beneficial conversion features, were recorded~~April 23, 2021 Note during the three and six months ended November 30, 2021 was approximately $0.4 million and $0.9 million, respectively. The unamortized discount and issuance costs balance for the April 23, 2021 Note was approximately $2.4 million as ~~a debt discount to~~of November 30, 2021. The accrued interest balance for the ~~Notes and a corresponding increase to additionalpaid-in~~ ~~capital and will be amortized over the life~~April 23, 2021 Note was approximately $1.8 million at November 30, 2021, which included approximately $1.5 million of ~~the Notes. The Company incurred debt discount of approximately $1.6 million during~~interest expense for the six months ended November 30, ~~2017, related to~~2021. The carrying value on the ~~beneficial conversion feature and detachable warrants issued with the Notes. During the year ended May 31, 2017 the Company incurred debt discount~~April 23, 2021 Note, including accrued interest, as of ~~approximately $92,000 related to the detachable warrants issued with the Notes. Accordingly, the Company recognized approximately $1.2 million and$-0-,~~ of~~non-cash~~ ~~debt discount during the six months ended~~ November 30, ~~2017 and year ended May 31, 2017, respectively. In connection with the Notes, the Company incurred direct issuance costs of~~2021, was approximately $0.4 million during the six months ended November 30, 2017. The issuance costs are amortized over the term of the Notes and accordingly, the Company recognized approximately $0.3 million of debt issuance costs during the six months ended November 30, 2017.$27.9 million.

~~Activity related to the Notes was as follows:~~

   November 30, 2017    May 31, 2017
Face amount of Notes
   $ 6,038,500    $ 1,150,000




Unamortized discount
   (493,000 )    (92,000 )
Unamortized issuance costs
   (153,500 )    —




Total carrying value of Notes
   $ 5,392,000    $ 1,058,000

Note ~~5 – Derivative Liability~~

The investor warrants issued with the September 2016 registered direct equity offering, and the placement agent warrants issued in conjunction with the offering, as fully described in Note 11, contain a provision for net cash settlement in the event that there is a fundamental transaction (contractually defined as a merger, sale of substantially all assets, tender offer or share exchange). If a fundamental transaction occurs in which the consideration issued consists principally of cash or stock in a successor entity, then the warrantholder has the option to receive cash equal to the fair value of the remaining unexercised portion of the warrant. Due to this contingent cash settlement provision, the investor and placement agent warrants require liability classification as derivatives in accordance with ASC 480 and ASC 815 and are recorded at fair value.

~~The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date September 15, 2016, May 31, 2017 and November 30, 2017:~~

   Shares Indexed    Derivative Liability
Balance May 31, 2016
   —      $ —
Inception date September 15, 2016
   7,733,334    5,179,200
Balance May 31, 2017
   7,733,334    3,014,667
Balance November 30, 2017
   7,733,334    $ 2,547,733

~~The Company recognized approximately $0.5 and $1.2 million of netnon-cash~~ ~~gain, due to the changes in the fair value of the liability associated with such classified warrants during the six months ended November 30, 2017 and November 30, 2016, respectively.~~

ASC 820 provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition. Fair values for the warrants were determined using a Binomial Lattice (“Lattice”) valuation model.

~~The Company estimated the fair value of the warrant derivative liability as of inception date September 15, 2016, May 31, 2017 and November 30, 2017, using the following assumptions:~~

   September 15, May 31, November 30,
   2016 2017 2017
Fair value of underlying stock
   $ 0.78 $ 0.60 $ 0.59
Risk free rate
   1.20 % 1.71 % 2.08 %
Expected term (in years)
   5 4.29 3.79
Stock price volatility
   106 % 94 % 80 %
Expected dividend yield
   —   —   —
Probability of Fundamental Transaction
   50 % 50 % 50 %
Probability of holder requesting cash payment
   50 % 50 % 50 %

Due to the fundamental transaction provisions, which could provide for early redemption of the warrants, the model also considered subjective assumptions related to the fundamental transaction provision. The fair value of the warrants will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes in interest and management’s assumptions related to the fundamental transaction provision.

~~Note 6 – Stock Options~~6. Equity Awards and Warrants

The Company has ~~one~~1 active stock-based equity plan at November 30, ~~2017,~~2021, the CytoDyn Inc. Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”), and ~~one~~1 stock-based equity plan that is no longer active, but under which certain prior awards remain ~~outstanding,~~outstanding. The 2012 Plan covered a total of 50 million shares of common stock at May 31, 2021. Effective June 1, 2021, the ~~CytoDyn Inc. 2004 Stock Incentive Plan (the “2004 Plan”~~amount covered and ~~together with~~available shares under the 2012 Plan increased by approximately 6.3 million shares due to a provision in the ~~“Incentive Plans”). The~~ 2012 Plan ~~was approved by stockholders at~~under which the ~~Company’s 2012 annual meeting to replace the 2004 Plan. The 2012 Plan was amended by stockholder approval in February 2015 to increase the~~total number of shares available ~~for issuance from 3,000,000~~ to ~~5,000,000~~be issued automatically increases on the first day of each fiscal year in an amount equal to 1% of the total outstanding shares on the last day of ~~common stock and in March 2016 to increase~~ the ~~number of shares available for issuance from 5,000,000 to 7,000,000 shares of common stock. At~~prior fiscal year, unless the ~~annual meeting of stockholders held on August 24, 2017,~~Board determines otherwise before the ~~stockholders approved an amendment to the 2012 Plan to increase the number of shares available for issuance from 7,000,000 to 15,000,000 shares of common stock.~~fiscal yearend. As of November 30, ~~2017, the Company had 5,693,807~~2021, there were approximately 18.8 million shares remaining available for future stock-based grants under the 2012 ~~Plan, as amended.~~Plan.

Stock Options and Other Equity Awards

During the six months ended November 30, ~~2017,~~2021, the Company granted ~~annual~~ stock ~~option awards to directors to purchase~~options covering a total of ~~450,000~~approximately 11.0 million shares of common stock to employees with an exercise ~~price of $0.57~~prices ranging from $1.32 to $2.23 per share. These ~~option awards~~stock options vest ~~quarterly over one year~~in three installments and have aten-year ~~term. The grant date fair value related to these options was $0.36 per share.~~

During the six months ended November 30, 2017, the Company granted an option award covering 600,000 shares of common stock with an exercise price of $0.57 per share, to its Chief Science Officer. This option vests annually over three years, has a~~ten-year~~ term and a grant date fair value of ~~$0.35~~between $0.93 and $1.71 per share.

During the six months ended November 30, ~~2017,~~2021, the Company ~~granted options, covering an aggregate of 800,000~~issued approximately 0.5 million shares of common stock in connection with the exercise of stock options. The stated exercise price was between $0.63 and $1.06 per share, which resulted in aggregate gross proceeds of approximately $0.4 million to ~~executive management and employees with exercise prices of $0.57 per share. The options vest annually over three years, have aten-year~~ ~~term and grant date fair values of $0.35 per share.~~

~~Warrants~~the Company.

During the six months ended November 30, ~~2017,~~2021, the Company ~~granted a warrant covering an aggregate of 200,000~~issued approximately 0.4 million shares of common stock in connection with ~~an exercise price~~the vesting of ~~$0.64 per share,~~performance stock units (“PSUs”) awarded in June 2020. The PSUs were subject to the Compensation Committee’s determination of the level of achievement of certain performance conditions set forth in the respective award agreements. The original awards covered a ~~consultant. The warrant vests 25% upon grant date, 25% on December 31, 2017 and 50% upon achieving certain future milestones. The warrant has a five-year term and a grant date fair value~~total of ~~$0.26 per share.~~4.35 million PSUs, of which approximately 3.9 million PSUs were forfeited. In connection with the approximate 0.4 million shares of common stock that vested, the Company recognized approximately $1.3 million in stock-based compensation expense in the fourth quarter of fiscal year 2021.

During the six months ended November 30, ~~2017,~~2021, the Company ~~granted a warrant covering an aggregate of 100,000~~issued approximately 0.4 million shares of common stock in connection with ~~an exercise price~~the time-based vesting of ~~$0.75 per shares, to a consultant.~~restricted stock units (“RSUs”). The ~~warrant vests immediately, has a five year term and a grant date fair value of $0.29 per share.~~

~~During~~Company incurred $0.3 million in stock-based compensation expense during the six months ended November 30, ~~2017, in connection with unsecured convertible promissory Notes, as fully described in Note 4, the Company issued common stock warrants, covering 3,258,990 shares of common stock~~2021 related to Note holders. The warrants have a five-year term and an exercise price of $1.00 per share. In connection with the promissory Notes, the Company issued warrants covering 350,766 to the placement agent. The warrants have a five year term and an exercise price of $0.825.

On June 14, 2017, the Company’s Board of Directors approved a modification in the warrant terms issued in connection with the promissory Notes, as fully described in Note 4. The warrant coverage was increased from 25% to 50% and the exercise price of the warrant was reduced to $1.00 per share from $1.35 per share. On June 19, 2017, in connection with new terms, the Company issued an incremental 383,333 warrant shares to the Note holdersRSUs. Also, during ~~the year ended May 31, 2017.~~

~~During~~ the six months ended November 30, ~~2017, in connection with a private equity offering, as~~2021, certain members of management received shares of fully ~~described in Note 10, the Company issued~~vested common stock ~~warrants covering 6,651,800~~ in lieu of a portion of their cash bonus for services in fiscal year 2021 totaling approximately 0.2 million

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shares of common ~~stock to investors.~~stock. The ~~investor warrants have a five-year term and an exercise price~~Company recognized $0.3 million of ~~$0.75 per share.~~ expense for these shares in lieu of cash bonus during the fourth quarter of fiscal year 2021.

Warrants

In connection with this offering, the Company also issued common stock warrants covering 452,180 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.55 per share.

On September 8, 2017, in connection with a registered direct equity offering, as fully described in Note 11, the Company issued common stock warrants covering 1,668,163 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $1.00 per share. In connection with this offering, the Company also issued common stock warrants covering 213,573 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.825 per share.

On October 11, 2017, in connection with a registered direct equity offering, as fully described in Note 11, the Company issued common stock warrants covering 940,380 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.75 per share. In connection with this offering, the Company also issued common stock warrants covering 150,461 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.715 per share.

On November 24, 2017, the Company filed an “Offer to Amend and Exercise” (the “Offer”) certain warrants covering an aggregate of 51,090,113 shares of common stock, at a potentially reduced exercise price of $0.50 per share. The original exercise price on these certain warrants ranged from $0.50 to $1.35 per share and have expiration dates beginning October 2018 continuing through October 2022. The Offer was scheduled to expire December 22, 2017, but was extended on December 21, 2017 to expire on January 26, 2018. The Offer is subject to the completion of an election to participate and exercise by the holder, certain representations and warranties by the holder and remittance of exercise proceeds to the Company.

On November 30, 2017, in connection with a registered direct equity offering dated September 8, 2017, as fully described in Note 11, the Company issued incremental common stock warrants covering 251,504 shares of common stock to investors. The investor warrants have a five-year term from initial investment date, September 8, 2017, and an exercise price of $0.75 per share. In connection with this offering, the Company also issued common stock warrants covering 26,702 shares of common stock to the placement agent. The placement agent warrants have a five-year term from September 8, 2017, and an exercise price of $0.715 per share.

~~During~~private warrant exchange agreements entered into during the six months ended November 30, ~~2017,~~2021, the Company ~~determined to extend the expiration dates~~issued a total of ~~certain warrants to June 30, 2017 covering 3,295,000~~approximately 7.9 million shares of common ~~stock. The warrants were originally issued~~stock in connection with ~~2012 convertible promissory notes~~the exercise of warrants for the purchase of 3.5 million shares issued in 2018 and ~~had an~~2019. The stated exercise ~~price~~prices of the original warrants ranged from $0.40 to $1.00 per share. ~~The extension to June 30, 2017 was contingent upon immediate exercise~~Gross and net proceeds of the ~~warrants at a reduced exercise price of $0.50 per share. The Company received proceeds of~~private warrant exchange transactions totaled approximately ~~$1.6 million and pursuant to U.S. GAAP, the Company recognizednon-cash~~ ~~inducement interest expense of approximately $0.8 million, which represented the incremental increase in the fair value of the extended warrants.~~$6.4 million.

The Company determined the fair value of the warrant extension using the Black-Scholes option pricing model utilizing certain weighted-average assumptions, such as expected stock price volatility, term of the warrants, risk-free rate and expected dividend yield at date of exercise.

   2017
Expected dividend yield
   0 %
Stock price volatility
   61.48 %
Expected term
   1 month
Risk-free interest rate
   0.84 %
Grant-date fair value
   $ 0.25

Compensation expense related to stock options and warrants for the three and six months ended November 30, ~~2017~~2021 totaled approximately $2.1 million and ~~November 30, 2016 was approximately $275,000~~$4.7 million, respectively, and ~~$530,000 and $335,000 and $688,000, respectively. The grant date fair value of options and warrants vested during~~for the three and six ~~month periods~~months ended November 30, ~~2017~~2020 totaled approximately $3.4 million and $5.5 million, respectively. Additionally, during the six months ended November 30, ~~2016 was approximately $127,000~~2021, the Company settled a dispute in part by the issuance of warrants covering 1.6 million shares of common stock that expire in seven years and ~~$574,000 and $279,000 and $530,000, respectively. As~~have a stated exercise price of November 30, 2017, there was approximately $1.0 million of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 1.43 years.$0.40 per share.

The following table represents stock option and warrant activity as of and for the six months ended November 30, ~~2017:~~2021:


				Weighted
				average
		Weighted		remaining	Aggregate
	Number of	average		contractual	intrinsic
(in thousands, except per share data)	shares	exercise price		life in years	value
Options and warrants outstanding May 31, 2021	61,573	$	0.95	4.40	$	68,756
Granted	20,151	$	1.97	—		—
Exercised	(5,654)	$	0.71	—		—
Forfeited or expired and cancelled	(6,443)	$	0.83	—		—
Options and warrants outstanding November 30, 2021	69,627	$	1.05	4.61	$	31,184
Outstanding exercisable November 30, 2021	59,807	$	0.87	3.51	$	30,747

   Number of
Shares    Weighted
Average
Exercise Price    Weighted
Average
Remaining
Contractual Life
in Years    Aggregate
Intrinsic
Value
Options and warrants outstanding - May 31, 2017
   77,859,626    $ 0.86    3.40    $ 40,250



Granted
   16,497,852    0.78    —      —
Exercised
   (3,295,000 )    0.50    —      —
Forfeited/expired/cancelled
   (3,510,677 )    0.98    —      —



Options and warrants outstanding - November 30, 2017
   87,551,801    0.83    3.51    70,500



Outstanding exercisable - November 30, 2017
   83,426,884    $ 0.83    3.25    $ 37,750

~~Note 7 – Acquisition of Patents~~

As discussed in Note 9 below, the Company consummated an asset purchase on October 16, 2012, and paid $3,500,000 for certain assets, including intellectual property, certain related licenses and sublicenses, FDA filings and various forms of the PRO 140 drug substance. The Company followed the guidance in Financial Accounting Standards Topic 805 to determine if the Company acquired a business. Based on the prescribed accounting, the Company acquired assets and not a business. As of November 30, ~~2017,~~2021, approximately 13.9 million outstanding stock options were vested, approximately 13.7 million outstanding stock options were unvested, and all outstanding warrants were exercisable.

Note 7. Private Equity Securities Offerings

PrivateWarrantExchanges

During the three and six months ended November 30, 2021, the Company ~~has recorded and is amortizing $3,500,000~~entered into privately negotiated warrant exchange agreements with certain accredited investors, pursuant to which the investors purchased shares of ~~intangible assets in the form of patents.~~common stock at exercise prices ranging from $0.40 to $1.00 per share. The Company ~~estimates~~issued approximately 3.5 million shares of common stock under the ~~acquired~~original warrants, as well as additional shares as an inducement to exercise their warrants, for a total of approximately 7.9 million shares of common stock. Aggregate gross and ~~enforceable patents have an estimated life of 10 years. Subsequent to~~net proceeds from the ~~acquisition date,~~private warrant exchange were approximately $6.4 million. In connection with these transactions, the Company ~~has continued to expand, amend~~recognized $4.7 million and ~~file patent applications central to its current clinical trial strategies, which, in turn, have extended the protection period for certain methods~~$5.2 million of ~~using PRO 140 and formulations comprising PRO 140 out through at least 2026 and 2038, respectively, in various countries.~~

~~The following presents intangible assets activity:~~

   November 30, 2017    May 31, 2017
Gross carrying amounts
   $ 3,500,000    $ 3,500,000
Accumulated amortization
   (1,793,808 )    (1,618,770 )




Total amortizable intangible assets, net
   1,706,192    1,881,230
Patents currently not amortized
   35,989    35,989




Carrying value of intangibles, net
   $ 1,742,181    $ 1,917,219

~~Amortization~~inducement interest expense ~~related to patents was approximately $87,500 and $175,000~~ for the three and six months ended November 30, ~~2017~~2021, respectively. Also see Note 6 above.

PrivatePlacementofSharesofCommonStockandWarrants

During the six months ended November 30, 2021,theCompanyissuedinaprivateplacementtoaccreditedinvestorsatotalofapproximately16.7millionsharesof commonstock,togetherwithwarrantstopurchaseatotalofapproximately4.2millionsharesofcommonstockatexerciseprices ranging from $1.00 to $1.80pershare.Thewarrantshaveafive-yeartermandareimmediatelyexercisable.Thesecuritieswereissuedwithacombinedpurchasepriceof between$1.00 and ~~2016.~~ $1.80perfixedcombinationof1shareofcommonstockandonequarterofonewarrant

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topurchaseoneshareofcommonstock,fortotalgross and netproceedstotheCompany of approximately $18.8 million.

The representations, warrantiesand covenantscontained inthe subscriptionagreements weremade solelyfor thebenefit oftheparties tothesubscription agreements.Inaddition,such representations,warrantiesandcovenants(i) areintendedasa wayofallocatingtherisk betweenthepartiesto thesubscriptionagreementsandnot asstatementsoffact,and(ii) mayapplystandardsofmaterialitythat aredifferentfromwhatmay beviewedasmaterial bystockholders of,or otherinvestors in,the Company.Accordingly, thesubscription agreementsonlyprovideinformationtoinvestorsregardingthetermsoftheprivateplacement,anddonotprovideinvestorswithanyotherfactualinformation regardingtheCompany.Stockholdersshouldnotrely ontherepresentations,warrantiesandcovenantsor anydescriptionsthereofascharacterizations of the actual stateof facts regarding orcondition of the Companyor any of its subsidiariesor affiliates.Moreover, informationconcerningthesubjectmatteroftherepresentationsandwarrantiesmaychangeafterthedateofeachsubscriptionagreement,whichsubsequentinformation may or may not be fully reflected in public disclosures. A form of the subscription agreement was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021 and is incorporated herein by reference.

PrivatePlacementof CommonStock andWarrants throughPlacementAgent

During the six months endedNovember 30, 2021,theCompanyissuedinaprivateplacementtoaccreditedinvestorsanaggregateofapproximately11.4millionsharesofcommonstock,togetherwithwarrantstopurchaseanaggregateofapproximately5.0millionsharesofcommonstockatanexercisepriceof$1.00pershare.Thesecuritieswereissuedatacombinedpurchasepriceof$1.00perfixedcombinationof1shareofcommonstockandthree-tenthsofonewarranttopurchaseoneshareofcommonstock,foraggregategross and net proceedstotheCompanyofapproximately$11.4million and $10.0 million, respectively.Thewarrantshaveafive-yeartermandareimmediatelyexercisable.AcopyoftheformofwarrantwasfiledasExhibit4.1totheCompany’sCurrentReportonForm8-KfiledwiththeSEConSeptember7,2021, and is incorporated herein by reference.See Exhibit10.1to this report for a copy of the form of subscription agreement used in the private placement.The foregoingsummary of theterms ofthe forms ofwarrant andsubscription agreement issubject to, andqualified inits entirety by,suchdocuments.

Therepresentations,warrantiesandcovenantscontainedinthesubscriptionagreementsweremadesolelyforthebenefitofthepartiestothesubscriptionagreements.Inaddition,suchrepresentations,warrantiesandcovenants(i)areintendedasawayofallocatingtheriskbetweenthepartiestothesubscriptionagreementsandnotasstatementsoffactand(ii)mayapplystandardsofmaterialityinawaythatisdifferentfromwhatmaybeviewedasmaterialbystockholdersof,orotherinvestorsin,theCompany.Accordingly, inclusion of theformofsubscriptionagreement as an exhibit to thisreport is intended onlytoprovideinvestorswithinformationregardingthetermsoftransaction,andnottoprovideinvestorswithanyotherfactualinformationregardingtheCompany.Stockholdersshouldnotrelyontherepresentations,warrantiesandcovenantsoranydescriptionsthereofascharacterizationsof the actual stateof facts orcondition of theCompany orany of itssubsidiaries or affiliates.Moreover, information concerningthe subjectmatter of therepresentationsandwarrantiesmaychangeafterthedateofthesubscriptionagreements,whichsubsequentinformationmayormaynotbefullyreflected in public disclosures.

As afeetotheplacementagent,theCompanyagreedtopayacashfeeequalto12%ofthegross proceedsreceivedfromqualifiedinvestorsintheoffering, aswell asa one-timenon-accountable expensefeeof $50,000in theaggregate forall closingsinthis offering.TheCompanyalso agreedtogrant theplacementagent,oritsdesignees,warrantswithanexercisepriceof$1.00pershareanda10-yeartermtopurchase12%ofthetotalnumberofshares of commonstock sold toqualified investors inthe offering.

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Note 8. Acquisition of Patents and Intangibles

The following table presents intangible assets as of November 30, 2021 and May 31, 2021, inclusive of patents:


(in thousands)	November 30, 2021		May 31, 2021
Leronlimab (PRO 140) patent	$	3,500	$	3,500
ProstaGene, LLC intangible asset acquisition, net of impairment		2,926		2,926
Website development costs		20		20
Gross carrying value		6,446		6,446
Accumulated amortization, net of impairment		(5,293)		(4,793)
Total amortizable intangible assets, net	$	1,153	$	1,653

Amortization expense related to all intangible assets was approximately $0.2 million and $0.5 million and $0.5 million and $1.0 million for the three and six months ended November 30, 2021 and 2020, respectively. The Company recognized an impairment charge of approximately $10.0 million related to the ProstaGene, LLC intangible asset acquisition during the third quarter of the year ended May 31, 2021. See the Company’s 2021 Form 10-K for additional discussion.

The following table summarizes the estimated aggregate future amortization expense related to the Company’s intangible assets with finite lives ~~is estimated at approximately $350,000 per year for the next five years.~~as of November 30, 2021:


Fiscal Year (in thousands)	Amount
2022 (6 months remaining)	$	221
2023		217
2024		85
2025		85
Thereafter		545
Total	$	1,153

Note ~~8 –~~9. License Agreements

The Company has a2 license ~~agreement~~agreements with a third-party licensor covering the licensor’s “systemknow-how” technology with respect to the Company’s use of proprietary cell lines to manufacture new ~~PRO 140~~leronlimab material. ~~In connection with this~~The Company accrues annual license ~~agreement, the Company became the primary obligor~~fees of ~~£600,000~~£0.6 million (approximately ~~US$807,000~~$0.8 million utilizing current exchange rates), which ~~was timely paid by June 30, 2016. The Company continues to accrue for a current annual license fee of £300,000 (approximately US$400,000 utilizing current exchange rates), which is~~fees are payable annually in ~~December, except for the December 2017 payment, which has been extended to March 15, 2018.~~December. Future annual license fees and royalty rate will vary depending on whether the Company manufactures ~~PRO 140,~~leronlimab, utilizes the third-party licensor as a contract manufacturer, or utilizes an independent party as a contract manufacturer. The licensor does not charge an annual license fee ~~of £300,000 (approximately US$400,000)~~ when it serves as the manufacturer. In addition, the Company will incur royalties of up to 0.75% to 2.0% of net sales, depending on who serves as the manufacturer, when the Company commences its first commercial sale; such royalties will continue for the duration of the license agreement. As of November 30, 2021, the Company accrued expense of approximately $0.4 million related to this arrangement and as of May 31, 2021 the Company recorded a prepaid asset of approximately $0.1 million related to this agreement.

Note ~~9 –~~10. Commitments and Contingencies

~~Under~~Commitments with Samsung BioLogics Co., Ltd. (“Samsung”)

In April 2019, the ~~Asset Purchase Agreement, dated July 25, 2012, between~~Company entered into an agreement with Samsung, pursuant to which Samsung will perform technology transfer, process validation, manufacturing, and supply services for the commercial supply of leronlimab effective through calendar year 2027. In 2020, the Company entered into an additional agreement, pursuant to which Samsung will perform technology transfer, process validation, vial filling and storage services for clinical, pre-approval inspection, and commercial supply of leronlimab. Samsung is obligated to procure necessary raw materials for the Company and ~~Progenics Pharmaceuticals, Inc. (“Progenics”) (the “Asset Purchase Agreement”),~~manufacture a specified minimum number of batches, and the Company ~~acquired from Progenics its rights~~is required to provide a rolling three-year forecast of future estimated manufacturing requirements to Samsung that are binding. On January 6, 2022,

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Samsung provided written notice to the ~~HIV viral-entry inhibitor drug candidate PRO 140 (“PRO 140”), a humanized anti-CCR5 monoclonal antibody, as well as certain other related assets, including~~Company of the ~~existing inventory~~Company’s material breach of ~~bulk PRO 140 drug product, intellectual property, certain related licenses~~the parties’ Master Services and ~~sublicenses, and U.S. Food and Drug administration (“FDA”) regulatory filings. On October 16, 2012,~~Project Specific Agreements for failure to pay approximately $13.5 million due on December 31, 2021. This amount was included in accounts payable at November 30, 2021. Under the agreements, the Company ~~paid~~has 45 days to ~~Progenics $3.5 million in cash~~make commercially reasonable efforts to ~~close~~commence curing the ~~transaction. The Company is also required to pay Progenics the following milestone payments and royalties: (i) $1.5 million at the time of the first dosing in a U.S. Phase 3 trial ornon-US~~ ~~equivalent, which was paid~~breach. If such steps have not been taken during the ~~year ended May 31, 2016; (ii) $5.0 million at~~cure period, Samsung may terminate the ~~time of~~agreements upon 45 days’ notice. Management has communicated to Samsung its intent to commence curing the ~~first U.S. new drug application approval by the FDA or othernon-U.S.~~ ~~approval for the sale of PRO 140; and (iii) royalty payments of up~~breach prior to ~~5% on net sales during the period beginning on the date of the first commercial sale of PRO 140 until the later of (a)~~ the expiration of the ~~last to expire patent included in the acquired assets, and (b) 10 years, in each case determined on acountry-by~~ country basis. During the year ended May 31, 2016 the Company paid $1.5 million of such milestones owed to Progenics as a result of the first dosing in a U.S. Phase 3 trial. To the extent that such milestone payments and royalties are not timely made, under the terms of the Asset Purchase Agreement, Progenics has certain repurchase rights relating to the assets sold to the Company thereunder. As of the date of this filing, it is management’s conclusion that the probability of achieving the subsequentcure period. The future ~~scientific research milestones is not reasonably determinable, thus the future milestone payments payable to Progenics and itssub-licensors~~ ~~are deemed contingent consideration and, therefore are not currently accruable.~~

Payments to the third-party licensor and to Progenics are in addition to payments due under a Development and License Agreement, dated April 30, 1999 (the “PDL License”), between Protein Design Labs (now AbbVie Inc.) (“PDL”) and Progenics, which was assigned to the Company in the Asset Purchase Agreement,commitments pursuant to which the Company has an exclusive worldwide license to develop, make, have made, import, use, sell, offer to sell or have sold products that incorporate the humanized form of the PRO 140 antibody developed by PDL under the agreement and must pay additional milestone payments and royaltiesthese agreements are estimated as follows: ~~(i) $1.0 million upon initiation of a Phase 3 clinical trial, which was paid during the year ended May 31, 2016; (ii) $0.5 million upon filing a Biologic License Application~~


Fiscal Year (in thousands)	Amount
2022 (6 months remaining)	$	21,271
2023		113,790
2024		106,140
2025		14,400
Total	$	255,601

Commitments with ~~the FDA ornon-U.S.~~ ~~equivalent regulatory body; (iii) $0.5 million upon FDA approval or approval by anothernon-U.S.~~ equivalent regulatory body; and (iv) royalties of up to 7.5% of net sales for the longer of 10 years and the date of expiration of the last to expire licensed patent. Additionally, the PDL License provides for an annual maintenance fee of $150,000 until royalties paid exceed that amount. During the year ended May 31, 2016, the Company paid $1 million of such milestones. To the extent that such milestone payments and royalties are not timely made, under the terms of the PDL License, AbbVie Inc. has certain termination rights relating to the Company’s license of PRO 140 thereunder. Pursuant to the foregoing Asset Purchase Agreement and PDL License, the Company accrued an expense of $2.5 million as of May 31, 2015 in connection with the anticipated milestone payments related to the first patient dosing in a Phase 3 clinical trial, all of which was paid during the year ended May 31, 2016, as described above. As of the date of this filing, it is management’s conclusion that the probability of achieving the subsequent future scientific research milestones is not reasonably determinable, thus the future milestone payments payable to PDL, Progenics and its~~sub-licensors~~ ~~are deemed contingent consideration and, therefore are not currently accruable.~~Contract Research Organization (“CRO”)

The Company has entered into project work orders, as amended, for each of ~~its~~our clinical trials with ~~its clinical research organization (“CRO”)~~our CRO and related laboratory vendors. Under the terms of these agreements, the Company incurs execution fees for direct services costs, which are recorded as a current asset. In the event the Company were to terminate any trial, it may incur certain financial penalties ~~which~~that would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range ~~from an approximate low of $0.1 million~~up to ~~an approximate high of $0.3~~approximately $0.2 million. In the remote circumstance that the Company would terminate all clinical trials, the collective financial penalties may range from ~~an approximate~~a low of ~~$0.5 million~~approximately $20 thousand to an approximate high of ~~$1.6~~approximately $0.6 million.

During the year ended May 31, 2017, the Company entered into agreements with contract manufacturing companies. Under the terms of the agreements, the Company incurred approximately $3.2 million of execution fees for process validation and manufacturing activities, of which the remaining $2.1 million is reflected as a current asset, as of November 30, 2017. In the event the Company were to terminate any of the agreements, it may incur certain financial penalties which would become payable to the manufacturers. Conditioned on the timing of termination, the financial penalties may range up to an approximate high of $4.0 million.Legal Proceedings

~~From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the~~The Company is a party to various legal proceedings. The Company recognizes accruals for ~~which management believes~~such proceedings to the extent a loss is determined to be both probable and reasonably estimable. The best estimate of a loss within a possible range is accrued; however, if no estimate in the range is more probable than another, then the minimum amount in the range is accrued. If it is determined that a material loss is not probable but reasonably possible and the loss or range of loss can be estimated, the possible loss is disclosed. It is not possible to determine the outcome of proceedings that have not been concluded, including the defense and other litigation-related costs and expenses that may be incurred by the Company, as the outcomes of legal proceedings are inherently uncertain and the outcomes could differ significantly from recognized accruals. Therefore, it is possible that the ultimate outcome ~~would have~~of any proceeding, if in excess of a recognized accrual or if an accrual had not been made, could be material ~~adverse effect on~~to the Company’s consolidated financial ~~position.~~statements.

~~Note 10 – Private Securities Offerings~~

~~During the year ended May 31, 2017,~~As of November 30, 2021, the Company ~~conducted~~did not record any legal accruals related to the outcomes of the matters described below.

September 2020 Washington Shareholder Derivative Lawsuit

On September 10, 2020, the same certain stockholders of the Company (the “Plaintiffs”), which previously filed a ~~private equity offering,~~derivative action in ~~which accredited investors purchased unregistered~~the Delaware Court of Chancery on April 24, 2020, filed another derivative action against CEO Nader Z. Pourhassan, Ph.D. claiming that he had violated Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to certain personal stock transactions in the Company’s common ~~stock at $1.00 per share~~stock. The parties filed cross-motions to dismiss. On March 12, 2021, the U.S. District Court for the Western District of Washington (the “U.S. District Court”) granted Dr. Pourhassan’s motion to dismiss with ~~warrant coverage~~prejudice. On April 9, 2021, the Plaintiffs filed a Notice of ~~25%,~~Appeal to the Ninth Circuit Court of Appeals appealing the decision of the U.S. District Court. The Plaintiffs filed their opening brief with the Ninth Circuit on July 8, 2021. Dr. Pourhassan filed a response brief on September 8, 2021. The Plaintiffs filed a reply brief on October 29, 2021. The court has stated that it will decide the appeal based on the ~~number~~briefs and the record without oral argument.

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Pestell Employment Dispute

On July 25, 2019, the Company’s Board terminated the employment of Dr. Pestell, the Company’s former Chief Medical Officer, for cause pursuant to the terms of Dr. Pestell’s employment agreement. On August 22, 2019, Dr. Pestell filed a lawsuit in the U.S. District Court for the District of Delaware (Pestell v. CytoDyn Inc., et al.), against the Company, its Chief Executive Officer and the Chairman of the Board, alleging breach of the employment agreement, a failure to pay wages and defamation, among other claims, and seeking damages related to severance entitlements for a non-cause termination under the employment agreement and a stock restriction agreement, among other relief. The treatment of those entitlements, including severance and, together with approximately 0.4 million unvested stock options and 8.3 million shares of unvested restricted common stock, ~~purchased. Pursuant~~in each case granted or issued on November 16, 2018 and which vest ratably over three years or upon a non-cause termination, are expected to be determined by the ~~Offering,~~outcome of this litigation. Dr. Pestell also seeks damages in connection with his alleged inability to liquidate the equity at issue since his termination, and as a result of the alleged defamation. On November 2, 2020, the Court dismissed Dr. Pestell’s wage claims with prejudice and the Company’s Chief Executive Officer and the Chairman of the Board were dismissed from the proceeding. The Company filed its answer and counterclaims thereafter. A bench trial is currently set for April 2022. The Company disputes all of Dr. Pestell’s claims and intends to vigorously defend the action. The Company cannot predict the ultimate outcome and cannot reasonably estimate the potential loss or range of loss, if any, that the Company ~~sold~~may incur.

Securities Class Action Lawsuit

On March 17, 2021, a ~~total~~stockholder filed a putative class-action lawsuit in the U.S. District Court for the Western District of ~~729,500~~Washington against the Company and certain current and former officers. The complaint generally alleges the defendants made false and misleading statements regarding the viability of leronlimab as a potential treatment for COVID-19. On April 9, 2021, a second stockholder filed a similar putative class action lawsuit in the same court, which the plaintiff voluntarily dismissed without prejudice on July 23, 2021. On August 9, 2021, the court appointed lead plaintiffs for the lawsuit. On December 21, 2021, lead plaintiffs filed an amended complaint, which is brought on behalf of an alleged class of those who purchased the Company’s common stock between March 27, 2020 and May 17, 2021. The amended complaint generally alleges that the Company and certain current and former officers violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by making purportedly false or misleading statements concerning, among other things, the safety and efficacy of leronlimab as a potential treatment for COVID-19, the Company’s CD10 and CD12 clinical trials, and its HIV BLA. The amended complaint also alleges that the individual defendants violated Section 20A of the Exchange Act by selling shares of the Company’s common stock ~~$0.001 par value, for aggregate gross proceeds~~purportedly while in possession of ~~$729,500~~material nonpublic information. The amended complaint seeks, among other relief, a ruling that the case may proceed as a class action and ~~issued~~unspecified damages and attorneys’ fees and costs. The Company and the individual defendants deny all allegations of wrongdoing in the complaint and intend to vigorously defend the ~~investors five-year warrants covering 182,375 shares of common stock with~~matter. Since this case is in an ~~exercise price of $1.35 per share.~~

During the six months ended November 30, 2017, the Company conducted a private equity offering, in which accredited investors purchased unregistered common stock at $0.50 per share with warrant coverage of 100%, based onearly stage where the number of ~~shares~~plaintiffs is not known, and the claims do not specify an amount of ~~common stock purchased. Pursuant~~damages, the Company is unable to predict the ultimate outcome of the lawsuit and cannot reasonably estimate the potential loss or range of loss the Company may incur.

2021 Shareholder Derivative Lawsuits

On June 4, 2021, a stockholder filed a purported derivative lawsuit against certain of the Company’s current and former officers, certain board members, and the Company as a nominal defendant, in the U.S. District Court for the Western District of Washington (“First Derivative Suit”). The complaint generally alleges the director defendants breached fiduciary duties owed to the ~~offering,~~Company by allowing the Company ~~sold~~to make false and misleading statements regarding the viability of leronlimab as a ~~total~~potential treatment for COVID-19 and failing to maintain an adequate system of ~~6,651,800 shares~~oversight and internal controls. The complaint asserts claims against one or more individual defendants for breach of ~~common stock for aggregate gross proceeds~~fiduciary duty, waste of ~~$3,325,900~~corporate assets, and ~~issued warrants covering an aggregate~~unjust enrichment, and seeks to recover on behalf of 6,651,800 shares of common stock with a five-year term and an exercise price of $0.75 per share. In connection with the offering the placement agent received a warrant covering 452,180 shares of common stock, with an exercise price of $0.55 per share and a five-year term.

~~In connection with the September 2017 Offering, as fully described below in Note 11, on November 30, 2017,~~ the Company ~~completed~~for any liability the Company incurs as a result of the individual defendants’ alleged misconduct. The complaint also seeks contribution on behalf of the Company from certain individual defendants for their alleged violations of federal securities laws. The complaint seeks declaratory and equitable relief, an ~~offer~~unspecified amount of damages, and ~~sale (the “Make-Whole Offering”~~attorneys’ fees and costs. On June 25, 2021, a second shareholder derivative lawsuit was filed against the same defendants in the same court (“Second Derivative Suit”), which includes allegations and claims similar to those made in the First

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Derivative Suit, adding claims against certain individual defendants based on allegedly false and misleading proxy statement disclosures and for breach of ~~503,015 shares of Common Stock (the “Make-Whole Shares”)~~fiduciary duty arising from alleged insider trading, and ~~warrants~~seeking similar relief as the First Derivative Suit. On August 18, 2021, a third shareholder derivative lawsuit was filed against the same defendants in the same court, which includes allegations and claims similar to ~~purchase up to 251,504 shares of common stock (the “Make-Whole Warrants”~~those made in the First Derivative Suit and ~~collectively with the Make-Whole Shares, the “Make-Whole Securities”~~Second Derivative Suit. The court has consolidated these 3 lawsuits for all purposes (“Consolidated Derivative Suit”). The ~~Make-Whole Securities issued were unregistered.~~

plaintiffs’ deadline to file a consolidated complaint is January 20, 2022. The ~~Make-Whole Securities were offered pursuant to a form~~Company and the individual defendants deny all allegations of ~~Waiver and Subscription Agreement (the “Waiver and Subscription Agreement”). The Make-Whole Securities represent the difference~~wrongdoing in the ~~numbers~~complaints and intend to vigorously defend the litigation. In light of ~~shares of Common Stock and warrants~~the fact that ~~would have been sold to investors~~the Consolidated Derivative Suit is in the September 2017 Offering had the reduced purchase price of $0.65 per share of Common Stock and related Warrants in the October 2017 Offering, registered direct offering (as compared to $0.75 in the September 2017 Offering)an early stage and the ~~reduced warrant exercise price~~claims do not specify an amount of $0.75 in the October 2017 Offering (as compared to $1.00 in the September 2017 Offering) applied to the September 2017 Offering as well. The Make-Whole Securities were offered as consideration for the release of potential claims by participating investors. In connection with these arrangements, the exercise prices of any warrants previously sold in the September 2017 Offering to participating investors has also been reduced to $0.75 from $1.00. In addition, warrants previously issued to the placement agent (or its designees) in respect of participating investors have also been proportionately adjusted to reflect a reduced exercise price of $0.715 (as compared to $0.825 in the September 2017 Offering) and 26,702 additional shares.

~~Note 11 – Registered Direct Equity Offerings~~

~~In September 2016,~~damages, the Company ~~entered into securities purchase agreements with certain institutional investors for~~cannot predict the ~~sale of 13,333,334 shares of common stock at a purchase price of $0.75 per share in a registered direct equity offering (the “Registered Offering”), pursuant to a registration statement on FormS-3.~~ The investors in this Registered Offering also received warrants to purchase 6,666,667 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the offering of approximately $9.0 million after placement fees of 8%ultimate outcome of the ~~gross proceeds~~Consolidated Derivative Suit and ~~various expenses. In addition,~~cannot reasonably estimate the ~~placement agent received warrants covering 1,066,667 shares (or 8%~~potential loss or range of ~~total shares sold to investors) with a per share exercise price of $0.825 and a five-year term.~~

~~A summary of the cash proceeds of the offering is shown below:~~

Gross proceeds from sale of common stock
   $ 10,000,000
Placement agent fees and expenses
   1,010,000


Total net proceeds
   $ 8,990,000

As fully described in Note 5 above, the investor warrants and the placement agent warrants issued in conjunction with the Registered Offering are required to be accounted for in accordance with ASC 480 and ASC 815.

~~A summary of the ASC 480 allocation of the proceeds of the offering is as follows:~~

Allocated to common stock and additional paid in capital
   $ 6,334,417
Allocated to warrant liabilities
   2,655,583


Total net proceeds
   $ 8,990,000

~~Closing costs included 1,066,667 warrants valued at $819,200 for placement agent fees. Based upon the estimated fair value of the stock and warrants in the units,~~loss the Company ~~allocated $241,986 to financing expense~~may incur.

Securities and ~~$577,214 as stock issuance costs.~~

~~On December 12, 2016, the Company entered into securities purchase agreements with certain investors for the sale~~Exchange Commission and Department of ~~4,000,000 shares of common stock at a purchase price of $0.75 per share in a registered direct offering (the “December Offering”), pursuant to a registration statement on FormS-3.~~ The investors in this December Offering also received warrants to purchase 2,000,000 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the December Offering of $3.0 million.

On January 31, 2017, the Company entered into subscription agreements with certain investors for the sale of 1,534,999 shares of common stock at a purchase price of $0.75 per share in a registered direct offering (the “January Offering”), pursuant to a registration statement on Form~~S-3.~~ The investors in the January Offering also received warrants to purchase 767,498 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the January Offering of approximately $1.0 million after placement fees of 9% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 122,799 shares (or 8% of total shares sold to investors) with a per share exercise price of $0.825 and a five-year term.

On February 28, 2017, the Company entered into subscription agreements with certain investors for the sale of 5,670,661 shares of common stock at a purchase price of $0.75 per share in a registered direct offering (the “February Offering”), pursuant to a registration statement on Form~~S-3.~~ The investors in the February Offering also received warrants to purchase 2,835,323 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the February Offering of approximately $3.8 million after placement fees of 9% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 453,652 shares (or 8% of total shares sold to investors) with a per share exercise price of $0.825 and a five-year term.

On September 8, 2017, the Company entered into subscription agreements with certain investors for the sale of 3,336,331 shares of common stock at a purchase price of $0.75 per shares in a registered direct offering (the “September 2017 Offering), pursuant to a registration statement on Form~~S-3.~~ The investors in this September 2017 Offering also received warrants to purchase 1,668,163 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the September 2017 Offering of approximately $2.3 million after placement fees of 9% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 213,573 shares (or 8% of total shares sold to investors) with a per share exercise price of $0.825 and a five-year term.

On October 11, 2017, the Company entered into subscription agreements with certain investors for the sale of 1,880,765 shares of common stock at a purchase price of $0.65 per shares in a registered direct offering (the “October 2017 Offering), pursuant to a registration statement on Form~~S-3.~~ The investors in this October 2017 Offering also received warrants to purchase 940,380 shares of common stock with an exercise price of $0.75 per share and a five-year term. The Company received net proceeds from the October 2017 Offering of approximately $1.1 million. In addition, the placement agent received warrants covering 150,461 shares (or 8% of total shares sold to investors) with a per share exercise price of $0.715 and a five-year term.

~~Note 12 – Employee Benefit Plan~~Justice Investigations

The Company has received subpoenas from the United States Securities and Exchange Commission (“SEC”) and the United States Department of Justice (“DOJ”) requesting documents and information concerning, among other matters, leronlimab, the Company’s public statements regarding the use of leronlimab as a potential treatment for COVID-19, HIV, and triple-negative breast cancer, related communications with the FDA, investors, and others, litigation involving former employees, the Company’s retention of investor relations consultants, and trading in the Company’s securities. Certain Company executives have received subpoenas concerning similar issues and may be interviewed by the DOJ or SEC in the future. The SEC informed the Company that its inquiry should not be construed as an ~~employee savings plan (the “Plan”) pursuant to Section 401(k)~~indication that any violations of law have occurred or that the SEC has any negative opinion of any person, entity or security.

The Company is cooperating fully with these non-public, fact-finding investigations, and as of the ~~Internal Revenue Code~~date of this filing, the Company is unable to predict the ultimate outcome and cannot reasonably estimate the potential possible loss or range of loss, if any.

September 2021 Delaware Court of Chancery Lawsuit

On September 22, 2021, a putative class-action lawsuit was filed against the Company and its board members in the Delaware Court of Chancery (the ~~“Code”~~“Court”). The complaint generally alleged that Article VI, Section 5 of the Company’s certificate of incorporation, which concerns the removal of directors (“Removal Provision”), ~~covering~~violates Delaware law. The plaintiffs requested a ruling that the case may proceed as a class action, a declaration that the Removal Provision is invalid and unenforceable, an order enjoining the defendants from attempting to enforce the Removal Provision, and attorneys’ fees and costs. On January 6, 2022, the Company and the plaintiffs submitted an agreed upon stipulation and proposed order to resolve the matter, asking the Court to enter an order invalidating certain language of the Removal Provision, striking that language from the Removal Provision and deeming it null and void and of no legal effect, and retaining jurisdiction solely for the purpose of adjudicating plaintiffs’ counsel’s anticipated application for an award of attorneys’ fees and reimbursement of expenses.

Amarex Dispute

On October 4, 2021, the Company filed a complaint for declaratory and injunctive relief and motion for a preliminary injunction against NSF International, Inc. and its subsidiary Amarex Clinical Research LLC (“Amarex”), the Company’s former contract research organization (“CRO”). Over the past eight years, Amarex provided clinical trial management services to the Company and managed numerous clinical studies of the Company’s drug product candidate, leronlimab. On December 16, 2021, the U.S. District Court for the District of Maryland issued a preliminary injunction requiring Amarex to provide the Company with access to to all of its ~~employees.~~ materials in the possession of Amarex. The court also granted CytoDyn the right to conduct an audit of Amarex’s work for CytoDyn. The order is subject to the Company’s posting of a $6.5 million bond by January 14, 2022. In order to obtain the bond, the Company will be required to tender $6.5 million in cash as collateral to the surety issuing the bond. If necessary, the Company will seek an extension of the deadline for posting the bond.

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The Company ~~makes~~simultaneously filed a ~~qualifiednon-elective~~ ~~contribution~~demand for arbitration with the American Arbitration Association. The arbitration demand alleges that Amarex failed to perform services to an acceptable professional standard and failed to perform certain services required by the parties’ agreements. Further, the demand alleges that Amarex billed the Company for services it did not perform. The Company contends that, due to Amarex’s failures, it has suffered avoidable delays in obtaining regulatory approval of 3%leronlimab and has paid for services not performed. In light of the fact that this dispute is in an early stage, the Company cannot predict the ultimate outcome of the lawsuit and cannot reasonably estimate the potential loss or range of loss that the Company may incur.

Proxy Contest and Lawsuits

On July 1, 2021, the Company received a notice of nomination dated June 30, 2021, from a group of activist stockholders, Paul A. Rosenbaum, Jeffrey P. Beaty and Arthur L. Wilmes (the “Activists”), ~~which consequently vests immediately. In addition, participants~~purporting to nominate five individuals for election to the Company’s Board of Directors at its 2021 annual meeting of stockholders. On July 30, 2021, the Company informed the Activists that their notice of nomination was invalid due to its failure to comply with the Company’s Amended and Restated By-Laws. On August 5, 2021, the Company filed a lawsuit in the ~~Plan may contribute a percentage~~United States District Court for the District of Delaware against the Activists, seeking to enjoin the defendants from misleading stockholders and continuing to wage an illegal proxy contest in light of their ~~compensation, but not in excess~~faulty nomination notice and violation of ~~the maximum allowed under the Code. During the three and six months ended November 30, 2017 and 2016,~~various federal securities laws. On September 16, 2021, the Company ~~incurred~~and the Activists agreed to dismiss the litigation in the United States District Court for the District of Delaware without prejudice if certain additional disclosures about the Activists’ conflicts of interest, sources of funding and agenda were made, for which the Activists filed an ~~expense~~amendment to their Schedule 13D. On September 20, 2021, the United States District Court for the District of ~~approximately $10,800~~Delaware ordered the dismissal without prejudice.

On August 26, 2021, the Activists sued the Company in the Delaware Court of Chancery, seeking a declaratory judgment that the nomination notice was valid. On October 13, 2021, the Delaware Court of Chancery ruled that the Company’s Board of Directors properly rejected the nomination notice presented by the Activists and ~~$21,500 and $9,800 and $18,600, respectively,~~rejected all of their claims, disallowing proxies or votes in favor of their nominees to be recognized at the Company’s 2021 annual meeting. The annual meeting was held on November 24, 2021, at which the Company’s nominees for ~~qualifiednon-elective~~ ~~contributions.~~election as directors were elected.

Note ~~13 –~~11. Related Party Transactions

On May 31, 2017, Anthony D. Caracciolo, Executive Chairman of the Company, participated in the private placement of Notes, as fully described in Note 4. Mr. Caracciolo purchased a promissory note, bearing interest of 7%, for $1,000,000 in aggregate principal and received a warrant covering 333,333 shares of common stock at an exercise price of $1.00. The ~~terms and conditions of Mr. Caracciolo’s investment were identical to those offered to all other investors in the offering and his investment was approved by the~~Board’s Audit Committee, ~~of the Board of Directors.~~

On July 26, 2017, Jordan G. Naydenov, a director with the Company, participated in the private placement of Notes, as fully described in Note 4. Mr. Naydenov purchased a promissory note, bearing interest of 7%, for $100,000 in aggregate principal and received a warrant covering 66,666 shares of common stock at an exercise price of $1.00. The terms and conditions of Mr. Naydenov’s investment were identical to those offered to all other investors in the offering and his investment was approved by the Audit Committee of the Board of Directors.

On July 28, 2017, Alpha Venture Capital Partners, LP (“AVCP”), participated in the private placement of Convertible Promissory Notes, as fully described in Note 4 above. Mr. Carl Dockery, the principal of AVCP, is a director of the Company. AVCP purchased a promissory note, bearing interest of 7%, for $50,000 in aggregate principal and received a warrant covering 33,333 shares of common stock at an exercise price of $1.00. The terms and conditions of the AVCP investment were identical to those offered to all other investors in the offering and his investment was approved by the Audit Committee of the Board of Directors.

On November 8, 2017, in connection with a private equity offering, a limited liability company in which Anthony D. Caracciolo, Executive Chairman of the Company, holds a partial ownership interest purchased $100,000 of common stock and warrants on terms identical to those applicable to the other investors in the private equity offering.

~~The Audit Committee of the Board of Directors, comprised~~composed of independent directors, or the full Board, reviews and approves all related party transactions. The ~~above~~ terms and amounts described below are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.

~~Note 14 – Subsequent Events~~

~~From December 5 through December 20, 2017,~~On September 23, 2021, Jordan G. Naydenov, a member of the ~~Company conducted~~Company’s Board of Directors, entered into a private ~~equity offerings,~~warrant exchange in which ~~accredited investors purchased unregistered common stock at $0.50 per share with warrant coverage of 100%, based on the number of~~he exercised warrants to purchase approximately 0.6 million shares of common stock, ~~purchased. Pursuant~~as well as approximately 0.6 million additional shares that were offered as an inducement to ~~the offerings, the Company sold~~exercise his warrants, for a total of ~~2,948,666~~approximately 1.3 million shares of common ~~stock~~stock. The terms and conditions of the investment totaling approximately $0.7 million made by Mr. Naydenov were identical to those offered to other investors. See also Note 12 below.

Note 12. Subsequent Events

On December 7, 2021, in partial satisfaction of the December 2021 Debt Reduction Amount, the Company and the April 2, 2021 Note holder entered into an exchange agreement, pursuant to which the April 2, 2021 Note was partitioned into a new note (the “December 7, 2021 Partitioned Note”) with a principal amount of $2.0 million. The outstanding balance of the April 2, 2021 Note was reduced by the December 7, 2021 Partitioned Note. The Company and the investor exchanged the December 7, 2021 Partitioned Note for ~~aggregate gross proceeds of~~ approximately ~~$1.5~~2.4 million ~~and issued warrants covering an aggregate of 2,948,666~~ shares of common stock with a five-year term and an exercise price of $0.75 per share. In connection with the offerings, the placement agent received warrants covering 243,667 shares (or 10% of total shares sold to investors) with an exercise price of $0.55 per share.

~~On December 21, 2017, the Company extended the expiration date for the warrant tender Offer, as fully described in Note 6 above, to January 26, 2018.~~

The Tax Cuts and Jobs Act (“TCJA”) was enacted into law on December 22, 2017 (the enactment date). The corporate tax rate will be reduced to 21% from 35% for tax years beginning after December 31, 2017. This will affect the value of the Company’s deferred tax asset and related valuation allowance. However, the Company’s deferred tax asset has a full valuation allowance. The TCJA also limits net operating loss carryforwards (“NOLs”) arising in tax years beginning after December 31, 2017, however, existing NOLs that arose in years prior to December 31, 2017 are not affected by the TCJA. The Company is currently evaluating the TCJA and its potential effects on its financial statements.stock.

On December 29, ~~2017,~~2021, in partial satisfaction of the December 2021 Debt Reduction Amount, the Company ~~conducted~~and the April 2, 2021 Note holder entered into an exchange agreement, pursuant to which the April 2, 2021 Note was

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partitioned into a ~~private equity offering, in which accredited investors purchased unregistered common stock at $0.50 per share~~new note (the “December 29, 2021 Partitioned Note”) with ~~warrant coverage~~a principal amount of ~~100%, based on~~$2.0 million. The outstanding balance of the ~~number of~~April 2, 2021 Note was reduced by the December 29, 2021 Partitioned Note. The Company and the investor exchanged the December 29, 2021 Partitioned Note for approximately 2.4 million shares of common stock purchased. Pursuant to the offering, the Company sold a total of 1,777,638 shares of common stock for aggregate gross proceeds of approximately $0.9 million and issued warrants covering an aggregate of 1,777,638 shares of common stock with a five-year term and an exercise price of $0.75 per share. In connection with the offerings, the placement agent received warrants covering 177,764 shares (or 10% of total shares sold to investors) with an exercise price of $0.55 per share.stock.

Item ~~2.Management’s~~2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

~~This filing,~~Certain information included in this Quarterly Report on Form 10-Q contains, or incorporates by reference, forward-looking ~~statements.~~statements within the meaning of Section 21E of the Exchange Act. The words “anticipate,” “believe,” “hope,” “expect,” “intend,” “predict,” “plan,” “seek,” “estimate,” “project,” “continue,” “could,” “may,” and similar terms and expressions, or the use of future tense, are intended to identify forward-looking statements. These statements include, among others, statements about leronlimab, its ability to have positive health outcomes, the impact of health epidemics including the ongoing COVID-19 pandemic, and information regarding future operations, future capital expenditures and future net cash flows. Such statements reflect current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, (i) the regulatory ~~initiatives~~determinations of leronlimab’s efficacy to treat human immunodeficiency virus (“HIV”) patients with multiple resistance to current standard of care, COVID-19 patients, and ~~compliance with governmental regulations,~~metastatic Triple-Negative Breast Cancer (“mTNBC”), among other indications, by the ~~sufficiency of~~U.S. Food and Drug Administration and various drug regulatory agencies in other countries; (ii) the Company’s ~~cash position and the~~ ability to raise additional capital to fund its operations; (iii) the Company’s ability to meet its debt and other payment obligations; (iv) the Company’s ability to enter into or maintain partnership or licensing arrangements with third-parties; (v) the Company’s ability to identify patients to enroll in its clinical trials in a timely fashion; (vi) the timely and sufficient development, through internal resources or third-party consultants, of analyses of the data generated from the Company’s clinical trials required by the FDA or other regulatory agencies in connection with the Company’s BLA resubmission or other applications for approval of the Company’s drug product, (vii) the Company’s ability to achieve approval of a marketable product; (viii) the design, implementation and conduct of the Company’s clinical trials; (ix) the results of the Company’s clinical trials, including the possibility of unfavorable clinical trial results; (x) the market for, and marketability of, any product that is approved; (xi) the existence or development of vaccines, drugs, or other treatments that are viewed by medical professionals or patients as superior to the Company’s ~~drug candidates,~~products; (xii) regulatory initiatives, compliance with governmental regulations and the regulatory approval process; (xiii) legal proceedings, investigations or inquiries affecting the Company or its products; (xiv) general economic and business conditions; (xv) changes in foreign, political, and social conditions; (xvi) stockholder actions or proposals with regard to the Company, its management, or its board of directors; and (xvii) various other matters, many of which are beyond the Company’s control. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated, or otherwise indicated. Consequently, ~~all of~~ the forward-looking statements made in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments. For a discussion of the risks and uncertainties that could materially and adversely affect the Company’s financial condition and results of operations, see “Risk Factors” set forth in our Annual Report on Form 10-K for the year ended May 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on July 30, 2021, as amended by Amendment No. 1 filed with the SEC on September 28, 2021 (the “2021 Form 10-K”), as well as those risks and uncertainties identified in Part II, Item 1A of this Form 10-Q.

The following discussion and analysis of ~~the Company’s~~our financial condition and results of operations should be read in conjunction with the 2021 Form 10-K and the other sections of this ~~Quarterly Report,~~Form 10-Q, including ~~the Company’s financial statements~~our Consolidated Financial Statements and related notes ~~appearing elsewhere herein. To the extent not otherwise defined herein, capitalized terms shall have the same meanings as~~set forth in ~~such financial statements and related notes.~~Part I, Item 1. This discussion and analysis ~~contains~~contain forward-looking statements, including information about possible or assumed results of ~~the Company’s~~our financial condition, operations, plans, objectives and performance that involve ~~risk,~~risks, uncertainties and assumptions. The actual results may differ materially from those anticipated and set forth in such forward-looking statements.

~~Results~~Overview of ~~Operations~~

~~Clinical Trials Update~~Our Business

~~Phase 2b Extension Study~~The Company is a late-stage biotechnology company focused on the clinical development and potential commercialization of leronlimab (PRO 140), a CCR5 antagonist to treat HIV infection, and multiple other potential therapeutic indications. Our current business strategy is to resubmit our Biologics License Application (“BLA”) for ~~HIV, as Monotherapy~~. There were 11 trial participants in the extension study who successfully completed 37 weeks of therapy and were not discontinued. There were eight trial participants who surpassed three years of suppressed viral load with PRO 140 as a single-agent therapy. Certain patients have dropped out of the study for various undisclosed reasons. This extension study remains ongoing with six patients.

~~Phase 2b/3 Pivotal Trial for HIV, as Combination Therapy. A pivotal25-week~~ ~~trial for PRO 140~~leronlimab as a combination therapy for highly treatment-experienced HIV patients as soon as possible, as well as to

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seek approval for other HIV-related indications. We will seek approval for leronlimab as a potential therapeutic benefit for severe-to-critical COVID-19 patients and COVID-19 long-hauler’s indications in the U.S. and Brazil. We plan to ~~existing HAART drug regimens. Several patients~~advance our clinical trials with leronlimab for various forms of cancer, including among others, our Phase 2 trial for metastatic triple-negative breast cancer (“mTNBC”) and Phase 2 basket trial for 22 solid tumor cancers. We also plan to complete our Phase 2 trial to evaluate NAFLD and liver fibrosis associated with nonalcoholic steatohepatitis (“NASH”) and concurrently explore other immunologic indications for leronlimab.

The target of leronlimab is the immunologic receptor CCR5. The CCR5 receptor is a protein located on the surface of white blood cells that serves as a receptor for chemical attractants called chemokines. Chemokines are the key orchestrators of leukocyte trafficking by attracting immune cells to the sites of inflammation. At the site of an inflammatory reaction, chemokines are released. These chemokines are specific for CCR5 and cause the migration of T-cells to these sites, promoting further inflammation. The mechanism of action of leronlimab has the potential to block the movement of T-cells to inflammatory sites, which could be instrumental in diminishing or eliminating inflammatory responses. Some disease processes that could benefit from CCR5 blockade include transplantation rejection, autoimmunity, and chronic inflammation such as rheumatoid arthritis and psoriasis.

Due to leronlimab’s mechanism of action (“MOA”), we believe leronlimab may have significant advantages in reducing side effects over other CCR5 antagonists. Prior studies have demonstrated that leronlimab does not cause direct activation of T-cells.

We continue to evaluate strategic licensing opportunities and supply and distribution partnerships and conduct exploratory discussions with third parties for other potential strategies to monetize our assets. As recently completed ~~this trial~~license and ~~have transitioned~~supply and distribution agreements demonstrate, such agreements are country or region-specific and generally are limited to a ~~rollover~~specific clinical indication for leronlimab.

See Item 1. Business in our 2021 Form 10-K for more information.

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Business Highlights & Recent Developments

COVID-19 Clinical Developments

1^st Quarter Developments

●	In June 2021, the Company received its first purchase order from Chiral Pharma Corporation (“Chiral”) to treat critically ill COVID-19 patients in the Philippines under a Compassionate Special Permit (“CSP”). This order was fulfilled in August 2021.

●	In June 2021, clinical trial data was unblinded from the Company’s exploratory COVID-19 long-hauler ‘s clinical trial suggesting greater improvement over placebo in the majority of symptoms.

●	In July 2021, the Company was granted a patent by the U.S. Patent and Trademark Office for methods of treating COVID-19.

●	In August 2021, the Company received clearance from Brazil’s ANVISA to commence its Phase 3 trial for severe COVID-19 patients. The trial will be conducted in up to 35 clinical sites with 612 patients. The first patient was treated in this trial in September 2021.

2^nd Quarter Developments

●	In September 2021, the Company received two additional purchase orders from Chiral in the aggregate amount of approximately $0.2 million to continue to treat critically ill COVID-19 patients in the Philippines under a CSP. These orders were shipped during the quarter ended November 30, 2021.

●	In September 2021, the Company received clearance from Brazil’s ANVISA to commence its pivotal Phase 3 trial in critically ill COVID-19 patients. The trial will be conducted in up to 22 clinical sites with 316 patients. The first patient was treated in this trial in October 2021.

●	In December 2021, Brazil’s ANVISA agreed to modify the Phase 3 trial for critically ill COVID-19 patients to require a total patient enrollment of 126 patients instead of the previously approved 316 patients and allow for interim efficacy analysis after 51 patients have been treated for 27 days.

●

In December 2021, the Company submitted a protocol to the FDA for a Phase 3 trial evaluating the efficacy and safety of leronlimab in combination with standard of care for critically ill patients with COVID-19 pneumonia with the need for invasive mechanical ventilation or Extracorporeal Membrane Oxygenation. In this trial, up to four weekly 700 mg doses of leronlimab will be administered by intravenous infusion. This trial was designed based on a subgroup analysis of 62 critically ill patients from the Company’s previously completed COVID-19 clinical trial. The FDA has accepted the trial design. The Company is currently finalizing the protocol and will then submit it to the FDA and an Institutional Review Board (“IRB”) for final approval before initiation of the trial.

●	As of January 6, 2022, the Brazilian Phase 3 trials for severe and critically ill COVID-19 patients had enrolled 38 and 6 patients, respectively.

HIV BLA & Clinical Developments

1^st Quarter Developments

●	In June 2021, an animal study was published in Nature Communications regarding the use of leronlimab for HIV PrEP.

●	In July 2021, the Company submitted its dose justification draft report to the FDA in connection with the resubmission of its BLA.

●	In August 2021, the Company received guidance from the FDA with regard to its previously submitted HIV BLA draft dose justification report.

2^nd Quarter Developments

●	In September 2021, the Company revised its current BLA resubmission completion date from October 2021 to the first calendar quarter of 2022.

●	In October 2021, the FDA accepted a revised rolling review timeline for resubmitting the BLA, allowing for contemporaneous review by the FDA for sections as they are submitted.

●	In November 2021, the Company resubmitted two of the three integral sections of the BLA for review by the FDA, the non-clinical and manufacturing sections. The Company expects to resubmit the third and final clinical section by the end of the first calendar quarter of 2022.

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●

In December 2021, the Company submitted a request to the FDA for potential approval of the expanded access use of leronlimab for multi-drug resistance HIV patients. The FDA responded to the Company’s request in December 2021, requesting that the Company provide an updated protocol to permit them to evaluate the request for expanded access. The Company is preparing an updated protocol for submission.

Cancer Clinical Developments

1^st Quarter Developments

●	In July 2021, the Company’s Phase 1b clinical trial for mTNBC advanced to Phase 2 of the trial.

●	In July 2021, the Company’s preliminary results from various trials of 30 mTNBC patients suggested decreases in circulating cells and an increase in overall survival at 12 months in certain patients.

●	In August 2021, the Company’s final mTNBC report indicated an increase in 12-month overall survival and 12-month modified progression-free survival in certain patients.

2^nd Quarter Developments

●	In October 2021, the Company signed a research agreement with a leading cancer research institution, the University of Texas MD Anderson Cancer Center, to evaluate the potential synergistic therapeutic efficacy of leronlimab in combination with immune checkpoint blockade.

●

In October 2021, the Company updated its results from its various cancer trials with varying doses for the treatment of 28 patients with mTNBC who had failed at least two lines of previous therapy. In November 2021, the Company announced that it had submitted to the FDA an application for Breakthrough Therapy designation for leronlimab as a potential treatment for mTNBC based on the recent data results.

●

In January 2022, the FDA notified the Company that its mTNBC data did not demonstrate a substantial improvement over existing mTNBC therapies; therefore, it could not grant Breakthrough Therapy designation. The FDA indicated that the Company may submit a new request with additional clinical evidence that demonstrates a substantial improvement in second-line treatment of mTNBC over existing therapies. The Company plans to submit a new request, with the additional data from the ongoing trial, when available.

●	In November 2021, Health Canada issued the Company a Letter of Authorization for the emergency use of leronlimab to treat a single patient with mTNBC.

NASH Clinical Developments

2^nd Quarter Developments

●

In November and December 2021, interim preliminary results were announced regarding the Company’s Phase 2 NASH, 14-week open-label, 350 mg weekly dose, clinical trial. In January 2022, the Company announced it met its primary endpoint in proton density fat fraction (“PDFF”) and its secondary endpoint in cT1 in this trial. This clinical trial compared the changes from baselines in these endpoints in 22 patients. The Company is evaluating the results of the other part of the trial, in which 50 patients received a 700 mg weekly dose of either leronlimab or a placebo in a double-blind, randomized manner.

Other Clinical Developments

2^nd Quarter Developments

●	In November 2021, a research paper was published in Frontiers in Immunology Journal regarding the use of leronlimab and the suggested results of the CCR5 receptor occupancy analysis with regard to increased peripheral blood CCR5+CD4+ T cells.

Corporate Developments

1^st Quarter Developments

●

In August 2021, the Company hired Seenu Srinivasan, Ph.D., as Executive Director, CMC Regulatory Affairs, who has 30 years of experience in pharmaceutical drug development. He most recently served as Director of CMC Regulatory Affairs at Regeneron Pharmaceuticals, Inc., where he led the CMC strategy and successfully submitted a monoclonal antibody-based BLA.

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2^nd Quarter Developments

●

In October 2021, the Company restructured its management team in order to optimize the BLA resubmission process and to advance other clinical developments by appointing its then Chief Operating Officer (“COO”), Christopher Recknor, M.D., to a newly created role of Senior Executive VP of Clinical Operations, and its then Chief Technology Officer (“CTO”), Nitya Ray, Ph.D., to serve as both COO and CTO.

●

In October 2021, the Company hired Alok Krishen, M.S., as Sr. Director, Head of Biostatistics, who has over 35 years of experience in biostatistics in the pharmaceutical industry. His experience includes biostatistical support for design and conducting clinical trials, data interpretation and reporting, regulatory submissions to the FDA and European regulatory agencies, and post-approval data exploration. Mr. Krishen is extensively published in clinical research and statistical journals. He most recently served as Director, Biostatistics at Parexel International. Before Parexel, he held positions of increasing responsibility for a combined 32 years at GlaxoSmithKline and Baxter Healthcare.

●	In November 2021, the Company held its 2021 Annual Meeting at which the stockholders approved all four proposals submitted to a vote:

The election of six directors to serve on the Board of Directors until the 2022 Annual Meeting of Stockholders, including Scott A. Kelly, M.D., Nader Z. Pourhassan, Ph.D., Jordan G. Naydenov, Lishomwa C. Ndhlovu, M.D., Ph.D., Harish Seethamraju, M.D. and Tanya Durkee Urbach.

The ratification, on an advisory basis, of the selection of Warren Averett, LLC as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2022.

The approval, on an advisory basis, of the Company’s named executive officer compensation.

The approval of a proposal to amend the Company’s Certificate of Incorporation to increase the total number of authorized shares of common stock from 800,000,000 to 1,000,000,000.

●	In December 2021, Dr. Seethamraju stepped down from the Company’s Board of Directors due to pre-existing professional commitments, but agreed to join the Company’s Scientific Advisory Board.

●

In December 2021, the Company hired John Andrews, Ph.D., as Executive Director, Clinical Regulatory Affairs, who has over 35 years of experience in pharmaceutical drug development, including developing antiviral and other drugs in oncology and cardiovascular and pulmonary diseases. John has extensive experience in global regulatory submissions, including presentations to CDER and CBER. He has been published in the infectious disease area and an invited speaker at FDA advisory panels. Before joining the Company, he was a clinical regulatory consultant. He worked at Hoffman LaRoche/Genentech, Chiltern (currently LabCorp), and Burroughs Wellcome, where he contributed to developing the first drug to treat AIDS.

●

In December 2021, the Company hired Darshana Jani, M.S., as Vice President, Clinical Biosciences, who has over 25 years of industry experience in pharmaceutical drug development, including designing and developing a variety of regulatory compliant biological and bioanalytical methods and assay platforms in therapeutic areas for hematology, oncology, neurology, and auto-immune disease. She has successfully contributed to numerous IND and BLA submissions in the U.S. and internationally. Ms. Jani has published multiple papers in clinical pharmacology. She has been invited as a speaker and chair to various sessions at international scientific conferences. She most recently served as Director/Head, Global Bioanalysis and Biomarker Development, Translational Sciences and Clinical Affairs at Agenus, Inc. Before Agenus, she held positions of increasing responsibility for a combined 27 years at Pfizer, Biogen, MedImmune, and Genzyme.

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Results of Operations for the three and six months ended November 30, 2021 and November 30, 2020
The following table sets forth the results of operations for the three and six months ended November 30, 2021 and November 30, 2020 respectively:

Three months ended November 30,

Change

Six months ended November 30,

Change

(in thousands)

2021

2020

$

%

2021

2020

$

%

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾

Total revenue

$
225

$
—

$
225

100
%

$
266

$
—

$
266

100
%

Total cost of goods sold

52

—

52

100
%

53

—

53

100
%

Gross margin

173

—

173

100
%

213

—

213

100
%

Operating expenses:






General and administrative

16,203

7,551

8,652

115
%

23,820

17,426

6,394

37
%

Research and development

9,040

16,446

(7,406)

(45)
%

22,824

31,738

(8,914)

(28)
%

Amortization and depreciation

252

506

(254)

(50)
%

528

1,011

(483)

(48)
%

Total operating expenses

25,495

24,503

992

4
%

47,172

50,175

(3,003)

(6)
%

Operating loss

(25,322)

(24,503)

(819)

(3)
%

(46,959)

(50,175)

3,216

6
%

Other income (expense):

Loss on extinguishment of convertible notes

(3,312)

(4,169)

857

21
%

(7,963)

(4,169)

(3,794)

(91)
%

Legal settlement

—

—

—

—
%

(1,941)

—

(1,941)

(100)
%

Interest expense:

Finance charges

(1,024)

(231)

(793)

(343)
%

(1,059)

(137)

(922)

(673)
%

Amortization of discount on convertible notes

(793)

(1,243)

450

36
%

(1,745)

(2,582)

837

32
%

Amortization of debt issuance costs

(23)

(15)

(8)

(53)
%

(51)

(19)

(32)

(168)
%

Inducement interest expense

(4,704)

(4,217)

(487)

(12)
%

(5,232)

(7,562)

2,330

31
%

Interest on convertible notes payable

(1,426)

(1,047)

(379)

(36)
%

(3,112)

(1,613)

(1,499)

(93)
%

Total interest expense

(7,970)

(6,753)

(1,217)

(18)
%

(11,199)

(11,913)

714

6
%

Loss before income taxes

(36,604)

(35,425)

(1,179)

(3)
%

(68,062)

(66,257)

(1,805)

(3)
%

Income tax benefit

—

—

—

—

—

—

—

—

Net loss

$
(36,604)

$
(35,425)

$
(1,179)

(3)
%

$
(68,062)

$
(66,257)

$
(1,805)

(3)
%

(1) See Note 2, “—Correction of Immaterial Misstatements in Prior Period Financial Statements”.

Product revenue
Revenue recognized was approximately $225.0 thousand and $266.0 thousand for the three and six months ended November 30, 2021, respectively, compared to none in the same periods of 2020. Revenue was related to the fulfillment of orders under a CSP in the Philippines for the treatment of COVID-19 patients, pursuant to an April 2021 exclusive supply and distribution agreement granting Chiral the right to distribute and sell up to 200,000 vials of leronlimab through April 15, 2022.
Cost of goods sold (“COGS”) and Gross margin
COGS was approximately $52.0 thousand and $53.0 thousand for the three and six months ended November 30, 2021, respectively, compared to none in the comparable periods of 2020. This resulted in a 76.9% and 80.1% gross margin for the three and six months ended November 30, 2021, respectively. FDA approval has not been received for

Table of Contents

leronlimab and the inventory sold was previously expensed as ~~requested~~research and development expense due to its being manufactured prior to the commencement of the manufacturing of commercial grade pre-launch inventories, which are capitalized. Therefore, COGS consists only of the costs of packaging and shipping of the vials, including related customs and duties. When inventories manufactured prior to the manufacturing of pre-launch inventories are fully depleted and commercial grade pre-launch inventories for which manufacturing costs have been capitalized are sold, it is expected that COGS will significantly increase and gross margin will significantly decrease.

Operating expenses

The future trends in expenses will be driven largely by the treating physicians to enable the patients to have continued access to PRO 140. At an October 2017 meeting, the FDA accepted the 40 patients enrolled at that time in the Company’s Phase 2b/3 pivotal combination trial as evaluableoutcomes of clinical trials and further agreed that the trial’s independent data monitoring committee can conduct an interim efficacy analysis of primary endpoint. The FDA also confirmed that at least 50 patients will be required for the completion of this trial. As previously reported, the FDA also confirmed that 300 patients will be required for the safety analysis in a BLA, which can be provided by all of the Company’s HIV trials, providing that those patients have beentheir related effect on ~~a PRO 140 therapy for 24 weeks, with the same or higher dose as the combination therapy trial.~~

On December 7, 2017, the Company reported that the Independent Data Monitoring Committee (IDMC) for the PRO 140 pivotal combination therapy trial had completed a planned interim analysis of efficacy data of the first 40 patientsresearch and ~~had recommended that the trial be continued as planned, with the protocol defined sample size~~development expenses, general and power to achieve primary endpoint. The Company expects to complete enrollment in January 2018.Management projects that the total estimated costs for this trial may range from $10 million to $11 million.

~~Rollover Study for HIV, as Combination Therapy~~. This study is designed for patients who successfully complete the Phase 2b/3 combination therapy trial and for whom the treating physicians request a continuation of PRO 140 therapy. If this study enrolls 50 patients from the Phase 3 combination therapy trial and all patients remain in the rollover study for one year, management estimates the cost of this study to be approximately $6 million to $7 million.

~~Phase 2b/3 Investigative Trial for HIV, as Long-term Monotherapy~~. An investigative trial including 300 patients to assess the treatment strategy of using PRO 140 subcutaneously as a long-acting single-agent maintenance therapy for 48 weeks in patients with suppressed viral load with CCR5-tropic~~HIV-1~~ infection. The primary endpoint is to assess the clinical safety of PRO 140 monotherapy regimen and to evaluate the proportion of participants experiencing virologic failure. The secondary endpoint is length of time to virologic failure. Enrollment of the first several patients was announced in December 2016. The Company is currently exploring a high-dose arm, with a 50% increase in dosage, within the trial’s protocol in order to evaluate an increased response rate among certain patients.The Company expects to increase the number of sites in order to accelerate enrollment following the completion of enrollment of the pivotal combination therapy trial. The estimates for the total cost of this trial currently range from $22 million to $25 million, but such estimates will be updated upon the determination of the requisite number of sites, the rate of patient enrollmentadministrative expenses, professional fees, legal proceedings, and the ~~overall duration~~manufacturing of the trial, all of which could cause the total trial costs to vary from the foregoing range. The Company expects enrollment to be completed in 2018, subject to the foregoing variables. Patients who are completing this trial are transitioning to a rollover protocol, as requested by the treating physicians to enable the patients to have continued access to PRO 140 as a single-agent maintenance therapy.

~~Phase 2 Trial for Graft-versus-Host Disease. This Phase 2, randomized, double-blind, placebo-controlled, multi-center100-day~~ ~~study with 60 patients is designed to evaluate the feasibility of the use of PRO 140 prophylaxis as anadd-on~~ therapy to standard GvHD treatment for prevention of acute GvHD in adult patients with acute myeloid leukemia (“AML”) or myelodysplastic syndrome (“MDS”) undergoing allogeneic hematopoietic stem cell transplantation (“HST”). Enrollment of the first patient was announced in May of 2017. Management estimates the cost of this trial to be approximately $3.5 million to $4 million. On October 5, 2017, the Company announced that the FDA had granted orphan drug designation to PRO 140 for the prevention of graft versus host disease.

~~The Company will~~new commercial leronlimab. We require a significant amount of additional capital ~~to complete the foregoing clinical trials for HIV~~ and ~~make its BLA submission. See “Liquidity and Capital Resources” below.~~

~~Results of Operations for the three months ended November 30, 2017 and 2016 are as follows:~~

~~For the three months ended November 30, 2017 and November 30, 2016, the Company had no activities that produced revenues from operations.~~

For the three months ended November 30, 2017, the Company incurred a net loss of approximately $10.9 million, as compared to a net loss of approximately $5.5 million for the corresponding period in 2016. The increase in net loss of approximately $5.4 million related primarily to an increase in operating expenses of approximately $4.6 million, as described below, higher comparative interest expense of approximately $0.5 million, offset in part by a reduction in the~~non-cash~~ ~~benefit of a change in derivative liability of approximately $0.4 million. The loss per share for the quarter ended November 30, 2017 was $(0.07) compared to $(0.04) in the comparable 2016 period.~~

For the three months ended November 30, 2017 and November 30, 2016, operating expenses totaled approximately $10.8 million and $6.2 million, respectively, consisting of research and development, general and administrative expenses and amortization and depreciation. The increase in operating expenses of approximately $4.6 million reflected increased research and development expenses of approximately $4.7 million, offset in part by a slight decrease in general and administrative expenses of approximately $0.1 million.

~~General and administrative expenses, which totaled approximately $1.6 million for the three months ended November 30, 2017, were comprised of salaries and benefits,non-cash~~ stock-based compensation expense, professional fees, insurance and various other expenses. The slight reduction in general and administrative expenses of approximately $0.1 million for the three months ended November 30, 2017 over the comparable period a year ago was due to reduced stock-based compensation and certain professional fees, offset in part by increased corporate insurance coverages.

Research and development (“R&D”) expenses of approximately $9.1 million for the three months ended November 30, 2017 increased approximately $4.7 million over the comparable 2016 quarter principally due to higher clinical trial and manufacturing-related expenses. For the quarter ended November 30, 2017, R&D expenditures continue to be primarily devoted to: (1) one pivotal Phase 2b/3 combination therapy trial, one investigative Phase 2b/3 monotherapy trial, one Phase 2 GvHD trial, (2) increased CMC (chemistry, manufacturing and controls) activities to address regulatory compliance requirements of a future BLA filing and to advance the preparations for manufacturing new PRO 140 and (3) preparation of the~~non-clinical~~ ~~section necessary to complete the BLA filing with the FDA.~~

We expect R&D expenses to continue to increase in future periods, as the activity within the Company’s clinical trials expands and the biologics manufacturing processes and related regulatory compliance activities increase, all of which support the Company’s objectives to advance the preparation for an anticipated BLA filing in late 2018,if a breakthrough therapy designation is granted by the FDA.

~~For the quarter ended November 30, 2017, the Company recognized anon-cash~~ ~~benefit associated with the reduction in fair value of a derivative liability of approximately $0.8 million, as compared to anon-cash~~ benefit of approximately $1.2 million in the similar 2016 quarter. The warrants that contain a provision which gives rise to a derivative liability originated in September 2016. For each reporting period, we determine the fair value of the derivative liability and record a corresponding~~non-cash~~ ~~benefit or anon-cash~~ ~~charge, as a consequence of a decrease or increase, respectively, in the calculated derivative liability.~~

~~For the three months ended November 30, 2017, the Company incurred approximately $1.0 million in interest expense, of which is primarilynon-cash.~~ The components of interest expense included amortization of discount on convertible notes, amortization of debt issuance costs and interest on convertible notes. The comparable quarter a year ago included only originating interest expense associated with the derivative liability, as there was no outstanding debt during the comparable period last year.

The future trends in all expenses will be driven, in large part, by the future outcomes of clinical trials and the correlative effect on research and development expenses, as well as general and administrative expenses, in addition to the manufacturing of new commercial grade PRO 140, along with the necessary regulatory processes to confirm its qualification for future sale, if approved. The Company requires a significant amount of additional capital and itsour ability to continue to fund operations will continue to depend on ~~its~~our ability to raise such capital. See, in particular, ~~“Liquidity~~“Capital Requirements” and ~~Capital Resources”~~“Going Concern” below and Item 1A in our 2021 Form 10-K and Part II Item 1A ~~Risk Factors~~ in this Form 10-Q.

General and administrative (“G&A”) expenses
G&A expenses consist of all employee-related costs, stock-based compensation expense, legal fees, professional fees, insurance, and other corporate expense. G&A expenses consisted of the ~~Annual Report on Form10-K~~following for the ~~year~~periods presented:

Three months ended November 30,

Change

Six months ended November 30,

Change

(in thousands)
2021

2020

$

%

2021

2020

$

%

Salaries, benefits, and other compensation
$
1,850

$
1,525

$
325

21
%

$
2,235

$
4,981

$
(2,746)

(55)
%

Stock-based compensation

2,060

3,423

(1,363)

(40)

4,657

7,115

(2,458)

(35)

Legal fees

9,206

1,359

7,847

577

11,557

2,580

8,977

348

Other

3,087

1,244

1,843

148

5,371

2,750

2,621

95

Total general and administrative
$
16,203

$
7,551

$
8,652

115
%

$
23,820

$
17,426

$
6,394

37
%

G&A expenses increased approximately $8.7 million, or 115%, for the three months ended ~~May 31, 2017.~~November 30, 2021 compared to the same period from 2020. The increase was primarily driven by increased legal and other fees, which were partially offset by decreased stock-based compensation expense. The increase in legal fees was primarily related to legal fees associated with the proxy contest and lawsuits, SEC and DOJ investigations, the Pestell employment dispute, and the Amarex dispute. Additionally, the increase in other G&A expense was primarily due to increased insurance premiums, costs associated with the annual meeting, and outsourced consulting and recruiting services.
~~Results of Operations~~G&A expenses increased approximately $6.4 million, or 37%, for the six months ended November 30, ~~2017~~2021 compared to the same period from 2020. The increase was primarily driven by increased legal fees and ~~2016 are as follows:~~other G&A expense, which were partially offset by decreased employee-related costs. The increase in legal fees was primarily related to the proxy contest, SEC and DOJ investigations, the Pestell employment dispute, and the Amarex dispute. The increase in other G&A expense was primarily due to increased insurance premiums, costs associated with the annual meeting, and outsourced consulting and recruiting services. The reduction in salaries, benefits and other compensation was attributable to a reduction in bonuses and the reclassification of previously accrued incentive compensation to stock-based compensation due to the compensation being issued in stock, offset by an increase in severance costs related to the termination of employees and salaries and benefits. The decrease in stock-based compensation includes a partial offset related to the previously described reclassification.

Table of Contents

Research and development (“R&D”) expenses

R&D expenses include the costs of clinical trials, non-clinical, Chemistry, Manufacturing and Controls (“CMC”), regulatory and license and patent fees. R&D expenses consisted of the following for the periods presented:

Three months ended November 30,

Change

Six months ended November 30,

Change

(in thousands)
2021

2020

$

%

2021

2020

$

%

Clinical
$
5,598

$
6,896

$
(1,298)

(19)
%

$
14,661

$
16,456

$
(1,795)

(11)
%

Non-Clinical

511

67

444

663

675

1,038

(363)

(35)

CMC

2,696

9,287

(6,591)

(71)

7,019

13,814

(6,795)

(49)

License and patent fees

235

196

39

20

469

430

39

9

Total research and development
$
9,040

$
16,446

$
(7,406)

(45)
%

$
22,824

$
31,738

$
(8,914)

(28)
%

For the six months ended November 30, ~~2017~~2021, R&D expenditures were primarily devoted to: (1) COVID-19 clinical trials, (2) NASH clinical trial, (3) HIV extension studies which continue to provide leronlimab to patients who have successfully completed a trial, (4) clinical trials for oncology and other immunology indications, (5) HIV BLA resubmission, and (6) CMC activities related to clinical and commercialization inventories, including expenses associated with the write-off of and reserving for the write-down of inventory.
For the three months ended November 30, ~~2016,~~2021, R&D expenses decreased approximately $7.4 million, or 45%, compared to the ~~Company had no~~same period from 2020. The decrease was primarily due to decreased CMC related activities ~~that produced revenues from operations.~~and clinical trial expenses, offset by slight increases in non-clinical expenses and license and patent fees. The reduction in CMC expense was related to decreased manufacturing activity related to the commercialization of leronlimab. The reduction in clinical expenses was primarily attributable to decreased expenses associated with the various clinical trials related to HIV extension studies, COVID-19, and oncology, and the packaging and shipping of leronlimab, which were partially offset by increases related to conducting NASH trials and costs related to resubmission of our HIV BLA.
For the six months ended November 30, ~~2017, the Company had a net loss of~~2021, R&D expenses decreased approximately ~~$22.6~~$8.9 million, asor 28%, compared to ~~a net loss~~the same period from 2020. The decrease was due to lower CMC, clinical trial and non-clinical expenses. The reduction in CMC expense was due to decreased manufacturing activity tied to the commercialization of ~~approximately $10.8 million for the similar 2016 period.~~leronlimab. The ~~approximate increase of $11.8 million~~decrease in ~~net loss for 2017 over 2016~~clinical expenses was primarily attributable to reduced expenses associated with the various clinical trials related to COVID-19, HIV extension studies, and oncology, and the packaging and shipping of leronlimab, which were partially offset by an increase in ~~research~~clinical trial costs related to NASH and ~~development~~costs related to resubmission of our HIV BLA. The reduction in non-clinical expenses was attributable to decreased activity associated with non-clinical studies.
We expect future R&D expenses to be dependent on the timing of our BLA resubmission and potential FDA approval, the timing of FDA clearance, if any, of our pivotal trial protocol for leronlimab as a monotherapy for HIV patients, clinical and regulatory activities related to COVID-19, and clinical activities related to NASH, oncology and immunology trials, along with the outcome of the studies for several other indications.
Amortization and depreciation expenses
Amortization and depreciation expense for the three and six months ended November 30, 2021 and November 30, 2020 was approximately $0.3 million and $0.5 million, and $0.5 million and $1.0 million, respectively. The decrease of approximately ~~$9.2~~$0.3 million, or 50%, and $0.5 million, or 48%, for the three and six month periods, respectively, was attributable to an ~~increase~~impairment charge related to an intangible asset recorded in ~~interest expense~~the third quarter of fiscal year 2021, which reduced the amortization of intangibles.
Loss on extinguishment of convertible notes
For the three and six months ended November 30, 2021 and November 30, 2020, we recognized a non-cash loss on the extinguishment of convertible notes of approximately ~~$1.9~~$3.3 million ~~coupled with~~and $4.2 million, and $8.0 million and $4.2 million, respectively. The losses resulted from separate and independently negotiated note payment settlements in which certain debt was agreed to be settled in exchange for shares issued at a ~~decrease in~~price less than the ~~benefit~~closing price for the date of ~~a reduction in~~ the ~~fair value~~

Table of ~~a derivative liability of approximately $0.8 million.~~Contents

respective transactions. The ~~loss per share for~~original underlying convertible notes were entered into on November 10, 2020 and April 2, 2021. The November 10, 2020 note was fully retired during the six months ended November 30, ~~2017 was $(0.15)~~2021.
Legal Settlement
For the three and six months ended November 30, 2021, we incurred approximately zero and $1.9 million, respectively, in legal settlement expense. We did not recognize any legal settlement expense during the comparable periods of fiscal 2021. The legal settlement expense consisted of a $0.2 million cash payment and approximately $1.7 million of non-cash expense related to the issuance of warrants in connection with a negotiated settlement of a dispute with a placement agent.
Interest expense
Interest expense includes finance charges, non-cash amortization of the discount on convertible notes, non-cash amortization of debt issuance costs, non-cash inducement interest expense, and interest on convertible notes payable. Interest expense consisted of the following for the periods presented:

Three months ended November 30,

Change

Six months ended November 30,

Change

(in thousands)
2021

2020

$

%

2021

2020

$

%

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾

Finance charges
$
1,024

$
231

$
793

343
%

$
1,059

$
137

$
922

673
%

Amortization of discount on convertible notes

793

1,243

(450)

(36)

1,745

2,582

(837)

(32)

Amortization of debt issuance costs

23

15

8

53

51

19

32

168

Inducement interest expense

4,704

4,217

487

12

5,232

7,562

(2,330)

(31)

Interest on convertible notes payable

1,426

1,047

379

36

3,112

1,613

1,499

93

Total interest expense
$
7,970

$
6,753

$
1,217

18
%

$
11,199

$
11,913

$
(714)

(6)
%

(1) See Note 2, “—Correction of Immaterial Misstatements in Prior Period Financial Statements”.

For the three months ended November 30, 2021, interest expense increased $1.2 million, or 18%, compared to the same period of fiscal year 2021. The increase was primarily driven by an increase in non-cash inducement interest expense related to private warrant exchanges that occurred during the three months ended November 30, 2021. Additionally, there were increases in finance charges associated with vendor trade payables and interest on convertible notes. These increases were offset in part by a ~~loss per share~~decrease in non-cash amortization of ~~$(0.08) in the comparable 2016 period.~~discount on convertible notes.
For the six months ended November 30, ~~2017 and November 30, 2016, operating expenses totaled approximately $20.6~~2021, interest expense decreased by $0.7 million, ~~and $11.5 million, respectively, consisting~~or 6%, compared to the same period of fiscal year 2021. The decrease was primarily ~~of research and development, general and administrative expenses~~driven by decreases in non-cash inducement interest expense related to a private warrant exchange and amortization ~~and depreciation. The increase in operating expenses over the comparable 2016 period~~of discount on convertible notes. These decreases were ~~attributable to increased research and development expenses of approximately $9.2 million,~~ offset in part by increases in interest on convertible notes and finance charges associated with vendor trade payables.
Fluctuations in Operating Results
The Company’s operating results may fluctuate due to a ~~slight decrease~~number of factors, such as the timing of product manufacturing activities and inventory related shelf lives, patient enrollment or completion rates in ~~general~~various trials, potential amendments to clinical trial protocols, and ~~administrative expenses~~legal proceedings and related outcomes. We periodically conduct offerings to raise capital, which can create various forms of non-cash interest expense or amortization of issuance costs. Further, we periodically negotiate the settlement of debt payment obligations in exchange for equity securities of the Company, which can create a non-cash loss or gain upon extinguishment of debt. In addition, in prior years, we had derivative liabilities tied to certain securities that included a contingent cash settlement provision that can vary substantially from period to period, creating a non-cash charge or benefit.

Table of Contents

Liquidity and Capital Resources

Cash

The Company’s cash position of approximately ~~$0.1 million.~~
~~General and administrative expenses, which totaled approximately $3.2~~$8.9 million ~~for the six months ended~~as of November 30, ~~2017, were comprised of salaries and benefits,non-cash~~ ~~stock-based compensation expense, professional fees, insurance and various other expenses. The decrease in general and administrative expenses~~2021 decreased by $25.1 million, when compared to the balance of approximately ~~$0.1~~$33.9 million ~~for the six months ended November 30, 2017 over the comparable 2016 period~~at May 31, 2021. This decrease was ~~due to lower stock-based compensation and professional fees, offset slightly~~primarily caused by ~~higher other operating expenses.~~
Research and development expenses, which totaled approximately $17.2 million for the six months ended November 30, 2017, increased approximately $9.2 million over the same 2016 period. This increase was attributable to higher clinical trial expenses, combined with an expansion of the Company’s CMC activities in connection with the preparation of a BLA. The Company expects research and development expenses to trend higher, as the two ongoing Phase 2b/3 trials with PRO 140 for HIV therapy continue, along with the related rollover studies, combined with the Phase 2 GvHD trial, and the increasing expenses to expand activities related to manufacturing cGMP PRO 140 material for the BLA and for future use.
~~For the six months ended November 30, 2017 the Company recognized an unrealized gain, or anon-cash~~ ~~benefit from a decline in derivative liability of approximately $0.4 million, as compared to an approximatenon-cash~~ ~~benefit of $1.2~~$60.6 million in ~~the comparable 2016 period. The warrants that contain a provision which gives rise to a derivative liability originated~~cash used in ~~September 2016. For each reporting period, we determine the fair value of the derivative liability and record a correspondingnon-cash~~ ~~benefit or anon-cash~~ ~~charge, as a consequence of a decrease or increase, respectively, in the calculated derivative liability.~~
~~Interest expense for the six months ended November 30, 2017 of approximately $2.5 million increased approximately $2.0 million over the samesix-month~~ ~~period a year ago, due primarily to the issuance of approximately $4.8~~operating activities, partially offset by $35.6 million in aggregate principal of short-term convertible promissory notes due on January 31, 2018. Accordingly, interest expense was comprised of amortization of debt discount, debt issuance costs and accrued interest payable, as well as~~non-cash~~ ~~inducement interest of approximately $0.8 million related to~~cash provided by financing activities. See Going Concern below for discussion around the ~~extension of the expiration date of certain warrants. In the comparablesix-month~~ ~~period in 2016, there was no outstanding debt or the incurrence of inducement interest expense.~~
The future trends in all expenses will be driven, in large part, by the future outcomes of clinical trials and the correlative effect on research and development expenses, as well as general and administrative expenses, in addition to the manufacturing of new commercial grade PRO 140, along with the necessary regulatory processes to confirm its qualification for future sale, if approved. The Company requires a significant amount of additional capital, and itsCompany’s ability to continue to fund operations ~~will continue to depend on~~and satisfy its ~~ability to raise such capital. See, in particular, “Liquidity~~payment obligations and ~~Capital Resources” below and Item 1A Risk Factors in the Annual Report on Form10-K~~ ~~for the year ended May 31, 2017.~~
commitments.

Six months ended November 30,

Change

(in thousands)
2021

2020

$

Net cash (used in) provided by:

Net cash (used in) operating activities
$
(60,632)

$
(61,119)

$
487

Net cash (used in) investing activities
$
(13)

$
(77)

$
64

Net cash provided by financing activities
$
35,577

$
76,311

$
(40,734)

~~Liquidity and Capital Resources~~
The Company’s cash position at November 30, 2017 decreased approximately $0.5 million to approximately $1.3 million, as compared to a balance of approximately $1.8 million as of May 31, 2017. The net decrease in cash for the six months ended November 30, 2017 was attributable to net cashCash used in operating activities ~~of approximately $12.9 million, offset in part by cash provided by financing activities of approximately $12.4 million.~~
As of November 30, 2017, the Company had negative working capital of approximately $12.0 million compared to negative working capital of approximately $0.02 million at May 31, 2017, a decrease of approximately $11.98 million attributable primarily to cash used in operations.
~~Cash Flows~~
Net cash used in operating activities totaled approximately ~~$12.9~~$60.6 million during the six months ended November 30, ~~2017, which reflects~~2021, representing an ~~increase~~improvement of approximately ~~$2.1~~$0.5 million ~~of net cash used in operating activities~~ over the ~~six months ended November 30, 2016.~~comparable period a year ago. The ~~increase~~decrease in net cash used in operating activities was due to an increase in net loss of approximately $11.8 million, which was mitigated in part by the effect of a comparative net change in working capital components totaling approximately $7.3 million, coupled with an increase in~~non-cash~~ ~~interest expense of approximately $1.7 million and offset by an approximate $0.8 million reduction in thenon-cash~~ ~~benefit of~~primarily the change in ~~fair value~~our net loss, working capital fluctuations, and changes in our non-cash expenses, all of ~~the derivative liability for six months ended November 30, 2017.~~which are highly variable.
~~There were no~~Cash used in investing activities
Net cash used in investing activities ~~during~~was immaterial for the six months ended November 30, ~~2017,~~2021, compared to the ~~approximately $3,500 in the comparable period a year ago.~~six months ended November 30, 2020.
Cash provided by financing activities
Net cash provided by financing activities oftotaled approximately ~~$12.4~~$35.6 million during the six months ended November 30, ~~2017, increased~~2021, a decrease of approximately ~~$2.5~~$40.7 million ~~over the $9.9 million of~~from net cash provided by financing activities during the six months ended November 30, ~~2016.~~2020. The ~~increase~~decrease in net cash provided from financing activities ~~during the six months ended November 30, 2017~~ was primarily attributable to a decrease in proceeds received from convertible notes of $50.0 million, and stock option and warrant transactions and exercises of approximately $20.8 million. These decreases were partially offset by increased proceeds of approximately ~~$4.9~~$27.8 million ~~from the sale of convertible notes, an increase of approximately $1.2 million in warrant exercise proceeds over the prior comparable period, offset by lower net proceeds~~ from the sale of common stock and ~~warrants~~warrants.
Inventory
The Company’s pre-launch inventories consist of raw materials purchased for commercial production and work-in-progress inventory related to the substantially completed commercial production of pre-launch inventories of leronlimab to support the Company’s expected approval of the product as a combination therapy for HIV patients in the United States. Work-in-progress consists of bulk drug substance, which is the manufactured drug stored in bulk storage, and drug product, which is the manufactured drug in unlabeled vials. See Note 2, Summary of Significant Accounting Policies – Inventory, and Note 3, Inventories, for further discussion of the capitalization of pre-launch inventories.
The Company’s inventory position as of November 30, 2021 was approximately $88.6 million, net of an approximate $2.5 million reserve, decreased approximately $4.9 million when compared to a balance of approximately ~~$3.7~~$93.5 million as of May 31, 2021, net of an approximate $0.7 million reserve. During the six months ended November 30, 2021, the decrease in inventory was primarily related to $2.5 million of raw materials returned, approximately $1.8 million reserved for current and future estimated obsolescence of raw materials, and approximately $1.5 million related to the write-off of expired raw materials not previously reserved for and untested vialed drug product used for clinical purposes, offset by inventory purchases of approximately $1.3 million. As of November 30,

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2021 the raw materials balance was approximately $22.5 million, net of an approximate $2.5 million reserve, and the total work-in-progress was approximately $66.0 million. Work-in-progress consists of bulk drug substance, which is the manufactured drug stored in bulk storage, and drug product, which is the manufactured drug in unlabeled vials. Bulk drug substance and drug product comprised approximately $12.6 million and $53.5 million, respectively, of work-in-progress inventory.
Convertible debt
A summary of our convertible debt arrangements is included in Note 5, Convertible Instruments, of the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
~~Capital Requirements~~April 2, 2021 Note
On April 2, 2021, we issued a convertible note with a principal amount of $28.5 million resulting in net cash proceeds of $25.0 million, after $3.4 million of debt discount and $0.1 million of offering costs. The ~~Company has not generated revenue~~note accrues interest daily at a rate of 10% per annum, contains a stated conversion price of $10.00 per share, and matures in April 2023. The April 2, 2021 Note required monthly debt reduction payments of $7.5 million for the six months beginning in May 2021, which could also be satisfied by payments on other notes held by the noteholder or its affiliates. Beginning six months after the issuance date, the noteholder may request monthly redemptions of up to $3.5 million. The outstanding balance of the April 2, 2021 Note, including accrued interest, was approximately $19.8 million as of November 30, 2021.
April 23, 2021 Note
On April 23, 2021, we issued a convertible note with a principal amount of $28.5 million resulting in net cash proceeds of $25.0 million, after $3.4 million of debt discount and $0.1 million of offering costs. The note accrues interest daily at a rate of 10% per annum, contains a stated conversion price of $10.00 per share, and matures in April 2023. Beginning six months after the issuance date, the noteholder may request monthly redemptions of up to $7.0 million. The outstanding balance of the April 23, 2021 Note, including accrued interest, was approximately $27.9 million as of November 30, 2021.
Common stock
We have 1,000.0 million authorized shares of common stock. As of November 30, 2021, we had approximately 685.4 million shares of common stock outstanding, approximately 44.9 million shares of common stock issuable upon the exercise of warrants, approximately 3.0 million shares reserved for unissued warrants, approximately 34.1 million shares of common stock issuable upon conversion of convertible preferred stock and ~~will not generate product revenue in~~undeclared dividends, approximately 25.3 million shares of common stock issuable upon the ~~foreseeable future. We expect that~~exercise of outstanding stock options or the vesting of outstanding restricted stock units, approximately 18.8 million shares of common stock reserved for issuance pursuant to future stock-based awards under our equity incentive plan, and approximately 12.0 million shares of common stock reserved and issuable upon conversion of outstanding convertible notes. As a result, as of November 30, 2021, we had approximately 176.4 million unreserved authorized shares of common stock available for issuance.
Commitments and Contingencies
Commitments with Samsung BioLogics Co., Ltd. (“Samsung”)
In April 2019, the Company entered into an agreement with Samsung, pursuant to which Samsung will ~~continue~~perform technology transfer, process validation, manufacturing, and supply services for the commercial supply of leronlimab effective through calendar year 2027. In 2020, the Company entered into an additional agreement, pursuant to ~~incur operating losses as expenses continue~~which Samsung will perform technology transfer, process validation, vial filling and storage services for clinical, pre-approval inspection, and commercial supply of leronlimab. Samsung is obligated to ~~increase as it proceeds with clinical trials with respect~~procure necessary raw materials for the Company and manufacture a specified minimum number of batches, and the Company is required to ~~PRO 140 and continues~~provide a rolling three-year forecast of future estimated manufacturing requirements to ~~advance it through~~Samsung that are binding. On January 6, 2022,

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Samsung provided written notice to the ~~product development and regulatory process. The future trends of all expenses will be driven, in large part, by the future outcomes~~Company of the ~~clinical trials~~Company’s material breach of the parties’ Master Services and ~~their correlative effect~~Project Specific Agreements for failure to pay approximately $13.5 million due on ~~general and administrative expenses,~~December 31, 2021. An additional approximate $22.8 million is due under the agreements on January 31, 2022. These amounts are included in ~~addition to~~accounts payable at November 30, 2021. Under the manufacturing of new commercial grade PRO 140, along with the necessary regulatory processes to confirm its qualification for future sale, if approved. The Company will require a significant amount of additional capital in the future for its clinical trials to fulfill BLA requirements related to manufacturing PRO 140 for commercial use.

~~In connection with this undertaking,~~agreements, the Company has ~~entered into an arrangement with a third party contract manufacturing organization (the “CMO”)~~45 days to ~~provide process transfer, validation and manufacturing services for PRO 140.~~make commercially reasonable efforts to commence curing the breach. If such steps have not been taken during the cure period, Samsung may terminate the agreements upon 45 days’ notice. Management ~~believes~~has communicated to Samsung its intent to commence curing the CMO will best serve the Company’s strategic objectives for the anticipated BLA filing and, if approved, the long-term commercial manufacturing capabilities for PRO 140. Management will continue to assess manufacturing capacity requirements as new market information becomes available. In the event that the Company terminates the agreement with its CMO, the Company may incur certain financial penalties which would become payablebreach prior to the ~~CMO. Conditioned on~~expiration of the ~~timing of termination, the financial penalties may range up~~cure period. The future commitments pursuant to ~~an approximate high of $4.0 million. These CMO undertakings~~these agreements are ~~anticipated to require approximately $17 million of additional capital over the nextseveral fiscal quarters, including the~~ estimated ~~costs to fill, label, and package product into the final commercial package for commercial sale.~~as follows:

Fiscal Year (in thousands)

Amount
2022 (6 months remaining)

$
21,271
2023

113,790
2024

106,140
2025

14,400
Total

$
255,601

Commitments with Contract Research Organization (“CRO”)
The Company has entered into project work orders, as amended, for each of ~~its~~our clinical trials with ~~its clinical research organization (the “CRO”)~~our CRO and related laboratory vendors. Under the terms of these agreements, the Company ~~has prepaid certain~~incurs execution fees for direct services ~~costs. In connection with its clinical trials, the Company has entered into separate project work orders for each trial with its CRO.~~costs, which are recorded as a current asset. In the event ~~that~~ the Company ~~terminates~~were to terminate any trial, ~~the Company~~it may incur certain financial penalties ~~which~~that would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range ~~from an approximate low of $0.1 million~~up to ~~an approximate high of $0.3~~approximately $0.2 million. In the remote circumstance that the Company ~~terminates~~would terminate all clinical trials, the collective financial penalties may range from ~~an approximate~~a low of ~~$0.5 million~~approximately $20 thousand to an approximate high of ~~$1.6~~approximately $0.6 million.
Legal Proceedings
~~Under~~The Company is a party to various legal proceedings. As of November 30, 2021, we were not party to any material pending legal proceedings, other than those described in Note 10, Commitments and Contingencies, to the ~~Asset Purchase Agreement (the “Asset Purchase Agreement”), dated July 25, 2012, between~~Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. The Company recognizes accruals for such proceedings to the extent a loss is determined to be both probable and reasonably estimable. The best estimate of a loss within a possible range is accrued; however, if no estimate in the range is more probable than another, then the minimum amount in the range is accrued. If it is determined that a material loss is not probable but reasonably possible and the loss or range of loss can be estimated, the possible loss is disclosed. It is not possible to determine the outcome of these proceedings, including the defense and other litigation-related costs and expenses that may be incurred by the Company, as the outcomes of legal proceedings are inherently uncertain, and ~~Progenics Pharmaceuticals, Inc. (“Progenics”),~~the outcomes could differ significantly from recognized accruals. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a recognized accrual or if an accrual has not been made, could be material to the Company’s consolidated financial statements. As of November 30, 2021, the Company ~~acquired from Progenics its proprietary~~had not recorded any accruals related to the outcome of the matters described in Note 10, Commitments and Contingencies—Legal Proceedings.
Distribution
In December 2019, the Company entered into a supply agreement with Vyera Pharmaceuticals, LLC (“Vyera”) for the sale of leronlimab for HIV ~~viral-entry inhibitor drug candidate PRO 140 (“PRO 140”)~~in the United States in conjunction with a commercialization and license agreement entered into with Vyera. See “Licensing” below for further discussion of the agreement. On April 6, 2021, the Company entered into an exclusive supply and distribution agreement with Biomm S.A., a ~~humanized anti-CCR5 monoclonal antibody, as well as certain other related assets, including~~Brazilian pharmaceutical company, granting the ~~existing inventory~~exclusive right to distribute and sell leronlimab in Brazil upon Brazilian regulatory approval. On April 15, 2021, the Company entered into an exclusive supply and distribution agreement with Chiral Pharma Corporation, a Philippine pharmaceutical company, granting the exclusive right to distribute and sell up to 200,000 vials of ~~bulk PRO 140 drug product, intellectual property, certain related licenses and sublicenses, and U.S.~~leronlimab during the 12 months ending April 15, 2022, to treat critically ill COVID-19 patients in the Philippines under CSP or Emergency Use Authorization (“EUA”) from the Food and Drug ~~administration (“FDA”) regulatory filings.~~Administration of the Philippines. On ~~October 16, 2012,~~May 11, 2021, the Company ~~paid $3.5 million~~entered into an exclusive supply and distribution agreement with Macleods Pharmaceuticals Ltd., an

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Indian pharmaceutical company, granting the exclusive right to distribute and sell up to 200,000 vials of leronlimab in ~~cash~~calendar year 2021 in India to treat COVID-19 patients under a CSP or EUA from the India Central Drugs Standard Control Organization.

Licensing

Under the Progenics ~~to close the acquisition transaction. The Company is also~~Purchase Agreement, we are required to pay Progenics the following ongoing milestone payments and royalties: (i) ~~$1.5 million at the time of the first dosing in a U.S. Phase 3 trial ornon-US~~ ~~equivalent, which was paid during the three months ended February 29, 2016; (ii)~~ $5.0 million at the time of the first U.S. new drug application approval by the FDA or othernon-U.S. approval for the sale of ~~PRO 140;~~leronlimab (PRO 140); and ~~(iii)~~(ii) royalty payments of up to five percent (5%) on net sales during the period beginning on the date of the first commercial sale of ~~PRO 140~~leronlimab (PRO 140) until the later of (a) the expiration of the last to expire patent included in the acquired assets, and (b) 10 years, in each case determined on acountry-by country basis. ~~Payments to Progenics are in~~In addition, ~~to payments due~~ under a Development and License Agreement dated April 30, 1999 (the “PDL License”), between Protein Design Labs (now AbbVie Inc.) and Progenics, which was previously assigned to us, ~~in the PRO 140 transaction, pursuant~~we are required to ~~which the Company must~~ pay AbbVie Inc. additional milestone payments and royalties as follows: (i) ~~$1.0 million upon initiation of a Phase 3 clinical trial, which was paid during the three months ended February 29, 2016; (ii)~~ $0.5 million upon filing a ~~Biologic License Application~~BLA with the FDA ornon-U.S. equivalent regulatory body; ~~(iii)~~(ii) $0.5 million upon FDA approval or approval by anothernon-U.S. equivalent regulatory body; and ~~(iv)~~(iii) royalties of up to ~~7.5%~~3.5% of net sales for the longer of 10 years and the date of expiration of the last to expire licensed patent. Additionally, the PDL License provides for an annual maintenance fee of $150,000 until royalties paid exceed that amount.

As discussed elsewhere in this Form 10-Q, the Company received a Refusal to File letter from the FDA in July 2020 with respect to its BLA as a combination therapy with HAART for highly treatment experienced HIV patients. In response to this letter, the Company commenced the resubmission of its BLA in July 2021 and currently expects the ~~date~~BLA resubmission to be completed in the first calendar quarter of ~~this filing,~~2022. As such, until the BLA is accepted by the FDA, it is management’s conclusion that the probability of achieving the subsequent future clinical development and regulatory milestones is not reasonably determinable, ~~thus~~such that the future milestone payments payable to Progenics and itssub-licensors ~~are~~ have been deemed contingent consideration and, therefore, ~~are~~ not currently accruable.

On January 31, 2018, approximately $6.0 million in aggregate principal of convertible notes issued between May 31, 2017 and July 28, 2017 will become due and payable. Unless the holders elect to convert the principal amount of such notes plus accrued interest at an annual rate of 7.0%, or an aggregate of approximately $6.3 million, into common stock at a conversion price of $0.75 per share, or agree to amend or extend such notes,In December 2019, the Company entered into a Commercialization and License Agreement and a Supply Agreement with Vyera (together the “License Agreements”), under which the Company granted Vyera an exclusive royalty-bearing license to commercialize pharmaceutical preparations containing leronlimab for treatment of HIV in humans in the United States. The License Agreements gave Vyera the right to assign its rights and obligations under the agreements to an affiliate of Vyera. In October 2020, Vyera assigned the License agreements to SevenScore Pharmaceuticals, which in turn assigned them to Regnum Corp. in December 2021. Vyera, SevenScore and Regnum are each controlled by their parent Phoenixus AG.

The License Agreements, as assigned, provide that, pursuant to the terms and subject to the conditions set forth therein, Regnum will, at its cost, use commercially reasonable efforts to commercialize leronlimab for treatment of HIV in the United States. CytoDyn retains the right to license leronlimab for uses in the United States for purposes other than the treatment of HIV and for any purposes outside the United States.

The License Agreements obligate Regnum to pay the Company up to approximately $87.0 million upon the achievement of certain sales and regulatory milestones. Certain milestones are subject to reduction if not achieved within an agreed-upon timeframe. Regnum may also pay the Company additional potential milestone payments upon the regulatory approval of leronlimab for certain subsequent indications in the field. Whether a particular subsequent indication qualifies for an additional milestone payment will be determined in good faith by the parties. In addition, during the Royalty Term, as defined in the License Agreements, but, in any event, a period of not less than 10 years following the first commercial sale under the License Agreements, Regnum is obligated to pay the Company a royalty equal to 50% of Regnum’s gross profit margin from product sales (defined in the License Agreements as “Net Sales”). The royalty is subject to reduction during the Royalty Term after patent expiry and expiry of regulatory exclusivity. Following expiration of the Royalty Term, Regnum has non-exclusive rights to commercialize the product. Regnum has the right to terminate the License Agreements (i) upon written notice to CytoDyn on or after December 19, 2021 and prior to the Company’s receipt of approval from the FDA of the BLA for the manufacture and sale of leronlimab for HIV, (ii) if Regnum fails to achieve certain aggregate Net Sales (as defined in the License Agreements) of leronlimab during the period beginning on the date of first commercial sale and ending on the date that is two years from the date of

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the first commercial sale, and (iii) with 180 days’ prior written notice, at Regnum’s convenience following the second anniversary of the first commercial sale of leronlimab.

Regulatory Matters

FDA Refusal to File Letter on HIV BLA Submission

In July 2020, the Company received a Refusal to File letter from the FDA regarding its BLA submission for leronlimab as a combination therapy with HAART for highly treatment experienced HIV patients. The FDA informed the Company the BLA did not contain certain information needed to complete a substantive review and therefore, the FDA would not file the BLA. In particular, the FDA informed the Company that the receptor occupancy analysis performed by its third-party laboratory was not properly performed, and would be required to ~~repay such amount~~be resubmitted, and the Company would need to ~~its investors~~correct certain administrative submission deficiencies. The FDA’s request does not require any additional clinical trials to be conducted. Subsequent to the Refusal to File letter, the Company received further clarification on the BLA’s deficiencies. The Company has engaged a leading global healthcare diagnostic company, along with an expanded team of subject matter expert consultants, to conduct the receptor occupancy analysis necessary in ~~cash, which will require not less than an equal amount~~order to resubmit the BLA. The Company began to resubmit the BLA in July 2021. In November 2021 it resubmitted the non-clinical and manufacturing sections of ~~new capital. Moreover, such required capital, if available, may not be on terms~~the BLA, and ~~conditions consistent~~currently expects to complete the resubmission process with the ~~Company’s recent financing activities, or on favorable terms to~~resubmission of the ~~Company. See “Going Concern.”~~clinical section of the BLA in the first calendar quarter of 2022.

Going Concern

As reported in the accompanying financial statements, ~~for~~during the six months ended November 30, ~~2017~~2021 and November 30, ~~2016,~~2020, the Company incurred net losses of approximately ~~$22.6~~$68.1 million and ~~$10.8~~$66.3 million, respectively. The Company has had limited to no activities that produced revenue in the periods presented and has sustained operating losses since inception.
~~The Company~~We currently ~~requires~~require and will continue to require a significant amount of additional capital to fund operations ~~repay its outstanding convertible notes due January 31, 2018,~~and pay ~~its accounts payables,~~our liabilities and ~~its~~commitments, and our ability to continue as a going concern is dependent ~~upon its~~on our ability to raise such additional capital, commercialize ~~its~~our product and achieve profitability. If the Company is not able to raise such additional capital on a timely basis or on favorable terms, ~~the Company~~it may need to scale back ~~its~~ operations and/or slow ~~down or cease certain clinical trials or CMO~~CMC-related activities, which could materially delay ~~the timeframe~~commercialization initiatives and its ability to ~~BLA submission.~~achieve profitability. The Company’s failure to raise additional capital could also affect its relationships with key vendors, disrupting its ability to timely execute its business plan. In extreme cases, the Company could be forced to file for bankruptcy protection, discontinue ~~its~~ operations or liquidate ~~its~~ assets.
Since inception, the Company has financed its activities principally from the ~~sale of~~ public and private sale of equity securities and proceeds from convertible notes payable and related party notes payable. The Company intends to finance its future operating activities and its working capital needs largely from the sale of equity and debt securities, combined with additional potential funding from other traditional and non-traditional financing sources. As of the date of this filing, the Company ~~had~~has approximately ~~$77.8~~176.4 million shares of ~~securities~~common stock authorized and unreserved and available for issuance ~~or approximately $62.9 million, assuming the full exercise of previously issued warrants in future financing rounds registered~~ under its ~~universal shelf registration statement on FormS-3,~~ ~~which was declared effective on September 9, 2016.~~certificate of incorporation, as amended.
The sale of equity and convertible debt securities to raise additional capital may result in dilution to stockholders and those securities may have rights senior to those of common shares. If the Company raises ~~additional~~ funds through the issuance of additional preferred stock, convertible debt securities or other debt financing, ~~these activities or other debt~~the related transaction documents could contain covenants restricting its operations. On April 2 and April 23, 2021, the Company entered into long-term convertible notes that ~~would restrict the Company’s operations.~~are secured by all of our assets (excluding our intellectual property), and include certain restrictive provisions, including limitations on incurring additional indebtedness and future dilutive issuances of securities, any of which could impair our ability to raise additional capital on acceptable terms and conditions. Any other third-party funding arrangements could require the Company to relinquish valuable rights. The Company ~~may~~expects to require additional capital beyond currently anticipated needs. Additional capital, if available, may not be available on reasonable or non-dilutive terms. Please refer to the ~~risk factors~~matters discussed under Item ~~1.A.~~1A in our 2021 Form 10-K and Item 1A. in Part II of this Form 10-Q.

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The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses for all periods presented and has a substantial accumulated deficit. As of November 30, 2021, these factors, among several others, raise substantial doubt about our ability to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s ~~Annual Report onForm 10-K.~~
continuation as a going concern is dependent upon its ability to obtain a significant amount of additional operating capital, to continue its research into multiple indications for and development of its product candidate, to obtain FDA approval of its product candidate for use in treating one or more indications, to outsource manufacturing of its product, and ultimately to attain profitability. The Company intends to seek additional funding through equity or debt offerings, licensing agreements, supply and distribution agreements, and strategic alliances to implement its business plan. There are no assurances, however, that it will be successful in these endeavors.
Off-Balance Sheet Arrangements
~~The Company does~~We do not have anyoff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on ~~its~~our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Estimates
Our critical accounting estimates are those estimates that require the most significant judgments and estimates in presenting the Company’s consolidated financial statements. The Company evaluates its estimates, judgments, and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Part II, Item 7, of our 2021 Form 10-K and Note 2 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. The application of our critical accounting policies require management to make judgments and estimates about the amounts reflected in the consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.
Recent Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies – Recent Accounting Pronouncements, of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for a discussion of recent accounting pronouncements and their anticipated effect on our business.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Interest Rate Risk
~~The Company’s~~We are exposed to market risks in the ordinary course of business. These risks primarily include interest rate sensitivities. As of November 30, 2021, we had $8.9 million in cash and cash equivalents. We intend to hold our cash in interest-bearing money market accounts. Our primary exposure to market risk is ~~limited to~~interest rate sensitivity, which is affected by changes in the ~~market price~~general level of U.S. interest rates. Due to the short-term maturities of our cash and the low risk profile of its ~~common stock and to~~investment, an immediate 100 basis point change in interest rates would not have a ~~lesser extent foreign currency exchange risk.~~material effect on the fair market value of our cash.
Common Stock Price ~~Risk~~Volatility

The ~~Company does not use derivative instruments~~Compensation Committee of the Board of Directors has historically granted stock incentive awards to ~~hedge risks relating to its ongoing business operations or~~management and employees in the form of stock options. Stock-based compensation expense is recognized for ~~speculative purposes. However,~~stock options over the requisite service period using the fair value of these grants as ~~described~~estimated at the date of grant using the Black-Scholes pricing

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model and the market value of our publicly traded common stock on the date of grant. This expense is reflected in ~~greater detail~~the “General and administrative” expense line item in ~~Note 5 (Derivative Liability)~~our consolidated statements of operations. In addition to the ~~accompanying financial statements,~~market value of our common stock, one of the ~~Company is required to account for certain outstanding series of warrants as derivative instruments.~~

~~All derivative instruments are required to be recorded on the balance sheet at their fair values. Each quarter, management determines~~inputs into this model that significantly impacts the fair value of the options is the expected volatility of our common stock over the estimated life of the option. We estimate expected volatility by using the most recent historical experience.

Since November 2019, our common stock has experienced periods of elevated volatility in trading. Grants of stock options and compensatory warrants ~~accounted for as derivative instruments using a binomial lattice valuation mode. The key inputs~~during 2022 will continue to reflect increased expected volatility in ~~determining~~the estimation of grant date fair value of ~~such derivative liabilities include~~stock options that would result in a higher value and related stock-based compensation expense for these awards when compared to prior years.

Additionally, we periodically negotiate the ~~Company’s stock price and stock price volatility, and the then applicable risk free interest rate. Changes~~settlement of debt payment obligations in ~~these inputs affect the valuation of such derivatives and result innon-cash~~ ~~gain or loss each quarterly period. For example, a 10% increase or decrease in stock price would increase or decrease the value~~exchange for equity securities of the ~~warrant derivative liability by approximately $0.4 million, resulting in~~Company, which can create anon-cash loss ~~(for an increase)~~ or gain ~~(for a decrease)~~upon extinguishment of debt as the ~~same amount. Similarly, a 10% increase or decrease in stock~~ price ~~volatility would increase or decrease the value~~ of ~~the warrant derivative liability by approximately $0.4 million, resulting in anon-cash~~ loss (for an increase) or gain (for a decrease) of the same amount. Finally, a 10% increase or decrease in the risk free interest rate would increase or decrease the value of the warrant derivative liability by approximately $0.4 million, resulting in a~~non-cash~~ loss (for an increase) or gain (for a decrease) of the same amount. Management’s discretion is required to estimate certain other factors described in Note 5 to the accompanying financial statements, which also contribute to the fair value estimates of such derivative liability.

~~During the six months ended November 30, 2017, the Company recorded anon-cash~~ ~~benefit, or unrealizednon-cash~~ ~~gain, from a reduction in the fair value of the derivative liability associated with certain warrants of approximately $0.8 million, due primarily to a decrease in the Company’s~~our common stock fluctuates. If we continue to enter into these settlements, the increased levels of volatility in our common stock trading price will result in increased dilution and ~~increases in stock price volatility and risk free interest rate.~~

~~Foreign Currency Exchange Risk~~

The Company may face certain exposure to fluctuation in foreign currency exchange rates, due primarily to a license agreement with a third-party licensor under which the Company is required to pay annual license fees and/extinguishment gains or royalties denominated in British pounds sterling. For more information about this license agreement, see Note 8 (License Agreements) to the accompanying financial statements. Nevertheless, fluctuations in foreign exchange rates have not previously had, nor does management believe that they will have, any material impact on earnings, cash flows or other financial results of the Company.losses.

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
~~Under~~We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the ~~supervision~~reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of ~~management, including the~~our Chief Executive Officer and ~~the~~ Chief Financial Officer, ~~of the Company, the Company has~~ evaluated the effectiveness of ~~its~~our disclosure controls and procedures ~~(as defined in Rule13a-15(e)~~ ~~and15d-15(e)~~ ~~under the Securities Exchange Act of 1934, as amended)~~ as of November 30, ~~2017. Based on~~2021 (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that ~~evaluation,~~any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our Chief Executive Officer and ~~the~~ Chief Financial Officer have concluded, based upon the evaluation described above, that, ~~the Company’s~~as of November 30, 2021, our disclosure controls and procedures were not effective asdue to the material weakness in internal control over financial reporting described below.
Material Weakness
In connection with the preparation of our financial statements for the three and six months ended November 30, ~~2017.~~
2021, we identified an error that resulted in revisions to additional paid-in capital and non-cash inducement interest expense beginning in fiscal year 2018 through the three months ended August 31, 2021. The error relates to a pre-existing model used to calculate non-cash inducement interest expense designed to calculate inducement interest expense specific to modification of a warrant term (e.g., extension of the term or modification of exercise price) without settling the instrument. However, starting in fiscal year 2018 and to date, inducements have been primarily structured to be a settlement of the warrant, not a modification. We believe the failure to identify these errors on a timely basis resulted from a material weakness related to the evaluation of complex accounting issues due to staffing constraints and lack of technical expertise.
In connection with the identification of the material weakness in our internal control over financial reporting, we continue to evaluate, design and implement controls and procedures to address this weakness. In recent periods, we have entered into consulting arrangements for external resources and have hired additional personnel with accounting skills to strengthen internal control over financial reporting, specifically in the areas of technical accounting and financial reporting. To date, resources have been added in each of these specific areas, and we intend to continue these arrangements and to further supplement internal personnel. We also are enhancing risk assessment and monitoring controls to ensure that control activities are appropriately designed, implemented and operating effectively and have

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engaged an external accounting firm to assist with this process. A material weakness in internal control over financial reporting is a matter that may require some period of time to correct. We will continue to evaluate, design and implement policies and procedures to address the material weakness, including enhancing accounting personnel to adequately execute our accounting processes and address our internal control over financial reporting as a public company.

Changes in Internal Control Over Financial Reporting

~~Changes~~Other than the changes to date described above, there have been no changes in ~~Control Over Financial Reporting~~

~~No changes occurred during~~our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the ~~quarter ended November 30, 2017,~~Exchange Act, that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

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PART II
Item 1. Legal Proceedings.
~~None.~~For a description of pending material legal proceedings, please see Note 10, Commitments and Contingencies, of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors.
~~There have been no material changes in the~~We are subject to various risks, including those set forth below, and those risk factors ~~applicable to us from those~~ identified in ~~the~~our Annual Report onForm 10-K, for the year ended May 31, 2021, filed with the SEC on July 30, 2021, as amended by Amendment No. 1 filed with the SEC on September 28, 2021, and our subsequent filings with the SEC, that could have a negative effect on our financial condition and could cause results to differ materially from those expressed in forward-looking statements contained in this report or other reports filed with the SEC. You should carefully consider these risk factors in addition to the other information in this Form 10-Q.
Our cash reserves are extremely low, requiring that we raise substantial additional financing to satisfy our current payment obligations and to fund our operations.
We must raise substantial additional funds in the near term to meet our payment obligations and fund our operations. This funding may not be available on acceptable terms or at all. If we fail to raise additional funds on a timely basis, we may be forced to delay, reduce the scope of, or eliminate one or more of our clinical trials or postpone our regulatory submissions and commercialization initiatives, which would adversely affect our business, financial condition, and stock price. If we deplete our cash reserves, we may have no choice but to discontinue our operations and liquidate our assets.
We are required to post a $6.5 million bond in the dispute with our former contract research organization, which requires us to provide cash collateral to secure the full amount of the bond.
As discussed in Note 10, Commitments and Contingencies, of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, the court issued an injunction requiring Amarex to provide the Company with access to the databases and other information Amarex acquired in the course of providing services to the Company with regard to its clinical trials. As a condition to the injunction, the court ordered the Company to post a $6.5 million bond to cover a portion of disputed invoices for services in the related arbitration. To obtain the bond, the Company must tender $6.5 million in cash as collateral to the surety issuing the bond. If the Company is unable to provide the collateral in a timely fashion, its ability to review the databases and related information that Amarex holds may be delayed, potentially for several months or longer, resulting in additional delays in completion of the BLA resubmission process.
We have received notice of a material breach of our payment obligations to Samsung, which could result in termination of our agreements for manufacturing of our drug product and related services by Samsung.
On January 6, 2022, Samsung, one of our contract manufacturing organizations, sent written notice to the Company that it had materially breached its agreements with Samsung by failing to pay approximately $13.5 million due on December 31, 2021. An additional $22.8 million is due under the agreements on January 31, 2022. These amounts are included in accounts payable at November 30, 2021. Under the agreements, the Company has 45 days to make commercially reasonable efforts to commence curing the breach. If such steps have not been taken during the cure period, Samsung may terminate the agreements upon 45 days’ notice. Management intends to and has communicated to Samsung its intent to commence curing the breach prior to the expiration of the cure period. See Note 10, Commitments and Contingencies, of the Notes to Consolidated Financial Statements included in Part I, Item 1 and “Commitments and Contingencies” in Part I, Item 2 of this Form 10-Q for additional information.
Additional delays in the completion of the resubmission of our BLA may substantially hinder our efforts to commercialize our drug product and decrease stockholder value.

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In September 2021, we notified the FDA of an expected delay in the completion of resubmission of our BLA for the use of leronlimab as a combination therapy with HAART for highly treatment-experienced HIV patients. The delay was caused by what we believe to be performance failures by our former contract research organization, coupled with the additional time for a new team to address the deficiencies. We currently expect to complete our BLA resubmission process during the first calendar quarter of 2022. This timing will further delay receipt of FDA approval, if any, of the use of our drug product in HIV patients, and the related achievement of our strategic goals with regard to the marketing and sale of our drug product in the U.S., including the realization of significant revenues from the commercialization of leronlimab. It will also give other pharmaceutical companies additional time to develop drugs intended to address similar patient needs, which may place us at a competitive disadvantage. We may need to write down the value of our inventories due to obsolescence and likely will need to obtain significant additional funding to continue our business operations, which may not be available on acceptable terms, if at all. It may also lead to reduced investor confidence in our company, which may adversely affect the market price of our common stock and decrease stockholder value.

Our Commercialization and License Agreement with Vyera was assigned in December 2021 to Regnum Corp., which has no operations and virtually no assets.

Our Commercialization and License Agreement with Vyera (the “License Agreement”), under which it had exclusive rights to commercialize leronlimab for use with HIV patients in the U.S., gave Vyera the right to assign its rights and obligations under the agreement to an affiliate of Vyera. In October 2020, Vyera assigned the agreement to SevenScore Pharmaceuticals, which in turn assigned the agreement to Regnum Corp. in December 2021. Vyera, SevenScore and Regnum are each affiliates controlled by their parent Phoenixus AG. Phoenixus acquired Regnum in April 2021; at September 30, 2021, Regnum had $4,000 in assets and had no operations or revenues during the nine months ended September 30, 2021. Regnum likely will require a significant infusion of capital to fund its obligations under the License Agreement following approval by the FDA, if any, of the use of leronlimab in the treatment of HIV patients. See “Licensing” in Part I, Item 2 of this Form 10-Q for additional information regarding the License Agreement.

We have identified a material weakness in our internal control over financial reporting as of November 30, 2021, which could, if not remediated, result in material misstatements in or untimely reporting of our financial results which could lead to substantial additional costs and an adverse impact on our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations require us to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal quarter, and to include a management report assessing the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K for each fiscal year. Management determined that, as of November 30, 2021, we had a material weakness in our internal control over financial reporting and that, accordingly, our disclosure controls and procedures were ineffective. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, in connection the preparation of our financial statements for the three and six months ended November 30, 2021, we identified an error that resulted in revisions to additional paid-in capital and non-cash inducement interest expense beginning in fiscal year 2018 through the three months ended August 31, 2021. We continue to evaluate, design and work through the process of implementing controls and procedures under a remediation plan designed to address the material weakness. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our financial statements may contain material misstatements and we could be required to restate our financial results, potentially resulting in substantial additional costs for accounting and legal fees, shareholder litigation and a decline in our stock price. See Part I, Item 4 of this Form 10-Q for additional information regarding the material weakness in our internal control over financial reporting.

Our business, operating results and financial condition could be negatively affected as a result of actions by activist investors.

On October 20, ~~2017.~~2021, the Delaware Court of Chancery denied a motion by a group of investors (the “Activist Group”) that had purported to nominate five nominees for election to the Company’s Board of Directors (the “Board”) at the 2021 Annual Meeting of Stockholders (the “Annual Meeting”). As a result, the Activist Group was unable to

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nominate their slate and the Board’s six nominees for election as directors were elected at the Annual Meeting. Although the Activist Group was unsuccessful in its proxy contest, similar actions may occur in the future.While the Company welcomes the opinions of all stockholders, responding to demands, litigation, proxy contests or other initiatives by activist investors may divert the attention of our Board, management team, and employees from their regular duties and the pursuit of business opportunities to enhance stockholder value. Such actions may also cause our existing or potential customers, employees, strategic partners and stockholders to have questions or doubts about the future direction of the Company and may provide our competitors with an opportunity to exploit these concerns. Such circumstances could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.

Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
~~None.~~
As described in Note 10, Commitments and Contingencies, of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, on January 7, 2022, the Delaware Court of Chancery entered an order that declared that a portion of Article VI, Section 5, of the Company’s certificate of incorporation was null and void and of no legal effect under Delaware law. The order was entered pursuant to a stipulation submitted by the Company and the plaintiffs in a putative class-action lawsuit filed on September 22, 2021, to resolve the matter. As a result of the court order, the language in brackets below was stricken:
“5. Removal. Subject to the rights, if any, of any series of Preferred Stock to elect Directors and to remove any Director whom the holders of any such stock have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office [(i) only with cause and (ii)] only by the affirmative vote of the holders of at least a majority in voting power of the shares then entitled to vote at an election of Directors.”.
The Company intends to file a certificate of amendment with the Secretary of State of the State of Delaware pursuant to the Delaware General Corporation Law to cause the amendment of Article VI, Section 5, to reflect removal of the bracketed language.

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~~Item 6.~~ Item 6. Exhibits.
(a)Exhibits:

Incorporated by Reference
Exhibit
No

Description

Filed
Herewith

Form
Exhibit No.
Filing Date
3.1

Amended and Restated Certificate of Incorporation, as amended November 24, 2021.

X

10.1

Form of Subscription Agreement.

8-K
10.1
11/23/2021

31.1

Rule 13a-14(a) Certification by CEO of Registrant.

X

31.2

Rule 13a-14(a) Certification by CFO of the Registrant.

X

32.1

Certification of CEO of the Registrant pursuant to 18 U.S.C. Section 1350.*

X

32.2

Certification of CFO of the Registrant pursuant to 18 U.S.C. Section 1350.*

X

101.INS

Inline XBRL Instance Document.

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

X

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

X

*Furnished, not filed.

52
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~~Exhibits.~~
~~(a) Exhibits:~~
    ~~3.1~~ ~~Certificate of Amendment to the Certificate of Incorporation of CytoDyn Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017)~~
    ~~4.1~~ ~~Form of Warrant Agreement (September 2017 Offering) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017)~~
    ~~4.2~~ ~~Form of Warrant Agreement (October 2017 Offering) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form8-K~~ ~~filed October 11, 2017)~~
    ~~4.3~~ ~~Form of Warrant Agreement (November 2017 Offering) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form8-K~~ ~~filed November 8, 2017)~~
    ~~4.4~~ ~~Form of Consultant Warrant (November 2017 Offering) (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form8-K~~ ~~filed June 22, 2017)~~
    ~~4.5~~ ~~Form of Placement Agent Warrant (September/October 2017 Offering)~~
  ~~10.1~~ ~~Form of Subscription Agreement (September 2017 Offering) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017).~~
  ~~10.2~~ ~~Form of Securities Purchase Agreement (September 2017 Offering) (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017).~~
  ~~10.3~~ ~~Form of Placement Agent Agreement (September 2017 Offering) (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017).~~
  ~~10.4~~ ~~Form of Subscription Agreement (October 2017 Offering) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form8-K~~ ~~filed October 11, 2017).~~
  ~~10.5~~ ~~Form of Subscription Agreement (November 2017 Offering) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form8-K~~ ~~filed November 8, 2017)~~
  ~~10.6~~ ~~Form of Waiver and Subscription Agreement (Make-Whole Offering) (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form8-K~~ ~~filed December 6, 2017)~~
  31.1* ~~Rule13a-14(a)~~ ~~Certification by CEO of Registrant.~~
  31.2* ~~Rule13a-14(a)~~ ~~Certification by CFO of the Registrant.~~
  32.1* ~~Certification of CEO of the Registrant pursuant to 18 U.S.C. Section 1350.~~
  32.2* ~~Certification of CFO of the Registrant pursuant to 18 U.S.C. Section 1350.~~
101.INS * ~~XBRL Instance Document.~~
101.SCH * ~~XBRL Taxonomy Extension Schema Document.~~
101.CAL * ~~XBRL Taxonomy Extension Calculation Linkbase Document.~~
101.DEF * ~~XBRL Taxonomy Extension Definition Linkbase Document.~~
101.LAB * ~~XBRL Taxonomy Extension Label Linkbase Document.~~
101.PRE * ~~XBRL Taxonomy Extension Presentation Linkbase Document.~~
* ~~Filed herewith.~~
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CYTODYN INC.
(Registrant)
Dated: January ~~8, 2018~~10, 2022
/s/ Nader Z. Pourhassan
Nader Z. Pourhassan
President and Chief Executive Officer
(Principal Executive Officer)
Dated: January ~~8, 2018~~10, 2022
/s/ ~~Michael D. Mulholland~~Antonio Migliarese
~~Michael D. Mulholland~~
Antonio Migliarese
Chief Financial Officer ~~Treasurer~~
(Principal Financial and ~~Corporate Secretary~~Accounting Officer)


	November 30, 2017			May 31, 2017
	(unaudited)
Assets
Current assets:
Cash	$	1,296,839		$	1,775,583
Prepaid expenses		294,364			207,314
Prepaid service fees		3,143,385			4,138,041

Total current assets		4,734,588			6,120,938
Furniture and equipment, net		14,036			17,281
Intangibles, net		1,742,181			1,917,219

Total assets	$	6,490,805		$	8,055,438

Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	9,716,970		$	4,281,204
Accrued compensation		926,542			637,190
Accrued license fees		517,400			167,000
Accrued interest on convertible notes		180,673			—
Convertible notes payable, net		5,391,998			1,058,611

Total current liabilities		16,733,583			6,144,005

Long-term liabilities:
Derivative liability		2,547,733			3,014,667

Total long-term liabilities		2,547,733			3,014,667

Total liabilities		19,281,316			9,158,672
Commitments and Contingencies		—			—
Stockholders’ (Deficit) Equity
Series B convertible preferred stock, $0.001 par value; 400,000 shares authorized, 92,100 shares issued and outstanding at November 30, 2017 and May 31, 2017, respectively		92			92
Common stock, $0.001 par value; 375,000,000 and 350,000,000 shares authorized, 165,135,154 and 149,468,244 issued and outstanding at November 30, 2017 and May 31, 2017, respectively		165,135			149,468
Additionalpaid-in capital		132,609,936			121,736,921
Accumulated (deficit)		(145,565,674	)		(122,989,715	)

Total stockholders’ (deficit)		(12,790,511	)		(1,103,234	)

Total liabilities and stockholders’ (deficit) equity	$	6,490,805		$	8,055,438


	Three Months Ended November 30,						Six Months Ended November 30,
	2017			2016			2017			2016
Operating expenses:
General and administrative	$	1,608,743		$	1,679,925		$	3,178,420		$	3,259,988
Research and development		9,077,172			4,383,636			17,225,348			8,069,109
Amortization and depreciation		89,136			92,556			178,282			185,140

Total operating expenses		10,775,051			6,156,117			20,582,050			11,514,237

Operating loss		(10,775,051	)		(6,156,117	)		(20,582,050	)		(11,514,237	)
Interest income		422			5,648			1,206			9,383
Change in fair value of derivative liability		829,600			1,223,466			466,934			1,223,466
Interest expense:
Amortization of discount on convertible notes		(728,843	)		—			(1,172,995	)		—
Amortization of debt issuance costs		(168,429	)		—			(282,129	)		—
Interest related to derivative liability		—			(540,333	)					(540,333	)
Inducement interest related to warrant exercise		—			—			(826,252	)		—
Interest on convertible notes payable		(105,384	)		—			(180,673	)		—

Total interest expense		(1,002,656	)		(540,333	)		(2,462,049	)		(540,333	)

Loss before income taxes		(10,947,685	)		(5,467,336	)		(22,575,959	)		(10,821,721	)
Provision for taxes on income		—			—			—			—

Net loss	$	(10,947,685	)	$	(5,467,336	)	$	(22,575,959	)	$	(10,821,721	)

Basic and diluted loss per share	$	(0.07	)	$	(0.04	)	$	(0.15	)	$	(0.08	)

Basic and diluted weighted average common shares outstanding		157,843,773			136,023,544			154,774,327			130,185,627


	Fair Value Measurement at				Fair Value Measurement at
	November 30, 2017 (1)				May 31, 2017 (1)
	Using				Using
	Level 3		Total		Level 3		Total
Liability:
Derivative liability	$	2,547,733	$	2,547,733	$	3,014,667	$	3,014,667

Total liability	$	2,547,733	$	2,547,733	$	3,014,667	$	3,014,667


Investor warrants issued with registered direct equity offering	$	4,360,000
Placement agent warrants issued with registered direct equity offering		819,200
Fair value adjustments		(2,164,533	)

Balance at May 31, 2017		3,014,667

Fair value adjustments		(466,934	)

Balance at November 30, 2017	$	2,547,733


	November 30, 2017			May 31, 2017
Face amount of Notes	$	6,038,500		$	1,150,000

Unamortized discount		(493,000	)		(92,000	)
Unamortized issuance costs		(153,500	)		—

Total carrying value of Notes	$	5,392,000		$	1,058,000


	Shares Indexed		Derivative Liability
Balance May 31, 2016		—	$	—
Inception date September 15, 2016		7,733,334		5,179,200
Balance May 31, 2017		7,733,334		3,014,667
Balance November 30, 2017		7,733,334	$	2,547,733


	September 15,			May 31,			November 30,
	2016			2017			2017
Fair value of underlying stock	$	0.78		$	0.60		$	0.59
Risk free rate		1.20	%		1.71	%		2.08	%
Expected term (in years)		5			4.29			3.79
Stock price volatility		106	%		94	%		80	%
Expected dividend yield		—			—			—
Probability of Fundamental Transaction		50	%		50	%		50	%
Probability of holder requesting cash payment		50	%		50	%		50	%


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Options and warrants outstanding - May 31, 2017		77,859,626		$	0.86		3.40	$	40,250

Granted		16,497,852			0.78		—		—
Exercised		(3,295,000	)		0.50		—		—
Forfeited/expired/cancelled		(3,510,677	)		0.98		—		—

Options and warrants outstanding - November 30, 2017		87,551,801			0.83		3.51		70,500

Outstanding exercisable - November 30, 2017		83,426,884		$	0.83		3.25	$	37,750


	November 30, 2017			May 31, 2017
Gross carrying amounts	$	3,500,000		$	3,500,000
Accumulated amortization		(1,793,808	)		(1,618,770	)

Total amortizable intangible assets, net		1,706,192			1,881,230
Patents currently not amortized		35,989			35,989

Carrying value of intangibles, net	$	1,742,181		$	1,917,219


Gross proceeds from sale of common stock	$	10,000,000
Placement agent fees and expenses		1,010,000

Total net proceeds	$	8,990,000


Allocated to common stock and additional paid in capital	$	6,334,417
Allocated to warrant liabilities		2,655,583

Total net proceeds	$	8,990,000


	Three months ended November 30,				Change				Six months ended November 30,				Change
(in thousands)	2021		2020		$		%		2021		2020		$		%
			(Revised) ⁽¹⁾								(Revised) ⁽¹⁾
Total revenue	$	225	$	—	$	225	100	%	$	266	$	—	$	266	100	%
Total cost of goods sold		52		—		52	100	%		53		—		53	100	%
Gross margin		173		—		173	100	%		213		—		213	100	%
Operating expenses:
General and administrative		16,203		7,551		8,652	115	%		23,820		17,426		6,394	37	%
Research and development		9,040		16,446		(7,406)	(45)	%		22,824		31,738		(8,914)	(28)	%
Amortization and depreciation		252		506		(254)	(50)	%		528		1,011		(483)	(48)	%
Total operating expenses		25,495		24,503		992	4	%		47,172		50,175		(3,003)	(6)	%
Operating loss		(25,322)		(24,503)		(819)	(3)	%		(46,959)		(50,175)		3,216	6	%
Other income (expense):
Loss on extinguishment of convertible notes		(3,312)		(4,169)		857	21	%		(7,963)		(4,169)		(3,794)	(91)	%
Legal settlement		—		—		—	—	%		(1,941)		—		(1,941)	(100)	%
Interest expense:
Finance charges		(1,024)		(231)		(793)	(343)	%		(1,059)		(137)		(922)	(673)	%
Amortization of discount on convertible notes		(793)		(1,243)		450	36	%		(1,745)		(2,582)		837	32	%
Amortization of debt issuance costs		(23)		(15)		(8)	(53)	%		(51)		(19)		(32)	(168)	%
Inducement interest expense		(4,704)		(4,217)		(487)	(12)	%		(5,232)		(7,562)		2,330	31	%
Interest on convertible notes payable		(1,426)		(1,047)		(379)	(36)	%		(3,112)		(1,613)		(1,499)	(93)	%
Total interest expense		(7,970)		(6,753)		(1,217)	(18)	%		(11,199)		(11,913)		714	6	%
Loss before income taxes		(36,604)		(35,425)		(1,179)	(3)	%		(68,062)		(66,257)		(1,805)	(3)	%
Income tax benefit		—		—		—	—			—		—		—	—
Net loss	$	(36,604)	$	(35,425)	$	(1,179)	(3)	%	$	(68,062)	$	(66,257)	$	(1,805)	(3)	%


~~3.1~~		~~Certificate of Amendment to the Certificate of Incorporation of CytoDyn Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017)~~

~~4.1~~		~~Form of Warrant Agreement (September 2017 Offering) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017)~~

~~4.2~~		~~Form of Warrant Agreement (October 2017 Offering) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form8-K~~ ~~filed October 11, 2017)~~

~~4.3~~		~~Form of Warrant Agreement (November 2017 Offering) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form8-K~~ ~~filed November 8, 2017)~~

~~4.4~~		~~Form of Consultant Warrant (November 2017 Offering) (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form8-K~~ ~~filed June 22, 2017)~~

~~4.5~~		~~Form of Placement Agent Warrant (September/October 2017 Offering)~~

~~10.1~~		~~Form of Subscription Agreement (September 2017 Offering) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017).~~

~~10.2~~		~~Form of Securities Purchase Agreement (September 2017 Offering) (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017).~~

~~10.3~~		~~Form of Placement Agent Agreement (September 2017 Offering) (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form8-K~~ ~~filed September 8, 2017).~~

~~10.4~~		~~Form of Subscription Agreement (October 2017 Offering) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form8-K~~ ~~filed October 11, 2017).~~

~~10.5~~		~~Form of Subscription Agreement (November 2017 Offering) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form8-K~~ ~~filed November 8, 2017)~~

~~10.6~~		~~Form of Waiver and Subscription Agreement (Make-Whole Offering) (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form8-K~~ ~~filed December 6, 2017)~~

31.1*		~~Rule13a-14(a)~~ ~~Certification by CEO of Registrant.~~

31.2*		~~Rule13a-14(a)~~ ~~Certification by CFO of the Registrant.~~

32.1*		~~Certification of CEO of the Registrant pursuant to 18 U.S.C. Section 1350.~~

32.2*		~~Certification of CFO of the Registrant pursuant to 18 U.S.C. Section 1350.~~

101.INS *		~~XBRL Instance Document.~~

101.SCH *		~~XBRL Taxonomy Extension Schema Document.~~

101.CAL *		~~XBRL Taxonomy Extension Calculation Linkbase Document.~~

101.DEF *		~~XBRL Taxonomy Extension Definition Linkbase Document.~~

101.LAB *		~~XBRL Taxonomy Extension Label Linkbase Document.~~

101.PRE *		~~XBRL Taxonomy Extension Presentation Linkbase Document.~~


	CYTODYN INC.
	(Registrant)

Dated: January ~~8, 2018~~10, 2022		/s/ Nader Z. Pourhassan
		Nader Z. Pourhassan
		President and Chief Executive Officer
		(Principal Executive Officer)

Dated: January ~~8, 2018~~10, 2022		/s/ ~~Michael D. Mulholland~~Antonio Migliarese
	~~Michael D. Mulholland~~	Antonio Migliarese
		Chief Financial Officer ~~Treasurer~~
		(Principal Financial and ~~Corporate Secretary~~Accounting Officer)

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company