UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

~~FORM 10-Q~~

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

For the quarterly period ended ~~August 31, 2020~~

February 28, 2021

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

For the transition period from

Commission File Number: 000-49908

CYTODYN INC.

(Exact name of registrant as specified in its charter)


~~Delaware~~		~~83-1887078~~
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.

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

~~(Section~~ (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-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” in

Rule 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 Rule

12b-2

of the Exchange Act): Yes ☐ No ☒

On ~~September 30, 2020,~~March 31, 2021, there were ~~570,751,049~~612,875,224 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
~~PART I~~	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		3	34
I~~TEM~~ ~~1. FINANCIAL~~ S~~TATEMENTS~~	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		3	49
I~~TEM~~ ~~2. MANAGEMENT~~’S D~~ISCUSSIONAND~~ A~~NALYSIS~~OF F~~INANCIAL~~ C~~ONDITIONAND~~ R~~ESULTS~~OF O~~PERATIONS~~	ITEM 4. CONTROLS AND PROCEDURES		26	50
I~~TEM~~ ~~3. QUANTITATIVEAND~~ Q~~UALITATIVE~~ D~~ISCLOSURES~~ A~~BOUT~~ M~~ARKET~~ R~~ISK~~PART II				36	51
I~~TEM~~ ~~4. CONTROLSAND~~ P~~ROCEDURES~~	ITEM 1. LEGAL PROCEEDINGS		36	51
~~PART II~~	ITEM 1A. RISK FACTORS		36	51
I~~TEM~~ ~~1. LEGAL~~ P~~ROCEEDINGS~~	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		36	53
I~~TEM~~ ~~1A. RISK~~ F~~ACTORS~~	ITEM 3. DEFAULTS UPON SENIOR SECURITIES		37	53
I~~TEM~~ ~~2. UNREGISTERED~~ S~~ALES~~OF E~~QUITY~~ S~~ECURITIESAND~~ USEOF P~~ROCEEDS~~	ITEM 4. MINE SAFETY DISCLOSURES		37	54
I~~TEM~~ ~~3. DEFAULTS~~ U~~PON~~ S~~ENIOR~~ S~~ECURITIES~~	ITEM 5. OTHER INFORMATION		38	54
I~~TEM~~ ~~4. MINE~~ S~~AFETY~~ D~~ISCLOSURES~~	ITEM 6. EXHIBITS		38
I~~TEM~~ ~~5. OTHER~~ I~~NFORMATION~~			38
I~~TEM~~ ~~6. EXHIBITS~~			39	55

Table of Contents

PART I

I. Financial Information

Item 1. Consolidated Financial ~~Statements.~~

Statements

CytoDyn Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data)

   August 31, 2020
(unaudited) May 31, 2020
(audited)
Assets

Current assets:

Cash
   $ 18,200 $ 14,282
Restricted cash
   13 10
Inventories
   58,474 19,147
Prepaid expenses
   828 498
Prepaid service fees
   2,361 2,890


Total current assets
   79,876 36,827
Operating lease
s
right-of-use
assets
   420 176
Property and equipment, net
   107 55
Intangibles, net
   12,959 13,456


Total assets
   $ 93,362 $ 50,514


Liabilities and Stockholders’ (Deficit) Equity

Current liabilities:

Accounts payable
   $ 21,351 $ 29,479
Accrued liabilities and compensation
   34,419 6,866
Accrued license fees
   148 13
Accrued interest on convertible notes
   858 292
Accrued dividends on convertible preferred stock
   1,401 981
Current portion of operating leases payable
   110 115
Current portion of long-term convertible notes payable
   18,124 6,745
Warrant
exercise
proceeds held in trust
   13 10


Total current liabilities
   76,424 44,501


Long-term liabilities:

Convertible notes payable, net
   13,856 8,431
Operating lease
s
liability
   314 63


Total long-term liabilities
   14,170 8,494


Total liabilities
   90,594 52,995


Commitments and Contingencies (
Note
10)
Stockholders’ (Deficit)
Equity

Preferred
s
tock, $0.001 par value; 5,000 shares authorized

Series D convertible preferred stock, $0.001 par value; 12 authorized; 9 issued and outstanding at
August 31,

2020 and May 31, 2020, respectively
   — —
Series C convertible preferred stock, $0.001 par value; 8 authorized; 8 issued and outstanding at August 31,

2020
and May 31, 2020, respectively
   — —
Series B convertible preferred stock, $0.001 par value; 400 shares authorized, 87 and 92 shares issued and outstanding at August 31, 2020 and May 31, 2020, respectively
   — —
Common stock, $0.001 par value; 800,000 shares authorized, 570,325 and 519,261 issued and 569,883 and
518,976 outstanding at August 31, 2020 and May 31, 2020, respectively
   570 519
Additional paid-in capital
   388,404 351,711
Accumulated (deficit)
   (386,206 ) (354,711 )
Less: treasury stock, $
0.001

par value (442 and 286 shares at August 31, 2020 and May 31, 2020, respectively)
   — —


Total stockholders’ (deficit) equity
   2,768 (2,481 )


Total liabilities and stockholders’ (deficit) equity
   $ 93,362 $ 50,514


	February 28, 2021		May 31, 2020
	(unaudited)		(audited)
Assets
Current assets:
Cash	$	14,291	$	14,282
Restricted cash		—		10
Inventories		93,537		19,147
Prepaid expenses		1,208		498
Prepaid service fees		1,819		2,890
Total current assets		110,855		36,827
Operating leases right-of-use asset		760		176
Property and equipment, net		124		55
Intangibles, net		1,915		13,456
Total assets	$	113,654	$	50,514
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	72,509	$	29,479
Accrued liabilities and compensation		13,575		6,879
Accrued interest on convertible notes		2,391		292
Accrued dividends on convertible preferred stock		2,227		981
Operating leases payable		183		115
Convertible notes payable, net		37,976		6,745
Warrant exercise proceeds held in trust		—		10
Total current liabilities		128,861		44,501
Long-term liabilities:
Convertible notes payable, net		—		8,431
Operating leases liability		588		63
Total long-term liabilities		588		8,494
Total liabilities		129,449		52,995
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 February 28, 2021 and May 31, 2020, respectively		—		—
Series C convertible preferred stock, $0.001 par value; 8 authorized; 8 issued and outstanding at February 28, 2021 and May 31, 2020, respectively	��	—		—
Series B convertible preferred stock, $0.001 par value; 400 shares authorized, 79 and 92 shares issued and outstanding at February 28, 2021 and May 31, 2020, respectively		—		—
Common stock, $0.001 par value; 800,000 shares authorized, 609,420 and 519,261 issued and 608,978 and 518,975 outstanding at February 28, 2021 and May 31, 2020, respectively		609		519
Additional paid-in capital		449,579		351,711
Accumulated (deficit)		(465,983)		(354,711)
Less: Treasury stock, $0.001 par value (442 and 286 shares at February 28, 2021 and May 31, 2020, respectively)		—		—
Total stockholders’ (deficit) equity		(15,795)		(2,481)
Total liabilities and stockholders' (deficit) equity	$	113,654	$	50,514

See accompanying notes to ~~unaudited~~ consolidated financial statements.

Table of Contents

CytoDyn Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

   Three Months Ended
   August 31, 2020 August 31, 2019
Operating expenses:

General and administrative
   $ 9,875 $ 3,046
Research and development
   15,188 9,055
Amortization and depreciation
   505 531


Total operating expenses
   25,568 12,632


Operating loss
   (25,568 ) (12,632 )
Change in fair value of derivative liabilities
   — 625
Interest expense:

Finance charges
   (10 ) (8 )
Amortization of discount on convertible notes
   (1,339 ) (1,030 )
Amortization of debt issuance costs
   (4 ) (284 )
Inducement interest - warrant exercises and debt
conversion
   (3,345 ) (2,431 )
Interest on convertible note
s
payable
   (566 ) (404 )


Total interest expense
   (5,264 ) (4,157 )


Loss before income taxes
   (30,832 ) (16,164 )
Income tax benefit
   — —


Net loss
   $ (30,832 ) $ (16,164 )


Basic and diluted loss per share
   $ (0.06 ) $ (0.04 )


Basic and diluted weighted average common shares outstanding
   555,531 364,639


	Three Months Ended				Nine Months Ended
	February 28,		February 29,		February 28,		February 29,
	2021		2020		2021		2020
Operating expenses:
General and administrative	$	7,902	$	6,465	$	25,328	$	12,605
Research and development		12,323		15,109		44,061		32,691
Amortization and depreciation		511		501		1,522		1,532
Intangible asset impairment charge		10,049		—		10,049		—
Total operating expenses		30,785		22,075		80,960		46,828
Operating loss		(30,785)		(22,075)		(80,960)		(46,828)
Other income		—		500		—		500
Interest income		1		3		2		5
Change in fair value of derivative liabilities		—		(2,934)		—		(2,105)
Loss on extinguishment of convertible notes		(7,625)		—		(11,794)		—
Interest expense:
Finance charges		(2)		(61)		(140)		(1,619)
Amortization of discount on convertible notes		(157)		—		(2,739)		(1,470)
Amortization of debt issuance costs		(21)		—		(40)		(404)
Inducement interest expense		(4,139)		(5,163)		(11,242)		(7,876)
Interest on convertible notes payable		(1,257)		(6,038)		(2,870)		(6,995)
Total interest expense		(5,576)		(11,262)		(17,031)		(18,364)
Loss before income taxes		(43,985)		(35,768)		(109,783)		(66,792)
Income tax benefit		—		—		—		—
Net loss	$	(43,985)	$	(35,768)	$	(109,783)	$	(66,792)
Basic and diluted loss per share	$	(0.08)	$	(0.08)	$	(0.18)	$	(0.17)
Basic and diluted weighted average common shares outstanding		577,854		432,112		595,226		396,641

See accompanying notes to ~~unaudited~~ consolidated financial statements.

Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

(In thousands, expect per share data)

   Preferred Stock    Common Stock    Treasury Stock
   Shares Amount    Shares    Amount    Shares    Amount
Balance May 31, 2020
   109 $ —    519,261    $ 519    286    $ —










First Quarter Fiscal Year Ended May 31, 2021

Issuance of stock for convertible note conversions
   — —    2,119    2    —    —
Issuance of legal settlement shares
   — —    4,000    4    —    —
Exercise of stock options
   — —    100    —    —    —
Stock issued for incentive compensation and tendered for income tax
   — —    323    —    156    —
Conversion of Series B
convertible preferred share
s to common stock
   (5 ) —    50    —    —    —
Private warrant exchange
   — —    16,544    17    —    —
Exercise of warrants
   — —    19,134    19    —    —
Cashless exercise of warrants
   — —    8,794    9    —    —
Inducement interest expense related to private warrant exchange
   — —    —    —    —    —
Offering costs related to private warrant exchange
   — —    —    —    —    —
Dividend declared and paid on Series B
p
referred shares ($0.25/share)
   — —    —    —    —    —
Dividends on Series C
p
referred shares
   — —    —    —    —    —
Dividends on Series D
p
referred shares
   — —    —    —    —    —
Stock-based compensation
   — —    —    —    —    —
Net
l
oss August 31, 2020
   — —    —    —    —    —










Balance August 31, 2020
   104 $ —    570,325    $ 570    442    $ —

   Preferred Stock    Common Stock    Treasury Stock
   Shares    Amount    Shares    Amount    Shares    Amount
Balance May 31, 2019
   95    $ —    329,554    $ 330    159    $ —












First Quarter Fiscal Year Ended May 31, 2020

Issuance of stock for note payable redemption
   —      —      3,014    3    —      —
Proceeds from registered direct offering ($0.50/share)
   —      —      5,640    6    —      —
Offering costs related to registered direct offering
   —      —      —      —      —      —
Proceeds from public warrant tender offers
   —      —      45,376    45    —      —
Offering costs related to public warrant tender offers
   —      —
Inducement interest expense — public warrant tender offers
   —      —      —      —      —      —
Proceeds from Series C
p
referred offering
   2    —
Offering costs related to Series C
p
refe
r
red offering
   —      —      —      —      —      —
Dividends on Series C
p
referred shares
   —      —      —      —      —      —
Legal fees in connection with equity offerings
   —      —      —      —      —      —
Stock-based compensation
   —      —      —      —      —      —
Net
l
oss August 31, 2019
   —      —      —      —      —      —












Balance August 31, 2019
   97    $ —    383,584    $ 384    159    $ —


	Preferred Stock			Common Stock			Treasury Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Total
Balance May 31, 2019	95	$	0	329,554	$	330	159	$	0	$	220,120	$	(229,364)	$	(8,914)
First Quarter Fiscal Year Ended May 31, 2020
Issuance of stock for convertible note repayment	—		—	3,014		3	—		—		1,002		—		1,005
Proceeds from registered direct offering ($0.50 per share)	—		—	5,640		6	—		—		2,250		—		2,256
Offering costs related to registered direct offering	—		—	—		—	—		—		(260)		—		(260)
Proceeds from public warrant tender offers	—		—	45,376		45	—		—		11,855		—		11,900
Offering costs related to public warrant tender offers	—		—	—		—	—		—		(1,058)		—		(1,058)
Inducement interest expense - tender offers and debt conversions	—		—	—		—	—		—		2,430		—		2,430
Proceeds from Series C preferred stock offering	2		—	—		—	—		—		1,754		—		1,754
Offering costs related to Series C preferred stock offering	—		—	—		—	—		—		(198)		—		(198)
Dividends on Series C preferred stock	—		—	—		—	—		—		—		(110)		(110)
Legal fees in connection with equity offerings	—		—	—		—	—		—		(16)		—		(16)
Stock-based compensation	—		—	—		—	—		—		581		—		581
Net Loss August 31, 2019	—		—	—		—	—		—		—		(16,164)		(16,164)
Balance August 31, 2019	97	$	0	383,584	$	384	159	$	0	$	238,460	$	(245,638)	$	(6,794)
Second Quarter Fiscal Year Ended May 31, 2020
Issuance of stock for convertible note repayment	—		—	2,270		2	—		—		738		—		740
Note conversion and extension fees	—		—	—		—	—		—		(217)		—		(217)
Proceeds from registered direct offering ($0.50 per share)	—		—	13,461		13	—		—		4,396		—		4,409
Offering costs related to registered direct offering	—		—	—		—	—		—		(74)		—		(74)
Inducement interest expense - debt conversion	—		—	—		—	—		—		283		—		283
Proceeds from Series C preferred stock offering	3		—	—		—	—		—		2,788		—		2,788
Offering costs related to Series C preferred stock offering	—		—	—		—	—		—		(182)		—		(182)
Exercise of option to repurchase common stock	—		—	—		—	—		—		(8)		—		(8)
Dividends on Series C preferred stock	—		—	—		—	—		—		—		(151)		(151)
Stock-based compensation	—		—	—		—	—		—		434		—		434
Net Loss November 30, 2019	—		—	—		—	—		—		—		(14,860)		(14,860)
Balance November 30, 2019	100	$	0	399,315	$	399	159	$	0	$	246,618	$	(260,649)	$	(13,632)
Third Quarter Fiscal Year Ended May 31, 2020
Issuance of stock for convertible note repayment	—		—	17,683		18	—		—		9,059		—		9,077
Proceeds from registered direct offering ($0.50 per share)	—		—	19,756		20	—		—		5,981		—		6,001
Offering costs related to registered direct offering	—		—	—		—	—		—		(44)		—		(44)
Proceeds from warrant exercises	—		—	10,716		11	—		—		5,417		—		5,428
Relative fair market value associated with warrants exercised	—		—	—		—	—		—		2,404		—		2,404
Proceeds from private warrant exchange	—		—	20,441		20	—		—		5,965		—		5,985
Offering costs related to private warrant exchange	—		—	—		—	—		—		(197)		—		(197)
Inducement interest expense - private warrant exchange	—		—	—		—	—		—		5,163		—		5,163
Proceeds from Series C preferred stock offering	—		—	—		—	—		—		415		—		415
Offering costs related to Series C preferred stock offering	—		—	—		—	—		—		(53)		—		(53)
Dividends on Series C preferred stock	—		—	—		—	—		—		—		(204)		(204)
Proceeds from Series D Preferred offering	8		—	—		—	—		—		7,570		—		7,570
Offering costs related to Series D Preferred offering	—		—	—		—	—		—		(5)		—		(5)
Dividends on Series D Preferred shares	—		—	—		—	—		—		—		(62)		(62)
Stock issued for services	—		—	2,620		3	—		—		(3)		—		—
Stock issued for bonuses and tendered for income tax	—		—	380		—	127		—		154		—		154
Exercise of stock options	—		—	181		—	—		—		54		—		54
Stock-based compensation	—		—	—		—	—		—		3,331		—		3,331
Net Loss February 29, 2020	—		—	—		—	—		—		—		(35,768)		(35,768)
Balance February 29, 2020	108	$	0	471,092	$	471	286	$	0	$	291,829	$	(296,683)	$	(4,383)

See accompanying notes to ~~unaudited~~ consolidated financial statements.

Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

(In thousands, except per share data)

   Additional
Paid-In Capital
Accumulated
Deficit Total
Balance May 31, 2020
   $ 351,711 $ (354,711 ) $ (2,481 )


First Quarter Fiscal Year Ended May 31, 2021

Issuance of stock for convertible note conversions
   9,535 — 9,537
Issuance of legal settlement shares
   (4 ) — —
Exercise of stock options
   39 — 39
Stock issued for incentive compensation and tendered for income tax
   828 — 828
Conversion of Series B
c
onvertible
p
referred
s
hares
to
c
ommon
s
tock
   — — —
Private warrant exchange
   7,787 — 7,804
Exercise of warrants
   13,450 —           13,469
Cashless exercise of warrants
   (9 ) — —
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
p
referred shares ($0.25
/
share)
   — (243 ) (243 )
Dividends on Series C
p
referred shares
   — (207 ) (207 )
Dividends on Series D
p
referred shares
   — (213 ) (213 )
Stock-based compensation
   2,086 — 2,086
Net
l
oss August 31, 2020
   — (30,832 ) (30,832 )


Balance August 31, 2020
   $ 388,404 $        (386,206 ) $ 2,768

   Additional
Paid-In
Capital Accumulated
Deficit Total
Balance May 31, 2019
   $ 220,120 $ (229,364 ) $ (8,914 )


First Quarter Fiscal Year Ended May 31, 2020

Issuance of stock for note payable redemption
   1,002 —   1,005
Proceeds from registered direct offering ($0.50/share)
   2,250 —   2,256
Offering costs related to registered direct offering
   (260 ) —   (260 )
Proceeds from public warrant tender offers
   11,855 —   11,900
Offering costs related to public warrant tender offers
   (1,059 ) —   (1,059 )
Inducement interest expense—public warrant tender offers
   2,431 —   2,431
Proceeds from
s
eries C
p
referred offering
   1,754 —   1,754
Offering costs related to Series C
p
r
ef
er
red offering
   (198 ) —   (198 )
Dividends on
s
eries C
p
referred shares
   —   (110 ) (110 )
Legal fees in connection with equity offerings
   (16 ) —   (16 )
Stock-based compensation
   581 —   581
Net
l
oss August 31, 2019
   —   (16,164 ) (16,164 )


Balance August 31, 2019
   $ 238,460 $ (245,638 ) $ (6,794 )


	Preferred Stock			Common Stock			Treasury Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Shares	Amount		Paid-In Capital		Deficit			Total
Balance May 31, 2020	109	$	0	519,261	$	519	286	$	0	$	351,711	$	(354,711)		$	(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 shares	—		—	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 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	$	0	570,325	$	570	442	$	0	$	388,404	$	(386,206)	��	$	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	—		—	—		—	—		—		3,758		—			3,758
Dividends accrued on preferred stock	—		—	—		—	—		—		—		(415)			(415)
Stock-based compensation	—		—	—		—	—		—		3,423		—			3,423
Net Loss November 30, 2020	—		—	—		—	—		—		—		(34,966)			(34,966)
Balance November 30, 2020	104	$	0	590,279	$	590	442	$	0	$	414,463	$	(421,587)		$	(6,534)
Third Quarter Fiscal Year Ended May 31, 2021
Issuance of stock for convertible note repayment	—		—	4,013		4	—		—		20,500		—			20,504
Exercise of stock options	—		—	2,471		2	—		—		1,778		—			1,780
Conversion of Series B convertible preferred stock to common stock	(8)		—	80		—	—		—		—		—			—
Private warrant exchange	—		—	5,939		6	—		—		3,461		—			3,467
Exercise of warrants	—		—	6,638		7	—		—		3,432		—			3,439
Inducement interest expense related to private warrant exchange	—		—	—		—	—		—		4,139		—			4,139
Offering costs related to private warrant exchange	—		—	—		—	—		—		(131)		—			(131)
Dividends accrued on preferred stock	—		—	—		—	—		—		—		(411)			(411)
Stock-based compensation	—		—	—		—	—		—		1,937		—			1,937
Net Loss February 28, 2021	—		—	—		—	—		—		—		(43,985)			(43,985)
Balance February 28, 2021	96	$	0	609,420	$	609	442	$	0	$	449,579	$	(465,983)		$	(15,795)

See accompanying notes to ~~unaudited~~ consolidated financial ~~statements~~

statements.

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CytoDyn Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

   Three Months Ended
   August 31, 2020 August 31, 2019
Cash flows from operating activities:

Net loss
   $ (30,832 ) $ (16,164 )
Adjustments to reconcile net loss to net cash used
i
n
operating activities:

Amortization and depreciation
   505 531
Amortization of debt issuance costs
   4 284
Amortization of discount on convertible notes
   1,339 1,030
Inducement interest - warrant exercises and debt conversion
   3,345 2,431
Interest expense associated with accretion of convertible notes payable
   —   266
Change in fair value of derivative liabilities
   —   (625 )
Stock-based compensation
   3,692 581
Changes in current assets and liabilities:

(Increase) in inventories
   (39,327 ) —
Decrease in prepaid expenses
   199 499
Increase (decrease) in accounts payable and accrued expenses
   20,127 (4,023 )


Net cash used in operating activities
   (40,948 ) (15,190 )


Cash flows from investing activities:

Furniture and equipment purchases
   (59 ) (5 )


Net cash used in investing activities
   (59 ) (5 )


Cash flows from financing activities:

Proceeds from private warrant exchange, net of offering costs
   7,441 2,256
Proceeds from exercise of warrants
   13,469 1,754
Proceeds from warrant tender offers
   —   11,900
Release of funds held in trust for warrant tender offer
   —   (854 )
Proceeds from exercise of stock options
   39 —
Payment of payroll witholdings related to tender of common stock for income tax withholding
   (778 ) —
Proceeds from convertible notes payable, net
of
discount and issuance costs
   25,000 —
Payment of offering costs
   — (1,532 )
Dividend declared and paid on Series
B
p
referred shares
   (243 ) —


Net cash provided by financing activities
   44,928 13,524


Net change in cash
   3,921 (1,671 )
Cash, beginning of period
   14,292 3,467


Cash, end of period
   $ 18,213 $ 1,796


Supplemental disclosure of cash flow information:


Cash paid during the period for interest
   $ 11 $ 10


Non-cash
investing and financing transactions:

Issuance of stock for note payable redemption and conversions
   $ 9,537 $ 1,005


Accrued dividends on Series C
c
onvertible
p
referred stock
   $ 207 $ 110


Accrued dividends on Series D
c
onvertible
p
referred stock
   $ 213 $ —


	Nine Months Ended
	February 28,		February 29,
	2021		2020
Cash flows from operating activities:
Net loss	$	(109,783)	$	(66,792)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation		1,522		1,532
Amortization of debt issuance costs		40		404
Amortization of discount on convertible notes		2,739		1,470
Inducement interest expense		11,242		7,876
Interest expense associated with accretion of convertible notes payable		—		6,615
Change in fair value of derivative liabilities		—		2,105
Stock-based compensation		9,053		4,346
Loss on extinguishment of convertible notes		11,794		—
Intangible asset impairment charge		10,049		—
Changes in operating assets and liabilities:
(Increase) in inventories		(74,391)		(15,896)
Decrease (increase) in prepaid expenses		362		165
Increase in accounts payable and accrued expenses		52,606		18,683
Net cash used in operating activities		(84,767)		(39,492)
Cash flows from investing activities:
Furniture and equipment purchases		(100)		(38)
Net cash used in investing activities		(100)		(38)
Cash flows from financing activities:
Proceeds from warrant transactions, net of offering costs		15,371		—
Proceeds from sale of common stock and warrants		1,000		12,666
Proceeds from exercise of warrants		18,647		23,313
Proceeds from sale of preferred stock, net of offering costs		—		12,527
Principal paid on maturity of short-term convertible notes		—		(460)
Payment on convertible notes		(950)		(1,725)
Exercise of option to repurchase shares held in escrow		—		(8)
Release of funds held in trust for warrant tender offer		(10)		(854)
Proceeds from exercise of stock options		1,829		54
Payment of payroll withholdings related to tender of common stock for income tax withholding		(778)		(89)
Proceeds from convertible notes payable, net		50,000		—
Payment of conversion offering costs		—		(2,303)
Dividend declared and paid on Series B preferred stock		(243)		—
Net cash provided by financing activities		84,866		43,121
Net change in cash		(1)		3,591
Cash, beginning of period		14,292		3,466
Cash, end of period	$	14,291	$	7,057

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	140	$	9
Non-cash investing and financing transactions:
Conversion of principal and interest of convertible notes to common stock	$	29,800	$	10,976
Accrued dividends on convertible preferred stock	$	1,246	$	527
Derivative liability associated with warrants	$	—	$	2,404
Common stock issued for accrued bonus compensation	$	—	$	155
Common stock issued for services	$	—	$	3

See accompanying notes to ~~unaudited~~ consolidated financial statements.

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CYTODYN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF ~~AUGUST 31, 2020~~

FEBRUARY 28, 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. The Company is a 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 in the areas of ~~Human Immunodeficiency Virus~~human immunodeficiency virus (“HIV”), ~~Cancer, Immunology,~~cancer, immunology, and

~~COVID-19.~~

novel coronavirus disease (“COVID-19”).

With respect to HIV, the CCR5 receptor appears to play a key role in the ability of HIV to enter and infect healthy

T-cells.

The Company’s lead product candidate, leronlimab, belongs to a class of HIV therapies known as entry inhibitors. These therapies block HIV from entering ~~into~~ and infecting certain cells.

With respect to ~~Cancer~~cancer and ~~Immunology,~~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,

graft-vs-host

disease (“GvHD”), and

~~Non-Alcoholic~~

~~Steatohepatitis~~ non-alcoholic steatohepatitis (“NASH”).

More recently, the Company ~~is expanding the~~expanded its clinical focus ~~with leronlimab~~ to include evaluating ~~its~~leronlimab’s effectiveness in multiple other autoimmune indications where ~~CCR~~CCR5 antagonism has shown initial promise, as well as ~~the novel coronavirus disease~~

~~(“COVID-19”).~~

COVID-19. The Company targets leronlimab treatment as a therapy for patients who experience respiratory complications ~~as a result of contracting~~

from COVID-19.

The Company believes leronlimab provides therapeutic benefit by enhancing the immune response while mitigating the “cytokine storm” that leads to morbidity and mortality in patients experiencing this syndrome.

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

Basis of Presentation

The accompanying consolidated interim financial statements are unaudited 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~~typical recurring adjustments, needed to fairly present the financial results ~~for these periods.~~of the periods presented. The consolidated financial statements and notes thereto are presented as prescribed by

Form 10-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~~U.S. GAAP have been omitted.

The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal ~~years~~year ended May 31, 2020 ~~and 2019~~ and notes thereto in the Company’s Annual Report on

Form 10-K for

the fiscal year ended May 31, 2020, filed with the Securities and Exchange Commission on August 14, 2020. Operating results for the three and nine months ended ~~August 31, 2020~~February 28, 2021 are not necessarily indicative of the results that may be expected for the entire 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 and nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and August 31, 2019,~~ (b) the financial position at ~~August~~February 28, 2021 and May 31, 2020 and (c) cash flows for the ~~three~~nine month periods ended ~~August 31, 2020~~February 28, 2021 and ~~August 31, 2019.~~

February 29, 2020.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, CytoDyn Operations Inc., and Advanced Genetic Technologies, Inc. (“AGTI”) ~~and CytoDyn Veterinary Medicine LLC (“CVM”)~~, of which ~~are~~AGTI is a dormant ~~entities.~~entity. All intercompany transactions and balances are eliminated in consolidation.

~~Reclassifications~~

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Reclassifications

Certain prior year and prior quarter amounts shown in the accompanying consolidated financial statements have been reclassified to conform to the ~~2021~~current period presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total stockholders’ (deficit) equity, net loss or loss per share.

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, the Company had losses for all periods presented. The Company incurred a net loss of ~~$30.8~~approximately $44.0 million and $109.8 million for the three and nine months ended ~~August 31, 2020~~February 28, 2021, respectively, and has an accumulated deficit of ~~$386.2~~approximately $466.0 million as of ~~August 31, 2020.~~February 28, 2021. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

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The 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 candidate, leronlimab, obtain ~~U.S. Food & Drug Administration (“FDA”)~~ approval to commercialize leronlimab from regulatory agencies, continue to outsource manufacturing of ~~the product candidate,~~leronlimab, and ultimately achieve initial revenues and attain profitability. The Company ~~is currently engaging~~continues to engage in significant research and development activities related to ~~its product candidate~~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 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 and the reported amounts of ~~revenues 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. Actual results could differ from ~~those~~these estimates.

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 at ~~August 31, 2020~~February 28, 2021 and May 31, 2020 approximated ~~$18.0~~$14.0 million and $14.0 million, respectively.

Identified Intangible Assets

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 0~~The Company recognized an impairment ~~charges~~charge of approximately $10.0 million for the three and nine months ended ~~August 31, 2020~~February 28, 2021 and ~~2019.~~NaN for the three and nine months ended February 29, 2020. The value of the Company’s patents would be

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significantly impaired by any adverse developments as they relate to the clinical trials pursuant to the patents acquired as discussed in Note 8.

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.~~

estimable, see further discussion in Note 9 and 10.

Inventory

The Company values inventory at the lower of cost or net realizable value using the average cost method. Inventories consist of ~~specialized~~raw materials, bulk drug substance, and ~~common raw materials~~drug product in unlabeled vials to be used for ~~commercial production~~commercialization of the Company’s biologic, leronlimab, which is ~~awaiting~~in the regulatory ~~approval.~~approval process. The consumption of ~~these~~raw materials during production is classified as

~~work-in-progress.~~

~~Inventory is classified as finished goods once~~ work-in-progress until saleable. Once it is determined to be in saleable ~~condition.~~condition following regulatory approval, inventory is classified as finished goods. Inventory ~~purchased in preparation for product launches~~ is evaluated for recoverability by considering the likelihood that revenue will be obtained from the future sale of the related inventory, in light of the status of the product within the regulatory approval process.

The 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 to

for pre-launch

inventory, the Company relies on independent ~~analysis~~analyses provided by a third ~~party~~parties knowledgeable of the range of likely commercial prices comparable to current comparable commercial product.

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Inventories Procured or Produced in Preparation for Product Launches

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 ~~some~~ 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

clinical trial results for the underlying product candidate, results from meetings with the relevant regulatory authorities prior to the filing of regulatory applications, and ~~the compilation~~status of the Company’s regulatory application. The Company closely monitors the status of the product within the regulatory review and approval process, including all relevant communication 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 0no longer qualify for capitalization.

~~For inventories capitalized in preparation for product launch, anticipated~~

Anticipated future sales, shelf lives, and expected approval date are ~~taken into account~~considered when evaluating ~~realizability.~~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

pre-launch

inventory, the Company considers the product stability data of all of the

pre-approval

inventory procured or produced to date to determine whether there is adequate shelf life.

Fair Value of Financial Instruments

~~At August 31, 2020,~~

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued liabilities, and short-term and long-term debt. As of February 28, 2021, the carrying value of the Company’s cash, accounts payable, and accrued liabilities approximate their fair value due to the short-term maturity of the ~~instrument~~instruments. Short-term and long-term debt are reported at amortized cost in the Consolidated Balance Sheets. The remaining financial instruments are reported in the Consolidated Balance Sheets at amounts that approximate current fair values.

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During the fiscal year ending May 31, 2020, the Company carried derivative financial instruments 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 ASC 815,

Derivatives and Hedging,

as their instruments are recorded as a derivative liability, at fair value, and ASC 480,

Distinguishing Liabilities from Equity,

as it relates to warrant liability, with changes in fair value reflected in the Consolidated Statement of Operations.

~~Fair Value Hierarchy~~

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 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.

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

~~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~~

~~include non-binding market~~

~~consensus prices~~

~~or non-binding broker~~

~~quotes that the Company was unable to corroborate with observable market data.~~

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 ~~August 31, 2020~~February 28, 2021 and May 31, 2020. As of ~~August 31, 2020,~~February 28, 2021, there were no assets or liabilities measured at fair value using Level 3 inputs; previous outstanding derivative warrants and related convertible debt had been converted prior to May 31, 2020 according to the terms of the agreements.

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. During the 2020 fiscal year, the Company used a Binomial Lattice Model to estimate the value of the warrant derivative liability and a Monte Carlo Simulation to value the derivative liability of the redemption provision within a convertible promissory note. These valuation models were used because management believes they reflect all the assumptions that market participants would likely consider in negotiating the transfer of the instruments.

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The Company’s derivative liabilities were classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation models.

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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) from inception to the year ended May 31, 2020 (in thousands):

Investor warrants issued with registered direct equity offering
   $ 4,360
Placement agent warrants issued with registered direct equity offering
   819
Fair value adjustments
   (3,855 )


Balance at May 31, 2018
   1,324
Inception date value of redemption provisions
   2,750
Fair value adjustments—convertible notes
   (745 )
Fair value adjustments—warrants
   (922 )


Balance at May 31, 2019
   2,407
Fair value adjustments—convertible notes
   (2,005 )
Fair value adjustments—warrants
   11,547
Exercise of derivative warrants
   (11,949 )


Balance at May 31, 2020
   $ —


Investor warrants issued with registered direct equity offering	$	4,360
Placement agent warrants issued with registered direct equity offering		819
Fair value adjustments		(3,855)
Balance at May 31, 2018		1,324
Inception date value of redemption provisions		2,750
Fair value adjustments—convertible notes		(745)
Fair value adjustments—warrants		(922)
Balance at May 31, 2019		2,407
Fair value adjustments—convertible notes		(2,005)
Fair value adjustments—warrants		11,547
Exercise of derivative warrants		(11,949)
Balance at May 31, 2020	$	—

Operating Leases

Operating leases are included in operating lease

right-of-use

(“ROU”) assets, ~~other~~ current ~~liabilities,~~portion of operating leases payable and operating ~~lease~~leases liabilities ~~on its consolidated balance sheets.~~

in the Consolidated Balance Sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms do not include options to extend or terminate the lease as it is not reasonably certain that it will exercise these options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and

non-lease

components, which are generally accounted for separately.

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.~~

achieved or when pre-defined performance conditions are met.

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 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 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, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Based on limited historical experience of forfeitures, the Company estimated future unvested forfeitures at 0% for all periods presented. Periodically, the Company will issue restricted common stock to executives or third parties as compensation for services rendered. Such stock awards are valued at fair market value on the effective date of the Company’s obligation.

~~Common Stock~~

Under the Company’s Certificate of Incorporation, as amended, the Company is authorized to issue up to 800,000,000 shares of common stock. As of August 31, 2020, the Company had 569,882,808 shares of common stock outstanding.

~~Preferred Stock~~

The Company’s Board is authorized to issue up to 5,000,000 shares of preferred stock without stockholder approval. As of August 31, 2020, the Company had 400,000 shares authorized and 87,100 shares outstanding of Series B convertible preferred stock, 8,203 shares authorized and outstanding of Series C convertible preferred stock, and 11,737 shares authorized and 8,452 shares outstanding of Series D convertible preferred stock. The remaining authorized preferred shares have no specified rights.

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~~Treasury Stock~~

Treasury stock purchases are accounted for under the par value method, whereby the cost of the acquired stock is recorded at par value. As of August 31, 2020, the Company holds 442,578 shares of $0.001 par value common stock as treasury stock.

~~Debt Discount~~

During the three months ended August 31, 2020, the Company incurred approximately $3.4 million of debt discount related to the issuance of the July 2020 Note, as described in Note 5. The discount is amortized over the life of the convertible promissory note. During the three months ended August 31, 2020 and August 31, 2019, the Company recorded approximately $1.3 million and $1.0 million of related amortization, respectively.

~~Debt Issuance Cost~~

During the three months ended August 31, 2020, the Company incurred $0.1 million of direct costs associated with the issuance of the July 2020 Note, as described in Note 5. During the three months ended August 31, 2020 and August 31, 2019, the Company recognized related amortization of approximately $4,000 and $284,000, respectively.

~~Offering Costs~~

During the three months ended August 31, 2020 and the year ended May 31, 2020, the Company incurred approximately $0.4 million and $2.3 million respectively, in direct incremental costs associated with the sale of equity securities as fully described in Note 11. The costs were recorded as a component of equity upon receipt of the proceeds.

~~Stock~~

~~Based Compensation for Services~~

The Company periodically issues stock options or warrants to consultants for various services. The Black-Scholes option pricing model, as described more fully above, is utilized to measure the fair value of the equity instruments on the date

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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 capitalized 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 11. 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 by the weighted average number of common shares outstanding during the period. Diluted loss per share would include the weighted average common shares 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~~the following options, warrants, unvested restricted stock, ~~options~~convertible preferred stock including undeclared dividends and ~~warrants to purchase approximately 87 million and 155 million shares of~~share reservations for convertible notes, which are issuable into common stock were not included in the computation of basic and diluted weighted average number of shares of common stock outstanding for the ~~three~~nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020 ~~and August 31, 2019, respectively. As of August 31, 2020 and August 31, 2019 the Company had convertible notes outstanding,~~

~~for which the~~

~~ompany has reserved~~

9.8 million and 11.6 million common shares, respectively; and shares of Series D, Series C and Series B convertible preferred stock, including undeclared dividends, that could potentially convert in the aggregate into approximately 30.3 million and 11.7 million common shares, respectively.

(in thousands), respectively:


	Three and Nine Months Ended
	February 28,	February 29,
	2021	2020
Stock options, warrants & unvested restricted stock	68,857	173,186
Convertible notes payable	12,000	8,108
Convertible preferred stock	32,159	28,387

Income Taxes

Deferred taxes are provided on the asset 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 basis. Future tax benefits for net operating loss carryforwards 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 of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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The Company follows the provisions of ~~FASB~~ ASC

740-10,

Uncertainty in Income Taxes

. 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~~from 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.

In accordance with Section 15 of the Internal Revenue Code, the Company utilized a federal statutory rate of 21% for the three and nine months ended ~~August 31, 2020~~February 28, 2021 and ~~August 31, 2019.~~February 29, 2020. The net tax expense for the three and nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and~~

~~2019~~

~~is zero.~~was 0. The Company ~~has~~had a full valuation allowance as

Table of ~~August 31, 2020~~Contents

of February 28, 2021 and May 31, 2020, as management does not consider it more than likely than not that the benefits from the deferred taxes will be realized.

~~Note 3 –~~

Recent 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

consolidated

financial statements.

In December 2019, the FASB issued ASU

No. 2019-12,

Simplifying the Accounting for Income Taxes (Topic 740)

. The objective of the standard is to improve areas of U.S. GAAP by removing certain exceptions permitted by ASC 740 and clarifying existing guidance to facilitate consistent application. The standard will become effective for the Company beginning on ~~January~~June 1, 2021. The Company is currently evaluating the new standard to determine the potential impact on its financial condition, results of operations, cash flows, and financial statement disclosures.

In August 2020, the FASB issued ASU

No. 2020-06,

Debt with Conversion and Other Options (Subtopic
470-20)

and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)

which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which 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

No. 2020-06

is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020. The Company is currently evaluating the potential

impact,

if any,

on its

consolidated

financial statements.

Note ~~4 –~~

3. Inventories

The Company’s inventory as of ~~August 31, 2020~~February 28, 2021 and May 31, 2020 was ~~$58.5~~approximately $93.5 million and $19.1 million, , respectively. Inventory as of ~~August 31, 2020~~February 28, 2021 consisted of raw materials purchased for commercial production and ~~work~~

~~progress~~

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. Bulk drug substance and drug product comprised approximately $34.9 million and $29.6 million, respectively, of work-in-progress inventory.

During the quarter ended February 28, 2021, the Company was notified by a third-party contract manufacturing partner that due to an operational error committed by the contract manufacturer 1 of the batches of a multiple-batch manufacturing campaign failed to meet quality standards, and thus would not be saleable upon regulatory approval. In accordance with the agreement, the contract manufacturer assumed liability for the failure, all costs to manufacture the batch, and committed to remanufacture the batch at a future date. As a result, the Company reduced work-in-progress inventory and the related amounts due to the contract manufacturer by $6.1 million. No other inventory was affected by this failure, and all other inventory has successfully passed quality standards.

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

the

Phase 3 clinical trial results, and information gathered

from pre-filing meetings

with the ~~FDA~~U.S. Food and Drug Administration (“FDA”) for its Biologic License Application (“BLA”). The Company submitted the ~~BLA. The~~last 2 portions of the BLA ~~was initially submitted~~(clinical and manufacturing) with the FDA in April 2020 and ~~the BLA submission was completed on~~ May ~~11,~~ 2020. In July 2020, the Company received a Refusal to File letter from the FDA regarding its BLA filing requesting additional ~~information,~~information. In August and ~~the Company requested a Type A meeting to discuss the FDA’s request for additional information~~

~~The FDA did not schedule a Type A meeting, but requested the Company submit all questions regarding the filing in writing. In~~ September 2020, the ~~Company submitted its questions~~FDA provided written responses to the ~~FDA, received written responses,~~Company’s questions and ~~held a telephonic meeting~~met telephonically with Company key personnel and its clinical research organization concerning its recent BLA for this HIV combination therapy to expedite the ~~FDA to obtain further clarity on what additional information was required with respect to the~~resubmission of its BLA ~~filing.~~filing for this indication. The Company is working ~~to provide the information required by the FDA in order~~diligently to resubmit the BLA, which it ~~anticipates will occur by~~expects to file in the ~~end~~middle of the calendar year ~~2020.~~2021 or shortly thereafter.

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Inventories as of ~~August 31, 2020~~February 28, 2021 and May 31, 2020 are presented below (in thousands):

August 31, 2020

May 31, 2020

Raw materials
   $ 20,263    $ 19,147
Work
-
in
-
pro
gress
   38,211    —
Total
   $ 58,474    $ 19,147

~~Table~~


	February 28, 2021		May 31, 2020
Raw materials	$	29,004	$	19,147
Work-in-progress		64,533		—
Total	$	93,537	$	19,147

Note 4. Accounts Payable and Accrued Liabilities

As of ~~Contents~~

February 28, 2021 and May 31, 2020, the combined total balance of the Company’s accounts payable and accrued liabilities was approximately $86.1 million and $36.4 million, respectively. The Company had 2 vendors which each accounted for approximately 79% and 10%, and 49% and 20%, of the combined total balance of accounts payable and accrued liabilities as of February 28, 2021 and May 31, 2020, respectively.

Note ~~5 –~~5. Convertible Instruments

Series D Convertible Preferred

Stock

~~On January~~

As of February 28, ~~2020,~~2021, the Company ~~filed a certificate of designation (the “Series D Certificate of Designation”) to authorize 11,737~~had authorized 11,757 shares of Series D ~~Convertible~~ Preferred Stock, $0.001 par value per share (“Series D Preferred Stock”), ~~and on January 31, 2020 issued 7,570 shares~~ of Series D Convertible Preferred Stock, at $1,000.00 per share for cash proceeds totaling $7,565,000, net of offering costs of $5,000. On March 13, 2020, the Company issued an additional 882 shares of Series D Preferred Stock at $1,000.00 per share resulting in net proceeds of $882,000. As of August 31, 2020,which 8,452 ~~shares~~ remain outstanding. The Series D Certificate of Designation provides, among other things, ~~that~~ holders of Series D Preferred Stock ~~shall be entitled~~the right to receive, out of any assets at the time legally available therefor, and as declared by the Board of Directors, cumulative dividends at the rate of ten percent (10%) per share per annum of the stated value of the Series D Preferred Stock, to be paid, at the option of the holder, in cash or in shares of common stock at the rate of $0.50 per share. 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 Series D Preferred Stock shall be cumulative and there are no sinking fund provisions applicable to the Series D Preferred Stock. The Series D Dividends are to be paid annually in arrears on the last day of December each year. The Series D Preferred Stock does not have redemption rights. The stated value per share for the Series D Preferred Stock is $1,000.00 (the “Series D Stated Value”).

In the event of any liquidation, dissolution or winding up of the Company, the holders of Series D Preferred Stock will be entitled

receive,

, on a pari passu basis with the holders of the Series C 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 D Stated Value plus the amount of any accrued and unpaid ~~dividends..~~dividends. If, at any time while the Series D Preferred Stock is outstanding, the Company effects any reorganization, merger or sale of the Company or substantially all of its assets (each 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 certificate of designation for the Series D Preferred Stock). No fractional shares will be issued upon the conversion of the Series D Preferred Stock. 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. As of ~~August~~February 28, 2021, and May 31, 2020, the accrued dividends were approximately ~~$0.5~~$0.9 million, or ~~606,000~~approximately 1.8 million shares of common ~~stock.~~

stock, and approximately $0.3 million, or approximately 0.5 million shares of common stock, respectively.

Series C Convertible Preferred Stock

~~On March 20, 2019,~~

As of February 28, 2021, the Company ~~filed a certificate of designation (the “Series C Certificate of Designation”) to authorize 5,000 shares and issued 3,246~~had authorized 8,203 shares of Series C ~~Convertible~~ Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”), ~~at $1,000.00 per share for cash proceeds totaling $3,083,700, net~~ of offering costs of $162,300. On August 29, 2019, the Company issued the remaining 1,754 shares of Series C Preferred Stock at $1,000.00 per share for cash proceeds totaling $1,542,545, net of offering costs and legal fees totaling $211,455. On October 11, 2019, the Company amended its certificate of designation to authorize an increase in authorized Series C Preferred Stock from 5,000 shares to 20,000 shares. Between October 21, 2019 and November 8, 2019, the Company issued an additional 2,788 shares of Series C Convertible Preferred Stock, and on December 6, 2020 the Company issued 415 shares of Series C Convertible Preferred Stock. On January 28, 2020, the Company further amended its Series C Certificate of Designation to reduce the number of authorized shares of Series C Preferred Stock from 20,000 shares towhich 8,203 shares ~~all of which~~ remain ~~outstanding as of August 31, 2020.~~outstanding. The Series C Certificate of Designation provides, among other things, that holders of Series C Preferred Stock shall be entitled to receive, 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, to be paid per share of Series C Preferred Stock, which dividends shall accrue

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whether or not declared. Any dividends paid by the Company will first 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 mandatory and cumulative and there are no sinking fund provisions applicable to the Series C Preferred Stock. The Series C Dividends are to be paid annually in arrears on the last day of December each year. The Series C Preferred Stock does not have redemption rights. The stated value per share for the Series C Preferred Stock is ~~$1,000~~$1,000.00 (the “Series C Stated Value”).

In the event of any liquidation, dissolution or winding up of the Company, the Series C Preferred Stock will be

~~titled~~ entitled to receive,

, on a pari passu basis with the holders of the Series D ~~preferred~~Preferred Stock and prior and in preference to any payment or distribution on any shares of ~~common stock, currently outstanding series of preferred stock,~~Series B Preferred Stock or ~~subsequent series of preferred~~common stock, an amount per share equal to the Series C Stated Value and the amount of any accrued and unpaid dividends. If, at any time while the Series C Preferred Stock is outstanding, the Company effects any 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 the Company’s common stock determined by dividing the Series C Stated Value by the conversion price of $0.50 per share (subject to adjustment as set forth in the Certificate of Designation). No fractional shares will be issued upon the conversion of the Series C Preferred Stock. Except as otherwise provided in the Certificate of Designation or as otherwise required by law, the Series C Preferred Stock has no voting rights. As of ~~August~~February 28, 2021, and May 31, 2020, ~~and August 31, 2019,~~ the accrued dividends were approximately ~~$0.9~~$1.3 million or, ~~1,832,000~~approximately 2.6 million shares of common stock, and approximately ~~$0.1~~$0.7 million, or ~~296,000 of~~approximately 1.4 million shares of common stock, respectively.

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Series B Convertible Preferred Stock

~~During fiscal year 2010,~~

As of February 28, 2021, the Company ~~issued~~had authorized 400,000 shares of Series B Convertible Preferred Stock, $0.001 par value per share (“Series B Preferred Stock”) ~~at $5.00 per share for cash proceeds totaling $2,009,000,~~, of which ~~87,100 shares remained outstanding at August 31, 2020.~~79,100 remain outstanding. Each share of the Series B Preferred Stock is convertible into ~~ten~~10 (10) shares of the Company’s common stock. Dividends are payable to the Series B Preferred stockholders when declared by the Board of Directors at the rate of $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. 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~~

$0.50 per share. The holders of the Series B Preferred Stock can only convert their shares to shares of common stock provided the Company has sufficient authorized shares of common stock 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 Preferred Stock was beneficial. The intrinsic value of the conversion option at the commitment date resulted in a constructive dividend to the Series B Preferred Stock holders of approximately

~~$6 million.~~

~~The constructive dividend increased and decreased additional paid-in capital by identical amounts.~~ The Series B Preferred Stock has liquidation preferences over the common shares at

~~$5.00~~

$5.00 per share, plus any accrued and unpaid dividends. ~~Dividends are payable to the Series B Preferred Stock holders when declared by the Board of Directors at the rate of~~

~~$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.~~ Except as provided by law, the Series B holders have no voting rights. On July 30, 2020, the Board declared a dividend and elected to pay such dividend in the form of cash in the aggregate amount of approximately

~~$0.2~~ $0.2 million

to all Series B Convertible Preferred stockholders. The dividend was payable ~~on July 30, 2020,~~ to Series B Convertible Preferred stockholders as of July 30, 2020. As of ~~August~~February 28, 2021, and May 31, 2020, ~~and August 31, 2019,~~ the undeclared dividends were ~~approximately~~

~~$2,000~~$12,319 or

~~4,000~~

24,636 shares of common stock, and approximately

~~$0.2~~ $0.2 million, or ~~432,000~~

approximately 0.5 million shares of common stock, respectively.

2019 Short-term Convertible Notes

During the year ended May 31, 2019, the Company issued approximately $5.5 million of nine-month unsecured Convertible Notes (the “2019 Short-term Convertible Notes”) and related warrants to investors for cash. Beginning on September 30, 2019 and through November 14, 2019, principal and interest totaling approximately $5.9 million came due. Holders of notes totaling approximately $1.1 million in principal and accrued interest agreed to extend their notes for another three months, and holders of notes totaling approximately $4.1 million in principal and accrued interest agreed to extend their notes for another six months. ~~One note-holder~~NaN noteholder with principal and accrued interest totaling approximately $0.2 million converted to shares of common stock of the Company. During the quarter ended November 30, 2019, a total of approximately $0.7 million of principal and accrued interest was repaid in cash. In addition, detachable stock warrants to purchase a total of ~~4,750,000~~4.75 million warrants with a five-year term and an exercise price of $0.30 per share were issued to investors who extended their notes. ~~One~~NaN investor received ~~200,000~~0.2 million warrants with a five-year term and an exercise price of $0.45 per share for converting the entire principal and accrued interest on

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its note. In connection with the 2019 Short-term Convertible Note extensions and conversion, the Company recorded a

non-cash

inducement interest expense of approximately $0.3 million during the quarter ended November 30, 2019. The new principal amount of the 2019 Short-term Convertible Notes, including any accrued but unpaid interest thereon, iswas convertible at the election of the holder at any time into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. The 2019 Short-term Convertible Notes

~~incurrs~~

incurred simple interest at the annual rate of 10%. Principal and accrued interest, to the extent not previously paid or converted, iswas due and payable on the maturity date. At the new commitment dates, the Company determined that there was a decrease in the fair value of the embedded conversion option resulting from the modification, the value of which is not required to be recognized under U.S. GAAP.

During the fiscal year ended May 31, 2020, holders of the 2019 Short-term Convertible ~~Note~~Notes in the aggregate principal amount of

~~$5,177,980,~~

$5.2 million, including accrued but unpaid interest, tendered a notices of conversion at the stated conversion rate of

~~$0.50~~ $0.50 per share. The Company issued ~~10,357,034~~

approximately 10.4 million shares of common stock in satisfaction of the conversion notices. The Company recognized approximately

~~$0.1~~

$0.4 million of interest expense for the ~~three~~nine months ended ~~August 31, 2019.~~

February 29, 2020.

Long-term Convertible Note—June 2018 Note

On June 26, 2018, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note with a two-year term to an institutional accredited investor in the initial principal amount of $5.7 million. The investor gave consideration of $5.0

million to the Company (the “June 2018 Note”). The June 2018 Note incurred interest of

10%

and

was convertible into common stock, at a conversion rate of $0.55 per share. The June 2018 Note provided for conversion in total, or in part, of the outstanding balance, into common stock of the Company at any time after six months from the issue date upon five trading days’ notice, subject to certain adjustments and ownership limitations specified in the June 2018 Note, and allowed for redemption, at any time after six months from the issue date upon five trading days’ notice, subject to maximum monthly redemption amount of ~~$350,000.~~$0.35 million. The securities purchase agreement required the Company to reserve shares for future conversions or redemptions by dividing the outstanding principal balance plus accrued interest by the conversion price of

~~$0.55~~

$0.55 per share times 1.5. As a result of the entry into the January 2019 Note (as defined below), the Company’s obligations under the June 2018 Note were secured by all of the assets of the Company, excluding the Company’s intellectual property.

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Effective November 15, 2018, the June 2018 Note was amended to allow the investor to redeem the monthly redemption amount of ~~$350,000~~$0.35 million in cash or stock, at the lesser of (i) $0.55, or (ii) the lowest closing bid price of the Company’s common stock during the 20

~~ays~~ days prior to the conversion, multiplied by a conversion factor of 85%. The variable rate redemption provision meets the definition of a derivative instrument and subsequent to the amendment, it no longer meets the criteria to be considered indexed to the Company’s own stock. As of November 15, 2018, the redemption provision ~~require~~

required bifurcation as a derivative liability at fair value under the guidance in ASC ~~Topic~~ 815,

Derivatives and Hedging

The amendment of the June 2018 Note was also evaluated under ASC ~~Topic~~

470-50-40,

Debt Modifications and Extinguishments

. Based on the guidance, the instruments were determined to be substantially different, and debt extinguishment accounting was applied. The Company recorded approximately $1.5 million as an extinguishment loss, which was the difference in the net carrying value of the June 2018 Note prior to the amendment of approximately $5.4 million, and the fair value of the June 2018 Note and embedded derivatives after the amendment of approximately $6.9 million. The extinguishment loss ~~includes~~included a

write-off

of unamortized debt issuance costs and the debt discount associated with the original the June 2018 Note.

During the nine months ended February 29, 2020, the Company recognized $0.5 million of interest expense related to the June 2018 Note, respectively. During the year ended May 31, 2020, the Company received a redemption notice requesting an aggregate redemption of ~~$4,476,000~~approximately $4.5 million settling the remaining outstanding balance in full, including accrued but unpaid interest. In satisfaction of the redemption notice, the Company issued approximately 8.5 million shares of common stock ~~totaling 8,512,622~~ and paid cash totaling ~~$525,000~~approximately $0.5 million to the June 2018 Note holder in accordance with the terms of the June 2018 Note. Following the redemptions, the June 2018 Note

was

fully satisfied and there is no outstanding balance.

~~During the three months ended August 31, 2019, the Company recognized approximately $0.1 million,~~

Table of ~~interest expense related to the June 2018 Note, respectively.~~

Contents

Long-term Convertible Note—January 2019 Note

On January 30, 2019, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note with a

two-year

term to the holder of the June 2018 Note in the initial principal amount of $5.7 million

~~(the~~ (the “January 2019 Note”).

In connection with the issuance of the January 2019 Note, the Company granted a lien against all of the assets of the Company, excluding the Company’s intellectual property, to secure all obligations owed to the investor by the Company (including those under both the January 2019 Note and the June 2018 Note). The investor gave consideration of $5.0 million to the Company, reflecting original issue discount of $0.6 million and issuance costs of $0.1 million. The January 2019 Note

incurred

interest of 10% and

was

convertible into common stock, at $0.50 per share. The January 2019 Note

provided for conversion

in total, or in part, of the outstanding balance, at any time after six months from the issue date upon five trading days’ notice, subject to certain adjustments and ownership limitations specified in the Note. The Company analyzed the conversion option for derivative accounting treatment under ASC 815 and determined that the embedded conversion option did not qualify for derivative accounting.

The

January 2019 Note provided the

investor

with the right to

redeem any portion of the January 2019 Note, at any time after six months from the issue date upon five trading days’ notice, subject to a maximum monthly redemption amount of ~~$350,000.~~$0.35 million. The monthly redemption amount may be paid in cash or stock, at the Company’s election, at the lesser of (i) $0.50, or (ii) the lowest closing bid price of the Company’s common stock during the 20 days prior to the conversion, multiplied by a conversion factor of 85%. The redemption provision met the definition of a derivative instrument and did not meet the criteria to be considered indexed to the Company’s own stock. Therefore, the redemption provision ~~require~~

required bifurcation as a derivative liability at fair value under the guidance in ASC ~~Topic~~ 815. The securities purchase agreement ~~require~~

required the Company to reserve ~~20,000,000~~20 million shares for future conversions or redemptions.

In conjunction with the January 2019 Note, the investor received a warrant to purchase ~~5,000,000~~5.0 million shares of common stock with an exercise price of $0.30 which is exercisable until the

~~5-year~~

5-year anniversary of the date of issuance. All the warrants were exercised during the fiscal year ending May 31, 2020. The warrant achieved equity classification at inception. The net proceeds of $5.0 million were allocated first to the redemption provision at its fair value, then to the warrants at their relative fair value and the beneficial conversion feature at its intrinsic value as follows (in thousands):

January 30, 2019

Fair value of redemption provision
   $ 1,465
Relative fair value of equity classified warrants
   858
Beneficial conversion feature
   2,677


Net proceeds of January 2019 Note
   $ 5,000

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	January 30, 2019
Fair value of redemption provision	$	1,465
Relative fair value of equity classified warrants		858
Beneficial conversion feature		2,677
Net proceeds of January 2019 Note	$	5,000

Under the guidance of ASC 815, after allocation of proceeds to the redemption provision, relative fair value of equity classified warrants and the beneficial conversion feature, there were no proceeds remaining to allocate to convertible note payable. Therefore, principal, accrued interest, debt discount and offering costs will be recognized as interest expense, which represents the accretion of the convertible note payable and related debt discount and issuance costs. During the ~~three~~nine months ended ~~August 31, 2019,~~February 29, 2020, the Company recognized approximately ~~$0.1~~$6.2 million, of interest expense related to the January 2019 Note. During the year ended May 31, 2020, the Company received a redemption notice from the holder of the Company’s January 2019 Note, requesting an aggregate redemption of approximately

~~6,271,000~~

$6.3 million settling the remaining outstanding balance in full, including accrued interest. In satisfaction of the redemption notice, the Company issued approximately 10.8 million shares of common stock ~~totaling~~

~~10,842,255~~

and paid cash totaling

~~850,000~~

$0.85 million to the January 2019 Note holder in accordance with the terms of the January 2019 Note. Following the redemption, the January 2019 Note has been fully satisfied and there is no outstanding balance.

Long-term Convertible Note—March 2020 Note

On March 31, 2020, the Company entered into a ~~Securities Purchase Agreement~~securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a

two-year

~~maturity~~ term to an institutional accredited investor in the initial principal amount of $17.1 million

~~(the~~ (the “March 2020 Note”).

The Company received consideration of $15.0 million, reflecting an original issue discount of $2.1 million. The

March 312020 Note

is secured by all of the assets of the Company, excluding the Company’s intellectual ~~property (including those under~~

~~both the~~property. The March

2020

Note incurred interest of 10% per annum and ~~the July~~was convertible into

~~2020~~

~~Note~~

~~, discussed below~~

~~Interest accrues on~~

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common stock, at $4.50 per share. The March 2020 Note provided for conversion in total, or in part, of the outstanding balance, ofat any time after six months from the

~~March 2020~~

~~Note at 10% per annum. Upon the occurrence of an~~

~~vent of~~

~~efault, interest accrues at the lesser of 22% per annum or the maximum rate permitted by applicable law. In addition,~~ issue date upon ~~any Event of Default, the~~

~~nvestor may accelerate the outstanding balance payable under the Note, which will increase automatically upon such acceleration by 15%, 10% or 5%, depending on the nature of the Event of Default.~~

~~Events of default~~

~~as referenced herein and not otherwise defined shall have the same meaning as set forth in the~~

~~March 2020~~

~~Note~~

~~transaction documents filed as an exhibit to the Company’s current report on Form 8-K filed on April 6, 2020.~~

~~The investor may convert all or any part the outstanding balance of the March 2020 Note into shares of common stock at an initial conversion price of~~

~~$4.50~~

~~per share upon~~ five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the ~~March 2020 Note. On April 3, 2020, the~~note. The Company ~~amended the March 2020 Note limiting monthly issuances of common stock resulting from conversions to~~

~~1,000,000~~

~~shares in any calendar month during the first six months and further amended the March 2020 Note to remove this conversion limitation in July 2020. In addition to standard anti-dilution adjustments,~~analyzed the conversion price of the March 2020 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 of 1933, as amended. The March 2020 Note providesoption for ~~liquidated damages upon failure to deliver common stock within specified~~

~~timeframes, and requires the Company to maintain a share reservation of 3,800,000 shares of common stock.~~

~~The~~

~~nvestor may redeem any portion of the~~

~~March 2020~~

~~Note, at any time after six months from the issue date, upon three trading days’ notice, subject to a Maximum Monthly Redemption Amount of $950,000. The~~

~~March 2020~~

~~Note require~~

~~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~~

~~March 2020~~

~~Note, in part or in full, at a 15% premium to par value, at any time upon fifteen trading days’ notice.~~

~~Pursuant to the terms of the~~

~~Securitie~~

~~s Purchase~~

~~Agreement and the~~

~~March 2020~~

~~Note, the Company must obtain the~~

~~nvestor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $15 million. Upon any such approval, the outstanding principal balance of the~~

~~March 2020 Note~~

~~shall increase automatically by 5% upon the issuance of such additional debt.~~

~~On July 24, 2020, the Company entered into an amendment to the March 2020 Note to eliminate the 1,000,000 shares per calendar month volume limitation on sales of Conversion Shares.~~

~~Table of Contents~~

~~The Company~~

~~filed an Amendment No. 1 to~~

~~Registration Statement on Form~~

S-

~~(Registration No. 333-236198)~~

~~with the SEC by April 30, 2020 registering a number of shares of common stock sufficient to convert the entire~~

~~utstanding~~

~~alance of the~~

~~March 2020~~

~~Note plus, 2,500,000~~

~~shares of common~~

~~stock~~

~~issued in connection with the~~

~~exercise of~~

~~warrants~~

~~, which S-3 was declared effective on May 11, 2020.~~

~~The embedded conversion feature in the~~

~~March~~

~~2020~~

~~Note was analyzed~~derivative accounting treatment 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,~~determined that the embedded conversion ~~feature does~~option did not require bifurcation from the host instrument. The Company determined there was no beneficial conversion feature since the effective conversion rate was greater than the market value of the Company’s stock upon issuance.

qualify for derivative accounting. Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was

de minimis

The ~~Company reconsiders~~March 2020 Note provided the ~~value~~investor with the right to redeem any portion of the ~~default put provisions each reporting period~~March 2020 Note, at any time after six months from the issue date, upon three trading days’ notice, subject to ~~determine if~~a Maximum Monthly Redemption Amount of $0.95 million. During the ~~value becomes material~~quarter ended November 30, 2020, the Company issued an additional secured convertible promissory note to an affiliate of March 2020 noteholder (the “November 2020 Note,” as described below), which obligates the ~~financial statements.~~

Company to reduce the aggregate outstanding note balances held by the investor by $7.5 million per month (the “Debt Reduction Amount,” as described under Long-term Convertible Note – November 2020 Note below), beginning in the month of November 2020.

The original issue discount of $2.1 million related to the March 2020 Note ~~has been~~was recorded as a discount on the March 2020 Note and the discount has been amortized over the term of the March 2020 Note. Amortization of the March 2020 debt ~~discounts~~discount during the three and six months ended ~~August 31, 2020 and May 31,~~November 20, 2020 amounted to approximately ~~$0.3~~$0.7 million and ~~$0.2~~$1.9 million, respectively, and are recorded as interest expense in the accompanying consolidated statements of operations. ~~The unamortized discount balance for the March 2020 Note of approximately~~

~~$1.7 million as of August 31, 2020, is being amortized over the term of the~~

~~March 2020~~

~~Note.~~ From June 26, 2020 to July 27, 2020, the

investor

converted in aggregate ~~$9,537,500~~approximately $9.5 million of combined principal and accrued interest into ~~2,119,444~~approximately 2.1 million shares of common stock at the $4.50 per share conversion price. During the quarter ended November 30, 2020, the Company received a redemption notice from the holder of the March 2020 Note, requesting a redemption of $0.95 million. In satisfaction of the redemption notice, the Company paid cash of $0.95 million to the March 2020 Note holder. Additionally, the Company elected to satisfy the Debt Reduction Amount for November 2020 by making repayments on this March 2020 Note, resulting in the note being fully satisfied during the quarter ended November 30, 2020. To settle this Debt Reduction Amount, the Company and the investor entered into 3 separately negotiated exchange agreements, pursuant to which the remaining balance of the March 2020 Note was partitioned into 3 new notes (the “Partitioned Notes”). The Company and the investor exchanged the Partitioned Notes for approximately 4.3 million shares in aggregate of the Company’s common stock, $0.001 par value. Following these exchanges, there was no outstanding balance of the March 2020 Note.

In connection with ~~these conversions~~extinguishment of the March 2020 Note, the Company analyzed the restructured note for potential requirement of debt extinguishment accounting under ASC 470, Debt Modifications and Extinguishments. The Company concluded debt extinguishment accounting treatment to be necessary and accordingly recorded aggregate debt extinguishment loss of approximately $4.2 million for the quarter ended November 30, 2020, 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 ~~of approximately $917,000.~~

and issuance costs.

Long-term Convertible Note—July 2020 Note

On July 29, 2020, the Company entered into a ~~Securities Purchase Agreement~~securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a

two-year

~~maturity~~ term to an institutional accredited investor in the initial principal amount of $28.5

million (the “July 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. The July 2020 Note is secured by all of the assets of the Company, excluding the Company’s intellectual ~~property (including those under both the March~~

~~2020~~

~~Note and the July~~

~~2020~~

~~Note).~~

property.

Interest

accrues on the outstanding balance of the July 2020 Note at

10%

per annum. Upon the occurrence of an event of default, interest accrues 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 July 2020 Note, which will increase automatically upon such acceleration by

15%, 10% or 5%,

depending on the nature of the event of default. Events of default as referenced herein and not otherwise defined shall have the same meaning as set forth in the July 2020 Note Transaction documents filed as an exhibit to the Company’s current report on Form 8-K filed July 31, 2020.

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The investor may convert all or any part the outstanding balance of the July 2020 Note into shares of common stock at an initial conversion price of

~~$10.00~~ $10.00 per share upon five trading ~~days~~’

days’ notice, subject to certain adjustments and volume and ownership limitations specified in the July 2020 Note. In addition to standard anti-dilution adjustments, the conversion price of the July 2020 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 of 1933, as amended. The July 2020 Note provides for liquidated damages upon failure to deliver common stock within specified timeframes

, and requires the Company to maintain a share reservation of ~~6,000,000~~6.0 million shares of common stock.

The investor may redeem any portion of the July 2020 Note, at

any time after six months from the issue date, upon three trading days’ notice, subject to a Maximum Monthly Redemption Amount of ~~$1,600,000.~~$1.6 million. The

July 2020

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

July 2020

Note, in part or in full, at a 15% premium to par value, at any time upon ~~fifteen~~one trading ~~days~~’days’ notice.

Pursuant to the terms of the ~~Agreement~~securities purchase agreement and the

July 2020

Note, the Company must obtain the

~~nvestor’s~~ investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than ~~$25~~$25.0 million. Upon any such approval, the outstanding principal balance of the

July 2020

Note shall increase automatically by 5% upon the issuance of such additional debt.

~~Table of Contents~~

The Company agreed to use commercially reasonable efforts to file a Registration Statement on Form

S-3

with the SEC by September 15, 2020 registering ~~a number of~~approximately 2.9 million shares of common stock sufficient to convert the entire ~~Outstanding Balance~~principal and interest balance of the July 2020 ~~Note, which~~

Note. The Form S-3

~~(Registration~~

(Registration No. 333-248823)

was declared effective on September 25, 2020.

The embedded conversion feature in the July 2020 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 effective conversion rate was greater than the market value of the Company’s stock upon issuance.

Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was

de minimis

. The Company reconsiders the value of the default put provisions each reporting period to determine if the value becomes material to the financial statements.

During the quarter ended February 28, 2021, the Company applied the Monthly Debt Reduction Amount for January 2021 of $7.5 million toward the July 2020 Note. In satisfaction of the Debt Reduction Amount, the Company and the investor entered into a separately negotiated exchange agreement, pursuant to which the July 2020 Note was partitioned into a new note (the “January 2021 Partitioned Note”) with a principal balance equal to $7.5 million. the outstanding balance of the July 2002 Note was reduced by the January 2021 Partitioned Note, and the Company and the investor exchanged the January 2021 Partitioned Note for approximately 1.8 million shares of the Company’s common stock.

In connection with the January 2021 Partitioned Note, the Company analyzed the restructured note for potential requirement of debt extinguishment accounting under ASC 470, Debt Modifications and Extinguishments. The ~~original issue~~Company concluded debt extinguishment accounting treatment to be necessary and accordingly recorded aggregate debt extinguishment loss of approximately $3.2 million during the quarter ended February 28, 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 ~~of $3.4 million~~ and issuance ~~cost of $0.1 million related to~~

~~July 2020 Note~~

~~has been recorded as a discount on the~~

~~July 2020 Note~~

~~and the discount is being amortized over the term of the~~

~~July 2020 Note~~

. costs.

Amortization of debt discounts and issuance costs during the three and nine months ended ~~August 31, 2020~~February 28, 2021 amounted to approximately ~~$0.1~~$0.4 million and ~~are~~$1.0 million, respectively, recorded as interest ~~expense in the accompanying consolidated statements of operations.~~expense. The unamortized discount and issuance costs balance for the

July 2020 Note

of is approximately ~~$3.3~~$1.8 million as of ~~August 31, 2020, is being amortized over~~February 28, 2021. The accrued interest balance for the ~~term of the~~

July 2020 Note is approximately $1.7 million as of February 28, 2021 resulting from approximately $0.7 million and $1.7 million of interest expense for the three and nine months ended February 28, 2021,

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respectively. The outstanding balance on the July 2020 Note, including accrued interest, was approximately $22.7 million at February 28, 2021.

The Company and the noteholder agreed to defer its February 2021 required Monthly Debt Reduction Amount of $7.5 million to March 12, 2021. On March 12, 2021, in satisfaction of the February 2021 Monthly Debt Redemption amount, the Company and the investor entered into a separately negotiated exchange agreement, pursuant to which the July 2020 Note was partitioned into a new note (the “February 2021 Partitioned Note”) with a principal balance equal to $7.5 million. The outstanding balance of the July 2020 Note was reduced by the February 2021 Partitioned Note, and the Company and the investor exchanged the February 2021 Partitioned Note for approximately 3.6 million shares of the Company’s common stock. Following this payment, the outstanding balance on the July 2020 Note, including accrued interest, was approximately $15.2 million.

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. The November 2020 Note is secured by all the assets of the Company, excluding the Company’s intellectual property.

Interest accrues on the outstanding balance of the November 2020 Note at 10% per annum. Upon the occurrence of an event of default, interest accrues 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 November 2020 Note, which will increase automatically upon such acceleration by 15%, 10% or 5%, depending on the nature of the event of default. Events of default as referenced herein and not otherwise defined shall have the same meaning as set forth in the November 2020 Note Transaction documents filed as an exhibit to the Company’s current report on Form 8-K filed November 16, 2020.

The investor may convert all or any part the outstanding balance of the November 2020 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 November 2020 Note. In addition to standard anti-dilution adjustments, the conversion price of the November 2020 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 of 1933, as amended. The November 2020 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 November 2020 Note, at any time after six months from the issue date, upon three trading days’ notice, subject to a Maximum Monthly Redemption Amount of $3.5 million. The November 2020 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 November 2020 Note, in part or in full, at a 15% premium to par value, at any time upon 15 trading days’ notice. In addition, beginning in the month of November 2020 and for each of the following five months, the Company is obligated to reduce the outstanding balance of the November 2020 Note by $7.5 million per month (the “Debt Reduction Amount”). Payments the Company makes under the March 2020 Note and the July 2020 Note will be applied toward the payment of each monthly Debt Reduction Amount. These payments are not subject to the 15% prepayment premium, which would otherwise be triggered if the Company were to make payments against the notes exceeding the allowed maximum monthly redemption amount. Consistent with ASC 470-50-40-10, Debt Modifications and Extinguishments, the Company assessed the restructuring of the outstanding agreements with the investor as either a debt modification or debt extinguishment through performance of the 10% cash flow test. The Company noted the change in present value of future cash flows to be less than 10% for all modifications, and therefore, concluded the restructuring be accounted for as a debt modification.

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Pursuant to the terms of the securities purchase agreement and the November 2020 Note, the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $25.0 million. Upon any such approval, the outstanding principal balance of the November 2020 Note shall increase automatically by 5% upon the issuance of such additional debt.

The Company filed a Registration Statement on Form S-3 (Registration No. 333-252154) with the SEC on January 15, 2021, which was declared effective on January 22, 2021, registering a number shares of common stock sufficient to convert the entire principal balance of the November 2020 Note.

The embedded conversion feature in the November 2020 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 effective conversion rate was greater than the market value of the Company’s stock upon issuance. Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was de minimis. The Company reconsiders the value of the default put provisions each reporting period to determine if the value becomes material to the financial statements.

During the quarter ended February 28, 2021, in satisfaction of the December 2020 Debt Reduction Amount, the Company and the investor entered into a separately negotiated exchange agreement, pursuant to which the November 2020 Note was partitioned into a new note (the “December 2020 Partitioned Note”) with a principal balance equal to $7.5 million. The outstanding balance of the November 2020 note was reduced by the December 2020 Partitioned Note, and the Company and the investor exchanged the December 2020 Partitioned Note for approximately 2.2 million shares of the Company’s common stock.

In connection with the December 2020 Partitioned Note, the Company analyzed the restructured note for potential requirement of debt extinguishment accounting under ASC 470, Debt Modifications and Extinguishments. The Company concluded debt extinguishment accounting treatment to be necessary and accordingly recorded aggregate debt extinguishment loss of approximately $4.4 million during the quarter ended February 28, 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 during the three and nine months ended February 28, 2021 amounted to approximately $0.3 million and $0.4 million, respectively. The unamortized discount and issuance costs balance for the November 2020 Note is approximately $2.2 million as of February 28, 2021. The accrued interest balance for the November 2020 Note is approximately $0.7 million as of February 28, 2021 resulting from approximately $0.6 million and $0.7 million of interest expense for the three and nine months ended February 28, 2021, respectively. The outstanding balance on the November 2020 Note, including accrued interest, was approximately $21.7 million at February 28, 2021.

Note ~~6 –~~6. Derivative Liabilities

The investor and placement agent warrants, issued in connection with a registered direct offering in September 2016, contained a provision for net cash settlement ~~in the event that~~if there is a fundamental transaction (contractually defined as a merger, sale of substantially all assets, tender offer or share exchange, whereby such other Person or group acquires more than

50%

of the outstanding common stock). If a fundamental transaction occurs in which the consideration issued consists principally of cash or stock in a successor entity, then the warrant holder 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,

Distinguishing Liabilities from Equity

, and ASC 815,

Derivatives and Hedging,

and are recorded at fair value. All of the investors and placement agent warrants were exercised during the fiscal year ending May 31, 2020.

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The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date September 15, 2016, prior fiscal year end date May 31, 2020 and current reporting date ~~August 31, 2020~~February 28, 2021 (in thousands):

Shares

Indexed

Derivative

Liability

Inception to date September 15, 2016
   7,733 $ 5,179
Change in fair value of derivative liability
   —   (4,777 )


Balance May 31, 2019
   7,733 402
Change in fair value of derivative liability
   —   11,547
Fair value of warrants exercised
   7,733 (11,949 )


Balance May 31, 2020
   — —
Change in fair value of derivative liability
   — —
Balance August 31, 2020
   — $ —


	Shares Indexed	Derivative Liability
Inception to date September 15, 2016	7,733	$	5,179
Change in fair value of derivative liability	—		(4,777)
Balance May 31, 2019	7,733		402
Change in fair value of derivative liability	—		11,547
Fair value of warrants exercised	7,733		(11,949)
Balance May 31, 2020	—		—
Change in fair value of derivative liability	—		—
Balance February 28, 2021	—	$	—

Changes in the fair value of the derivative liability are reported as “Change in fair value of derivative ~~liability”~~liabilities” in the Consolidated Statements of Operations. The Company recognized 0 and approximately ~~$0.1~~

$4.1 million

non-cash

~~gain~~

, loss, due to the changes in the fair value of the liability associated with such classified warrants during the three and nine months ended ~~August 31, 2019.~~

February 28, 2021 and February 29, 2020, respectively.

ASC 820,

Fair Value Measurement

, provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods ~~subsequent to~~after the initial recognition. Fair values for the warrants were determined using a Binomial Lattice valuation model.

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The Company estimated the fair value of the warrant derivative liability as of inception date September 15, 2016, May 31, 2019 and ~~August 31, 2019,~~February 29, 2020, using the following assumptions:

   September 15,
2016 May 31,
2019 August 31,
2019
Fair value of underlying stock
   $ 0.78 $ 0.39 $ 0.40
Risk free rate
   1.20 % 1.94 % 1.50 %
Expected term (in years)
   5 2.29 2.04
Stock price volatility
   106 % 61 % 60 %
Expected dividend yield
   0   0   0
Probability of
f
undamental
t
ransaction
   50 % 50 % 50 %
Probability of holder requesting cash payment
   50 % 50 % 50 %


	September 15,			May 31,			February 29,
	2016			2019			2020
Fair value of underlying stock	$	0.78		$	0.39		$	1.05
Risk free rate		1.20	%		1.94	%		0.93	%
Expected term (in years)		5			2.29			1.55
Stock price volatility		106	%		61	%		87	%
Expected dividend yield		0			0			0
Probability of fundamental transaction		50	%		50	%		50	%
Probability of holder requesting cash payment		50	%		50	%		50	%

Due to the fundamental transaction provision contained in the warrants, 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 rates and management’s assumptions related to the fundamental transaction provisions.

As described in Note 5 above, the redemption provision embedded in the June 2018 and January 2019 Notes required bifurcation and measurement at fair value as a derivative. The fair value of the ~~Note~~note redemption provision derivative liabilities was calculated using a Monte Carlo Simulation which uses randomly generated stock-price paths obtained through a Geometric Brownian Motion stock price simulation. The fair value of the redemption provision will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes in interest rates and management’s assumptions related to the redemption factor. The Company estimated the fair value of the

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redemptive provision using the following assumptions on the closing date of November 15, 2018, January 30, 2019 and ~~August~~May 31, 2019:

   August 31, 2019
   November 15,
2018 January 30,
2019 June
Note January
Note
Fair value of underlying stock
   $ 0.57 $ 0.49 $ 0.40 $ 0.40
Risk free rate
   2.78 % 2.52 % 1.76 % 1.76 %
Expected term (in years)
   1.61 2 0.82 1.42
Stock price volatility
   58.8 % 61 % 63.8 % 61.6 %
Expected dividend yield
   0   0   0   0
Discount factor
   85 % 85 % 85 % 85 %


							May 31, 2019
	November 15,			January 30,			June 2018			January 2019
	2018			2019			Note			Note
Fair value of underlying stock	$	0.57		$	0.49		$	0.39		$	0.39
Risk free rate		2.78	%		2.52	%		2.21	%		1.95	%
Expected term (in years)		1.61			2			1.07			1.67
Stock price volatility		58.8	%		61	%		62.2	%		62.2	%
Expected dividend yield		0			0			0			0
Discount factor		85	%		85	%		85	%		85	%

As discussed above, the June 2018 and January 2019 Notes were fully satisfied during the fiscal year ended May 31, 2020 and there is no outstanding balance as of ~~August 31, 2020.~~

February 28, 2021.

The following table summarizes the fair value of the convertible note redemption provision derivative liability as of inception dates November 15, 2018, January 30, 2019 and ~~August~~May 31, 2019 (in thousands):

   Net Proceeds    Derivative Liability
   Inception date    August 31, 2019
Inception date June 2018 Note, November 15, 2018
   $ 5,000    $ 1,285    $ 373
Inception date January 2019 Note, January 30, 2019
   5,000    1,465    1,070


         $ 1,443


			Derivative Liability
	Net Proceeds		Inception date		May 31, 2019
Inception date June 2018 Note, November 15, 2018	$	5,000	$	1,285	$	847
Inception date January 2019 Note, January 30, 2019		5,000		1,465		1,158
					$	2,005

The Company recognized approximately ~~$0.6~~

$2.0 million

non-cash

gain, due to the changes in the fair value of the liability associated with such classified redemption provision for the ~~three~~nine months ended ~~August 31, 2019.~~

February 29, 2020. There was 0 gain or loss for the three and nine months ended ~~August~~February 28, 2021, as the notes were fully satisfied during the fiscal year ended May 31, 2020.

Note ~~7 –~~7. Stock Options and Warrants

The Company has ~~one~~1 active stock-based equity plan at ~~August 31, 2020,~~February 28, 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, the CytoDyn Inc. 2004 Stock Incentive Plan (the “2004 Plan” and, together with the 2012 Plan, the “Incentive Plans”). ~~The~~In September 2020, the stockholders approved the CytoDyn Inc. Amended and Restated 2012 Equity Incentive Plan ~~was approved by stockholders at the Company’s 2012 annual meeting to replace the 2004 Plan, and was amended by stockholders in February 2015~~ to increase the number of shares available for issuance from

~~3,000,000~~ 25 million to ~~5,000,000~~

50 million shares ~~of common stock, in March 2016 to increase the number of shares available for issuance fro~~

~~m 5,000,000 to 7,000,000~~

~~shares of common stock, in August 2017 to increase the number of shares available for issuance from~~

~~7,000,000 to 15,000,000~~

~~shares of common stock, and in May 2019 to increase the number of shares available for issuance from~~

~~15,000,000 to 25,000,000~~

~~shares of common stock. As of August 31, 2020, the Company had~~

~~261,854~~

~~shares available for future stock-based grants under the 2012 Plan, as amended.~~

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~~As described in Note 15 below, on September 30, 2020 the stockholders approved amending and restating the 2012 Plan. As a result of this approval, the~~among other amendments. The total ~~number of shares of common stock available for grant under the 2012 Plan was increased from 25,000,000 shares to 50,000,000 shares, the~~ number of shares available to be issued will ~~be increased~~increase on the ~~last~~first day of each fiscal ~~yea~~

year in an amount equal to 1% of the total outstanding shares on the last day of the prior fiscal year, and the term of the ~~2012 plan~~Plan was extended for an additional ~~ten~~10 years to September 30, 2030.

~~Stock Options~~

~~On June 25, 2020,~~ As of February 28, 2021, the Company ~~granted directors a portion~~had approximately 15.4 million shares available for future stock-based grants under the 2012 Plan.

Stock Options and Other Equity Awards

Upon the September 30, 2020 stockholder approval of ~~their annual~~the 2012 Plan, the Company issued to executives of the Company non-qualified stock ~~option awards to purchase an aggregate total~~options covering 3.35 million shares of ~~225,000~~common stock, time-vesting restricted stock units (“RSUs”) covering 1.12 million shares of common stock, and performance based RSUs (“PSUs”) covering 4.35 million shares of common stock. The stock options have a per share exercise price of ~~the stock option awards~~

~~was~~

~~$6.15~~

~~per share, the closing price of~~

~~the Company’s common~~

~~stock on the date of grant. These stock option awards became fully vested effective August 31, 2020 and have a ten-year term. The~~$3.12, grant date fair value of ~~these~~$2.12 per share, and vest equally over three years. The RSUs vest equally over three years and have a grant date fair value of $3.12 per share. The PSUs will vest over the fiscal year ending May 31, 2021 only if certain performance conditions set forth in the awards are met. Concurrent with the stockholder approval, the Company also issued to its non-employee directors stock options ~~was~~covering a total of 506,250 shares of common stock, or 168,750 shares of common stock for each director, which represented the remaining portion of the annual director compensation for the fiscal year beginning June 1, 2020. The

~~$4.46~~

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options were issued with a per ~~share.~~

share exercise price of $6.15, grant date fair value of $4.20 per share, and vest equally over three quarterly installments beginning in the quarter ended November 30, 2020.

During the ~~three~~nine months ended ~~August 31, 2020,~~February 28, 2021, the Company granted stock options, covering anin aggregate ~~of 1,165,000~~approximately 1.9 million shares of common stock, to non-executive employees

and ~~advisors~~

consultants with exercise prices ranging between ~~$2.75~~$2.60 and $6.15 per share. These stock option awards vest annually over three years, with

a ten-year term

and grant date fair values ranging between ~~$2.23~~$1.84 and ~~$4.23~~$4.46 per share.

During the ~~three~~ nine months ended ~~August 31, 2020,~~February 28, 2021, the Company issued ~~100,000~~approximately 2.6 million shares of common stock in connection with the exercise of stock ~~options covering an aggregate of 100,000 shares.~~options. The stated exercise price ~~of $0.39~~ranged from $0.30 to $1.40 per share which resulted in aggregate gross

proceeds of approximately

~~$39,000.~~

$1.8 million to the Company.

Warrants

~~On June 16, 2020,~~

During the nine months ended February 28, 2021, the Company issued ~~compensa~~

~~tory~~

compensatory warrants covering anin aggregate ~~of 105,000~~approximately 0.1 million shares of common stock to consultants. The warrants have a ~~five-year~~five-year term and an exercise price of $3.07. The grant date fair value of these warrants was $2.11 per share.

During the ~~quarter~~nine months ended ~~August 31, 2020,~~February 28, 2021, the Company issued ~~27,927,669~~approximately 26.5 million shares of common stock, $0.001 par value, in connection with the exercise of ~~28,657,889~~approximately 26.5 million warrants. The stated exercise price ranged from $0.30 to $1.35 per share, which resulted in aggregate gross proceeds of approximately ~~$13.5~~$18.6 million.

Additionally, during the nine months ended February 28, 2021, the Company issued approximately 10.6 million shares of common stock, $0.001 par value, in connection with the cashless exercise of approximately 11.7 million warrants with stated exercise prices ranging from $0.40 to $1.35. In connection with the various private warrant exchange agreements during the three months ended February 28, 2021, the Company issued approximately 5.9 million shares of common stock, $0.001 par value, in connection with the exercise of approximately 4.7 million warrants, see Note 11 below for additional information.

Compensation expense related to stock options

and

warrants for the three and nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and August 31, 2019~~ was approximately ~~$2.0~~$1.9 million and ~~$0.6~~$7.4 million and approximately $3.3 million and $4.3 million, respectively. In addition to compensation expense related to stock options and warrants, during July 2020 the Company incurred $1.6 million in compensation expense for shares awarded to Nader Z. Pourhassan, Ph.D., Chief Executive Officer, as described in Note 12. The grant date fair value of options, warrants, and common stock vested during the ~~three~~nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020 ~~and 2019~~ was approximately ~~$4.4~~$4.2 million and ~~$0.5~~$1.9 million, respectively. As of ~~August 31, 2020,~~February 28, 2021, there was approximately ~~$4.8~~$13.9 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 ~~0.97~~1.61 years.

The following table represents stock option and warrant activity as of and for the ~~three~~nine months ended ~~August 31, 2020~~February 28, 2021 (in thousands, except per share data):


				Weighted
				Average
		Weighted		Remaining	Aggregate
	Number of	Average		Contractual	Intrinsic
	Shares	Exercise Price		Life in Years	Value
Options and warrants outstanding—May 31, 2020	131,361	$	0.65	5.79	$	302,961
Granted	5,836	$	3.72	—		—
Exercised	(73,358)	$	0.58	—		—
Forfeited/expired/cancelled	(648)	$	1.10	—		—
Options and warrants outstanding—February 28, 2021	63,191	$	0.92	4.49	$	227,079
Outstanding exercisable - February 28, 2021	57,042	$	0.75	4.10	$	216,042

   Number of
Shares    Weighted
Average
Exercise Price    Weighted
Average
Remaining
Contractual
Life in

Years    Aggregate Intrinsic
Value
Options and warrants outstanding - May 31, 2020
   131,361    $ 0.65    5.79    $ 302,961
Granted
   1,495    $ 4.10    —      —
Exercised
   (45,301 )    $ 0.60    —      —
Forfeited/expired/cancelled
   (333 )    $ 1.23    —      —



Options and warrants outstanding - August 31, 2020
   87,222    $ 0.70    4.13    $ 232,949



Outstanding exercisable - August 31, 2020
   84,375    $ 0.67    3.99    $ 227,520

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Note ~~8 –~~8. Acquisition of Patents and Intangibles

The Company consummated an asset purchase on October 16, 2012, and paid ~~$3,500,000~~$3.5 million for certain assets, including intellectual property, certain related licenses and sublicenses, FDA filings and various forms of the

leronlimab (PRO 140)

drug substance. The Company followed the guidance in ASC 805,

Business Combinations

, to determine if the Company acquired a business. Based on the prescribed accounting, the Company acquired assets and not a business. As of ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ the Company has recorded and is amortizing ~~$3,500,000~~$3.5 million of intangible assets related to the patent rights acquired. The Company estimates the acquired patent has an estimated life of ten ~~years.~~years. Subsequent to the acquisition date, the Company has continued to expand, amend and file new patents central to its current clinical trial strategies, which, in turn, have extended the protection period for certain methods of using

leronlimab (PRO 140)

and formulations comprising

leronlimab (PRO 140)

out through at least 2031 and 2038, respectively, in various countries.

On November 16, 2018, the Company completed the acquisition of substantially all of the assets of ProstaGene, LLC (“ProstaGene”), a biotechnology

start-up

company, which included patents related to clinical research, a proprietary CCR5 technology for early cancer diagnosis, and a noncompetition agreement with ProstaGene’s founder and Chief Executive Officer, Richard G. Pestell. The Company accounted for the ProstaGene acquisition as an asset acquisition under

ASC 805-10-55,

Business Combinations,
,

because the assets ~~retained~~acquired from ProstaGene do not include an assembled workforce, and the gross value of the assets acquired meets the screen test in

ASC 805-10-55-5A

related to substantially all of the fair value being concentrated in a single asset or group of assets (i.e., the proprietary technology and patents) and, thus, is not considered a business. Thus, management concluded that the acquisition did not include both an input and substantive processes that together significantly contribute to the ability to create outputs. The acquisition of ProstaGene’s assets expanded the Company’s clinical development of leronlimab (PRO 140) into cancer indications and potential commercialization of certain cancer diagnostic tests. The aggregate purchase price paid for the ProstaGene acquisition was ~~$11,558,000~~approximately $11.6 million based on the issuance of ~~20,278,000~~approximately 20.3 million shares of the Company’s common stock at $0.57 per share, including ~~1,620,000~~

~~hares~~

approximately 1.6 million shares to ~~the~~an investment bank for advisory services. In connection with the purchase, the Company entered into a Stock Restriction Agreement with Dr. Pestell, (the “Stock Restriction Agreement”), restricting the transfer of ~~8,342,000~~approximately 8.3 million shares of common stock (the “Restricted Shares”) payable to Dr. Pestell for a ~~three-year~~three-year period from the closing date of the ProstaGene ~~transaction (the “Restricted Shares”).~~transaction. The Stock Restriction Agreement provided that in the event Dr. Pestell’s employment with the Company is terminated by Dr. Pestell ~~not~~other than for Good Reason,

or by the Company for Cause, as defined in Dr. Pestell’s employment agreement with the Company,

the Company w

~~ould~~

would have an option to repurchase such Restricted Shares from Dr. Pestell at a purchase price of $0.001 per share. The Restricted Shares w

~~ere~~were to

vest and be released from the Stock Restriction Agreement in ~~three~~3 equal annual installments commencing one year after the closing date of the acquisition of ProstaGene. On July 25, 2019, the Company’s Board terminated the employment of Dr. ~~Richard G.~~ Pestell prior to the vesting of any of the Restricted Shares. The vesting and/or release or forfeiture of the Restricted Shares is currently subject to litigation between the Company and Dr. Pestell.

A summary of the net purchase price and allocation to the acquired assets is as follows (in thousands):

ProstaGene,
LLC

CytoDyn Inc. equity
   $ 11,558
Acquisition expenses
   741
Release of deferred tax asset
   2,827


Total cost of acquisition
   $ 15,126


Intangible assets
   $ 15,126
Other
   0


Allocation of acquisition costs
   $ 15,126


	ProstaGene, LLC
CytoDyn Inc. equity	$	11,558
Acquisition expenses		741
Release of deferred tax asset		2,827
Total cost of acquisition	$	15,126
Intangible assets	$	15,126
Other		0
Allocation of acquisition costs	$	15,126

Assets acquired from ProstaGene include (1) patents issued in the United States and Australia related to “Prostate Cancer Cell Lines, Gene Signatures and Uses Thereof” and “Use of Modulators of CCR5 in the Treatment of Cancer and Cancer Metastasis,” (2) an algorithm used to identify a

14-gene

signature to predict the likelihood and severity of cancer diagnoses, and (3) a noncompetition agreement in connection with an employment agreement with Dr. Pestell as Chief

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Medical Officer of the Company. The fair value of the assets acquired approximates the consideration paid. The Company did not assume any liabilities.

The fair value of the technology acquired is identified using the Income Approach. The fair value of the patents acquired is identified using the Cost to Reproduce Method. The fair value of noncompetition agreement acquired is identified using the Residual Value Method. Goodwill is not recorded as the transaction represents an asset acquisition in accordance with ASU

~~2017-01.~~

~~Acquisition costs for asset acquisitions are capitalized and included in the total cost of the transaction. In addition, pursuant to ASC 805,~~

~~Business Combinations~~

~~, the net tax effect of the deferred tax liability arising from the book to tax basis differences is recorded as a cost of the acquisition.~~

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~~The fair value of the technology acquired is~~was identified using the Income Approach. The fair value of the patents acquired is identified using the Cost to Reproduce Method. The fair value of the noncompetition agreement acquired is identified using the Residual Value Method. Goodwill is not recorded as the transaction represents an asset acquisition in accordance with ASU

2017-01.

Acquisition costs for asset acquisitions are capitalized and included in the total cost of the transaction. In addition, pursuant to ASC 805, the net tax effect of the deferred tax liability arising from the book to tax basis differences is recorded as a cost of the acquisition.

The following table presents intangible assets ~~activity,~~as of February 28, 2021 and May 31, 2020, inclusive of patents (in thousands):

   August 31, 2020    May 31, 2020
Leronlimab (PRO 140) patent
   $ 3,500    $ 3,500
ProstaGene, LLC intangible asset acquisition
   15,126    15,126
Website development costs
   20    20
Accumulated amortization
   (5,687 )    (5,190 )




Total amortizable intangible assets, net
   12,959    13,456
Patents currently not amortized
   0      0




Carrying value of intangibles, net
   $ 12,959    $ 13,456


	February 28, 2021		May 31, 2020
Leronlimab (PRO 140) patent	$	3,500	$	3,500
ProstaGene, LLC intangible asset acquisition, net of impairment		2,926		15,126
Website development costs		20		20
Gross carrying value		6,446		18,646
Accumulated amortization, net of impairment		(4,531)		(5,190)
Total amortizable intangible assets, net		1,915		13,456
Patents currently not amortized		0		0
Carrying value of intangibles, net	$	1,915	$	13,456

The Company concluded a five-day arbitration hearing on March 19, 2021 concerning a claim by ProstaGene for approximately 3.1 million shares of common stock that the Company withheld for damages incurred by the Company in connection with the acquisition of an intangible asset from ProstaGene in November 2018. Expert testimony and report during the arbitration hearing revealed the stage of development was low, among other issues, and projected the technology would require a sizable amount of incremental capital and development time to advance towards a possible monetization. Based on this expert testimony and report, it is management’s conclusion the net carrying value of the proprietary algorithm is fully impaired. As such, the Company recorded an intangible asset impairment charge of approximately $10.0 million for the quarter ended February 28, 2021 resulting from the write-off of the allocated purchase price of $12.2 million and $2.2 million of associated accumulated amortization. Closing and reply briefs will be filed by mid-May 2021 and a decision by the arbitration panel will be rendered thereafter. Amortization expense related to all intangible assets was approximately $0.5 million and $1.5 million and $0.5 million and $1.5 million for the three and nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and 2019.~~respectively. The following table summarizes the estimated aggregate future amortization expense related to the Company’s intangible assets with finite lives is estimated to be approximately $2.0 million for the next year, approximately $1.5 million the following year, approximately $1.1 million for the next year, and $1.0 million per year for the following 2 years.

as of February 28, 2021 (in thousands):


Fiscal Year	Amount
2021 (3 months remaining)	$	262
2022		720
2023		217
2024		85
2025		85
Thereafter		546
Total	$	1,915

Note ~~9 –~~9. License Agreements

The Company has ~~two~~2 license agreements with a third-party licensor covering the licensor’s “system

know-how”

technology with respect to the Company’s use of proprietary cell lines to manufacture new leronlimab (PRO 140) material. The Company accrues annual license fees of ~~£600,000~~£0.6 million (approximately ~~US$774,000~~$0.8 million utilizing current exchange rates), which fees are payable annually in

December. Future annual license fees and royalty rate will vary depending on whether the Company manufactures leronlimab (PRO 140), utilizes the third-party licensor as a contract

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manufacturer, or utilizes an independent party as a contract manufacturer. The licensor does not charge an annual license fee when it serves as the manufacturer. In addition, the Company will incur royalties of up to 0.75% to 2%2.0% of net sales, depending upon who serves as the manufacturer, when the Company commences

its

first commercial sale, which will continue as long as the license agreement is maintained.

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

~~During the fourth quarter of fiscal 2019, the Company entered into a Master Services Agreement and Product Specific Agreement (collectively, the “Samsung Agreement”)~~

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

In April 2019, the 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. As of quarter ended~~

~~August 31,~~

~~202~~

~~, the Company delivered to Samsung purchase orders totaling approximately $45 million related to the manufacture of~~ leronlimab ~~and payments totaling $34 million, with additional payments scheduled to be made throughout~~effective through calendar 2020. Under the Samsung Agreement, the purchase order is binding and the Company is obligated to pay the full amount of the purchase order. Under the terms of the Samsung Agreement, the Company is obligated to make specified minimum purchases of leronlimab from Samsung pursuant to forecasted requirements which the Company is required to provide to Samsung. The first forecast schedules 11 manufacturing batches

~~all beginning in the quarter~~

~~ended Au~~

~~gust 31, 2020~~

~~, setting forth the total quantity of commercial grade leronlimab the Company expects to require in the following years. The Company estimates initial~~

~~ramp-up~~

costs to manufacture commercial grade leronlimab at scale could total approximately $112 million, with approximately $65 million payable over the course of calendar 2020, of which $37 million has been paid as of the date of this filing, and approximately $24 million payable during calendar 2021, and approximately $23 million payable in January of 2022. Thereafter, the Company will pay Samsung per 15,000L batch according to the pricing terms specified in the Samsung Agreement. The Samsung Agreement has an initial term ending in December 2027 and will be automatically extended for additional

~~two-year~~

periods unless either party gives notice of termination at least six months prior to the then current term. Either party may terminate the Samsung Agreement in the event of the other party’s insolvency or uncured material breach, and the Company may terminate the agreement in the event of a voluntary or involuntary complete market withdrawal of leronlimab from commercial markets, with one and half year’s prior notice. Neither party may assign the agreement without the consent of the other, except in the event of a sale of all or substantially all of the assets of a party to which the agreement relates.

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~~On May 22,~~year 2027. In 2020, the Company entered into ~~a Drug Product Manufacturing Services Agreement with Samsung (the “Samsung Vial Filling Agreement”),~~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. ~~Under the terms of the~~ Samsung ~~Vial Filling Agreement, the Company~~ is obligated to ~~have~~procure necessary raw materials for the Company and manufacture a specified minimum ~~quantities~~number of ~~vials filed with leronlimab by Samsung pursuant to forecasted requirements which~~batches, and the Company is required to provide ~~to Samsung. The Company has not provided~~ a rolling three-yearforecast of future estimated manufacturing requirements to Samsung ~~however based on~~

~~set-up~~

~~related costs and manufacturing~~which are binding. The future commitments pursuant to ~~the Samsung Agreement the Company expects to deliver commitments of approximately $2.6 million in the form of purchase orders related to the Samsung Vial Filling Agreement through January 2021.~~

~~In addition to our manufacturing agreement~~these agreements are estimated as follows (in thousands):


Fiscal Year	Amount
2021 (3 months remaining)	$	9,062
2022		7,288
2023		137,112
2024		51,211
2025		—
Thereafter		—
Total	$	204,673

Commitments with Samsung, the Company also previously entered into an arrangement with another third-party contract manufacturer to provide process transfer, validation and manufacturing services for leronlimab. In the event that the Company terminates the agreement with this manufacturer, the Company may incur certain financial penalties which would become payable to the manufacturer. Conditioned upon the timing of termination, the financial penalties may total approximately $2.1 million. These amount and timing of the financial commitments under an agreement with our secondary contract manufacturer will depend on the timing of the anticipated approval of our BLA and the initial product demand forecast, which is critical to align the timing of capital resources in order to ensure availability of sufficient quantities of commercial product.

Contract Research Organization (“CRO”)

The Company has entered into project work orders, as amended, for each of ~~its~~our clinical trials with 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 would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range up to ~~$0.7~~approximately $3.4 million. In the remote circumstance that the Company would terminate all clinical trials, the collective financial penalties may range from an approximate low of ~~$1.9~~$2.0 million to an approximate high of $3.7 million.

Legal Proceedings

From time to time the Company is a party to various legal proceedings. As of the quarter ended February 28, 2021, we were not party to any material pending legal proceedings, except those described below and as described in Part I, Item 3 of our 10-K for the fiscal year ended May 31, 2020 (as updated in Part II. Item 1 of our quarterly reports on Form 10-Q for the fiscal quarters ended August 31, 2020 and November 30, 2020). 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 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 had not been made, could be material to the Company’s consolidated financial statements.

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The Company did not record any material accruals for the matters described below in our Consolidated Balance Sheets as of February 28, 2021 and May 31, 2020.

Delaware Shareholder Derivative Lawsuit

As previously disclosed, on April 24, 2020, certain stockholders of the Company (the “Plaintiffs”) filed a derivative action, alleging claims for breach of fiduciary duty and unjust enrichment against the Company’s CEO, current and former CFO, CMO, and current and former members of the Company’s board of directors in connection with certain equity grant awards to these individuals in December 2019 and January 2020 (the “Defendants”). The Company was named a nominal defendant. The Plaintiffs demanded the rescission of the awards, a finding that the named directors breached their fiduciary duty to the Company, and an unnamed amount of damages. The Company appointed a Special Litigation Committee (“SLC”), consisting solely of independent directors not named in the complaint, to investigate the allegations in the complaint.

On December 15, 2020, the Defendants reached an agreement in principle with the SLC (collectively “Parties”) to resolve the lawsuit. On December 18, 2020, the Parties executed a memorandum of understanding outlining the key terms of their agreement. On January 27, 2021, the Parties entered into a proposed Stipulation and Agreement of Compromise, Settlement, and Release (the “Stipulation”) to settle the derivative action. A hearing has been scheduled for April 19, 2021 to consider the fairness of the Stipulation.

Pursuant to the Stipulation, the current directors agreed to implement a series of corporate governance reforms related to director and executive officer compensation and certain Defendants agreed to forfeit a substantial portion of the December 2019 Awards following approval of the settlement by the Delaware Court, in exchange for a release of claims and the dismissal of the Derivative Action with prejudice. Specifically, the December 2019 Awards to Michael A. Klump, Jordan G. Naydenov, and David F. Welch, Ph.D. will be forfeited in their entirety; 60 percent of the December 2019 Awards to Scott A. Kelly, M.D. will be forfeited; and the warrant to acquire 2,000,000 shares of common stock of the Company awarded to Nader Z. Pourhassan, Ph.D. in the December 2019 Awards will be forfeited in its entirety. In addition, Dr. Pourhassan will forfeit vested options to purchase 373,000 shares of common stock of the Company that he currently owns (issued separate and apart from the December 2019 Awards). Executive officers Michael D. Mulholland and Nitya Ray, Ph.D., and former officer Brendan Rae, will retain their December 2019 Awards.

On March 19, 2021, the Plaintiffs filed a brief agreeing to the proposed settlement and seeking an award of approximately $4.1 million for bringing the lawsuit. Plaintiff’s demand is based on the claimed value or benefit to the Company and its stockholders from the value of the rescinded equity awards, in addition to the time incurred by the Plaintiffs’ attorney with regard to this action.

On April 8, 2021, the SLC filed an opposition to the Plaintiff’s motion contending that the amount of the award being demanded is not legally supported as the actions resulting from the derivative action taken by the Company and the Defendants were the result of actions of the SLC, not those of the Plaintiffs’ attorney. The SLC contends the Plaintiffs’ attorney is only entitled to a quantum meruit award equal to a proportional amount of the legal fees incurred, equating to approximately $0.4 million. This amount was calculated by the SLC obtaining the amounts of hours and the various rates of the Plaintiffs’ attorney and then applying the same proportion applied to the award being demanded by the Plaintiff. If the court were to rule in favor of the SLC’s Opposition that the Plaintiff is only entitled to a Quantum Meruit award, the loss is expected to be approximately $0.4 million, alternatively if the court were to rule in favor of the Plaintiff’s full claim for award the loss is expected to be approximately $4.1 million.

In assessing whether the Company should accrue a liability for this litigation in the Consolidated Financial Statements, the Company considered various factors, including the legal and factual circumstances of the case, relevant case law, judge’s history of rulings in similar cases, similar derivative stockholder matters brought against the Company, the current status of the proceedings, the views of the SLC, its legal counsel, and the Company’s legal counsel, and the likelihood an award as requested will be upheld. As a result of this analysis, the Company recorded an immaterial accrual in accordance with applicable accounting standards and determined it is not probable a material loss will be incurred by the Company resulting from this legal proceeding. However, we cannot at this time predict the ultimate outcome of the decision in the current derivative action.

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Washington Shareholder Derivative Lawsuit

On September 10, 2020, the Plaintiffs from the April 24, 2020 derivative action filed another derivative action against CEO Nader Z. Pourhassan claiming he had violated Section 16(b) of the Securities Exchange Act of 1934 with respect to certain personal stock transactions in the Company’s stock. The parties filed cross-motions to dismiss. On March 12, 2021, the U.S. District Court for the Western District of Washington granted Dr. Pourhassan’s motion to dismiss with prejudice. On April 9, 2021, the Plaintiffs filed a Notice of Appeal to the Ninth Circuit Court of Appeals appealing the decision of the District Court.

Placement Agent Arbitration Claim

As previously disclosed, on April 29, 2020, Torreya Capital LLC (“Torreya”) filed an arbitration claim against the Company demanding payment of a transaction fee in the amount of ~~$600,000~~$0.6 million plus attorney fees, for the Company’s alleged failure to pay a transaction fee to Torreya under the terms of the engagement letter with the ~~Company. The~~ Company, ~~denied Torreya’s right to a fee pursuant to the terms of the engagement. On~~and amended its claim on September 17, 2020 ~~Torreya amended its claim~~ to add an additional transaction fee claim, increasing its demand to ~~$1.74~~approximately $1.8 million. The Company ~~similarly~~has denied Torreya’s contractual right to any ~~fee.~~

fee under the terms of the engagement letter with the Company. The parties filed dispositive motions in August 2020 and September 2020, which the arbitrator denied on October 5, 2020.

On February 18, 2021, a one-day arbitration hearing was held to determine Torreya’s right to approximately $1.8 million in transaction fees plus attorney fees. Closing briefs were filed on April 1, 2021, and a decision is expected by May 3, 2021. Although the Company cannot predict the ultimate outcome of this arbitration claim, the Company believes there is no legal basis for the fees and that the final award, if any, will not be a material amount.

Securities Class Action Lawsuit

On March 17, 2021, a stockholder filed a class-action lawsuit in the U.S. District Court for the Western District of Washington against the Company and certain officers, alleging the defendants made false and misleading statements regarding the viability of leronlimab as a potential treatment for COVID-19 (“First CA Suit”). Plaintiff seeks a ruling that this case may proceed as a class action, and seeks unspecified damages, and attorneys’ fees and costs. On April 9, 2021, a second stockholder filed a similar class-action lawsuit suit (“Second CA Suit”, together with the First CA Suit “CA Suits”) alleging the same facts as the First CA Suit and seeking similar relief. The Company ~~continues~~and the individual defendants deny any allegations of wrongdoing in the complaints and intend to vigorously defend the matters. In light of the fact that these cases are in their early stages, the number of plaintiffs are not known, and the claims do not specify an amount of damages, the Company cannot predict the ultimate outcome of the CA Suits and cannot reasonably estimate the potential loss or range of loss that the Company may incur.

Pestell Employment Dispute

As previously disclosed, in 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 his employment agreement. On August 22, 2019, the Company received notice that a lawsuit naming the Company and its Chief Executive Officer, and the Chairman of the Board was filed by Dr. Pestell in the U.S. District Court for the District of Delaware, alleging breach of Dr. Pestell’s employment agreement, among other claims, and seeking damages in the amount of certain severance entitlements thereunder pertaining to non-cause termination, among other relief. The treatment of those entitlements and of certain previously granted unvested stock options and shares of restricted common stock, which were subject to a repurchase option, are expected to be determined by the outcome of this litigation. On September 17, 2019, the Company and the other defendants moved to dismiss the complaint in part. On September 27, 2019, Dr. Pestell amended his complaint. On October 10, 2019, the Company again moved to dismiss certain wage and hour and defamation claims, and on June 12, 2020, the Court dismissed the wage and hour claims. On July 10, 2020, Dr. Pestell moved again to amend the dismissed wage claims, which the Company again moved to dismiss on July 24, 2020. On November 2, 2020, the Court dismissed Dr. Pestell’s wage claims with prejudice and the individual defendants were dropped from the proceeding. The Company filed its answer and counterclaims thereafter. A bench trial is currently set for mid-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 that the Company may incur.

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ProstaGene Arbitration

On March 19, 2021, the Company concluded a five-day arbitration hearing concerning a claim by ProstaGene and counterclaims by the Company for approximately 3.1 million shares of the Company’s common stock held in escrow as holdback stock pursuant to the transaction agreement for the acquisition of certain intangible assets from ProstaGene in November 2018. Based upon facts revealed during the hearing from the testimony and report from an expert, as of February 28, 2021 the Company recognized a full impairment charge against the net carrying value of a certain acquired intangible asset. See Note 8 of the Notes to Consolidated Financial Statements included herein above. Notwithstanding the foregoing, ProstaGene also seeks monetary damages, in an amount to be determined by the arbitration panel, based on the difference between then-current stock price per share and the stock price on June 29, 2020 of $7.93 per share for any shares awarded to ProstaGene and the Company ~~issued the note holder of the January 2019 Note 4,000,000 shares of common stock with~~seeks their respective attorney fees and costs. Post-hearing briefing will be concluded by mid-May 2021, and a ~~settlement value of $22.5 million. These shares were issued as settlement for a~~decision and award is expected thereafter. The Company disputes ProstaGene’s claim ~~filed by the note holder~~and has vigorously defended against

that claim, and the Company ~~alleging that the note holder was owed additional shares upon conversion of the January 2019 Note, compared to the number of shares requested by the noteholder~~believes its counterclaims are meritorious and ~~issued by of the~~has vigorously prosecuted its counterclaims. The Company ~~to the note holder upon conversion.~~

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 Company is a party for which management believescannot, however, predict the ultimate outcome ~~would have a material adverse effect on~~and cannot reasonably estimate the ~~Company’s financial position.~~

potential loss or range of loss that the Company may incur.

Note ~~11 –~~11. Private ~~Warrant Exchange~~

~~On June 17,~~Securities Offerings

During the six months ended November 30, 2020, the Company entered into

various separate privately negotiated

warrant exchange

agreements with

certain accredited

investors, pursuant to ~~these~~which the investors

purchased common stock at a range of $0.21 to ~~$0.70~~$1.08 per share

in exchange for warrants with an

exercise price ranging from ~~$0.35~~$0.30 to $1.35 per share of common stock. The Company

issued

~~16,543,539~~ approximately 29.0 million shares of common stock, $0.001

par value, in exchange for ~~16,543,539~~approximately 27.9 million warrants to purchase common stock,

which resulted in

net

aggregate

proceeds of approximately ~~$7.4~~$12.4 million. In connection with these transactions, the Company recognized approximately $7.1 million

~~after~~ of non-cash inducement interest expense.

On November 17, 2020, the Company conducted a private equity offering, ~~costs~~in which Dr. Christopher P. Recknor, M.D., Chief Operating Officer, who was a non-executive at the time of ~~approximatley $0.4~~the offering, purchased unregistered common stock at $1.50 per share. Pursuant to the offering, the Company sold approximately 0.67 million shares of common stock, $0.001 par value, for aggregate proceeds of $1.0 million.

The transaction was approved by the Company’s Board of Directors, see Note 14 for further description.

On December 4, 2020, the Company entered into a privately negotiated warrant exchange agreement with an accredited investor, pursuant to which the investor purchased common stock at $0.36 per share in exchange for warrants with an exercise price of $0.45 per share of common stock. The Company issued approximately 0.3 million shares of common stock, $0.001 par value, in exchange for approximately 0.3 million warrants to purchase common stock, which resulted in net aggregate proceeds of approximately $0.1 million. In connection with this transaction,

the Company recognized approximately ~~$3.3~~$0.1 million

in of non-cash

inducement interest expense.

On December 8, 2020, the Company entered into a privately negotiated warrant exchange agreement with an accredited investor, pursuant to which the investor purchased common stock at $0.24 per share in exchange for warrants with an exercise price of $0.30 per share of common stock. The Company issued approximately 2.0 million shares of common stock, $0.001 par value, in exchange for approximately 1.9 million warrants to purchase common stock, which resulted in net aggregate proceeds of approximately $0.4 million. In connection with this transaction, the Company recognized approximately $0.7 million of non-cash inducement interest expense.

On January 28, 2021, the Company entered into privately negotiated warrant exchange agreements with certain accredited investors, pursuant to which the investors purchased common stock at a range of $0.45 to $0.75 per share in exchange for warrants with an exercise price ranging from $0.90 to $1.50 per share of common stock. The Company issued approximately 3.6 million shares of common stock, $0.001 par value, in exchange for approximately 2.5 million warrants to purchase common stock, which resulted in net aggregate proceeds of approximately $2.9 million. In connection with this transaction, the Company recognized approximately $3.4 million of non-cash inducement interest expense and approximately $0.1 million offering costs.

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As described in Note 5, an aggregate of approximately 8.3 million shares of common stock, $0.001 par value, were issued in exchange for the retirement of the March 2020 Note and partial repayment of portions of the July 2020 and November 2020 Notes during the nine months ended February 28, 2021.

Note ~~12 –~~12. Stock Grants to Employees

On January 28, 2020, the Company awarded ~~11,650,000~~approximately 11.7 million performance shares to certain of its directors and executive officers outside of the 2012 Plan (“January 2020 Performance ~~Shares~~

”Shares”), which

awards

would

vest and be settled in shares of common stock of the Company if the Company

achieved

FDA Breakthrough Therapy designation for cancer within

six

months of the award date and if certain other requirements have been met.

The awards were forfeited on July 28, 2020 when the performance ~~condition~~

conditions were not met.

On July 31, 2020, the Company ~~issued 323,157~~awarded approximately 0.3 million shares of common stock to Nader Z. Pourhassan Ph.D., Chief Executive Officer, of which ~~156,570~~approximately 0.2 million were tendered back to the Company to cover income tax withholding requirements. As a result, the Company incurred approximately $1.6 million in stock compensation

expense.

~~Table~~

As described in Note 7 above, upon the September 30, 2020 stockholder approval of ~~Contents~~

the Amended and Restated 2012 Plan, the Company issued to executives of the Company non-qualified stock options covering 3.35 million shares of common stock, time-vesting restricted stock units (“RSUs”) covering 1.12 million shares of common stock and performance based RSUs (“PSUs”) covering 4.35 million shares of common stock. The RSUs vest equally over three years, and the PSUs will vest over the fiscal year ending May 31, 2021 only if certain performance conditions set forth in the awards are met. The options vest equally over three years.

On October 16, 2020, in connection with his hiring the Company granted Mahboob U. Rahman M.D., Ph.D., FACR, Chief Scientific Officer, 0.2 million time-vesting RSUs. The RSUs vest equally over three years. The grant date fair value of these RSUs was $2.81 per share.

Note ~~13 –~~13. Employee Benefit Plan

The Company has an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code (the “Code”), covering all ~~of its~~ employees. The Company makes a

qualified non-elective contribution

of 3%, which ~~consequently~~ vests immediately. In addition, participants in the Plan may contribute a percentage of their compensation, but not ~~in excess of~~greater than the maximum allowed under the Code. During the three and nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ the Company incurred an expense of approximately ~~$173,000~~$0.3 million and ~~$26,000,~~$0.5 million and $30,000 and $75,000, respectively, for qualified

non-elective

contributions.

Note ~~14 –~~14. Related Party Transactions

The Audit Committee of the Board of Directors, comprised of independent directors, or the full Board of Directors, reviews and approves all related party transactions.

On ~~July 15, 2019,~~March 11, 2021, the Company appointed its former Vice President, Clinical Operations, Dr. Christopher P. Recknor, M.D. as its Chief Operating Officer (“COO”), an executive position of the Company. The Center for Advanced Research & Education, LLC (“CARE”), owned by Dr. Christopher Recknor’s spouse, Julie Recknor, Ph.D., (and previously owned by Dr. Christopher Recknor until March 11, 2021) is one of several clinical locations for the Company’s ongoing NASH and COVID-19 long-hauler clinical trials, and was a clinical location for the Company’s completed Phase 2b/3 mild-to-moderate and severe-to-critical COVID-19 clinical trials. Dr. Julie Recknor serves as the Site Director of CARE and manages its day-to-day operations. The Company entered into ~~consulting agreements~~a Clinical Trial Agreement (“CTA”) with ~~two~~CARE for each of ~~its directors, one with Scott A. Kelly, M.D.~~these clinical trials. Each CTA was negotiated in the ~~capacity~~ordinary course of

~~non-executive~~

~~Chief Science Officer,~~ business by Amarex, the ~~other~~Company’s clinical research organization, prior to Dr. Recknor’s appointment as COO, and the operational and financial terms of the CTAs with ~~David F. Welch, Ph.D.~~CARE are comparable to the terms available to unrelated clinical locations. Dr. Recknor was not involved in the ~~capacity~~Company’s decision to choose CARE as a clinical location for its ongoing trials, and he is not involved in patient

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~~non-executive~~

~~Strategy Advisor. On September 12, 2019,~~

treatment at the CARE site. During the fiscal year ended May 31, 2020, the Company made 0 payments to CARE, as it had not yet received any services under the one CTA in effect prior to this time. The Company expects to make payments to CARE during the fiscal year ending May 31, 2021 and thereafter of approximately $2.5 million, which is based upon the total number of patients that enrolled in the Company’s previously completed trials and the number of patients that may enroll in the Company’s current clinical trials. As of February 28, 2021, the Company had approximately $0.3 million in accounts payable due to CARE, a related party. On November 17, 2020, the Company conducted a private equity offering, in which Dr. ~~Welch agreed~~Recknor, who was a non-executive at the time of the offering, purchased unregistered common stock at $1.50 per share. Pursuant to ~~amend his consulting agreement to eliminate any cash compensation (including previously earned entitlements) thereunder. The company has issued options for an aggregate of 1,375,000~~the offering, the Company sold approximately 0.7 million shares of common stock, ~~to Dr. Kelly and Dr. Welch as compensation pursuant to such agreements, including options to Dr. Kelly~~$0.001 par value, for ~~750,000 shares at an exercise price~~aggregate proceeds of ~~$0.385, on September 12, 2019, and 187,500 shares at an exercise price~~$1.0 million. The transaction was approved by the Company’s Board of $0.39, on October 7, 2019; and options to Dr. Welch for 250,000 shares at an exercise price of $0.385, on September 12, 2019, and 187,500 shares at an exercise price of $0.39, on October 7, 2019. The options granted on September 12, 2019 vested immediately upon issuance and have a

~~10-year~~

~~expiration term. The options issued on October 7, 2019 vest in four equal quarterly installments beginning on the grant date and have a~~

~~10-year~~

~~expiration term.~~

On June 12, 2019, the Company concluded a warrant tender offer (the “June 2019 Warrant Tender Offer”) for certain outstanding series of eligible warrants, offering the holders of such warrants the opportunity to amend and exercise their warrants at a reduced exercise price equal to the lower of (i) their respective existing exercise price or (ii) $0.40 per share of common stock. As an inducement to holders to participate in the June 2019 Warrant Tender Offer, the Company offered to issue to participating holders shares of common stock equal to an additional 50% of the number of shares issuable upon exercise of the eligible warrants (collectively, the “Additional Shares”). Dr. Kelly validly tendered warrants beneficially owned by him, covering an aggregate of 50,000 shares of common stock, and received 25,000 Additional Shares. Dr. Kelly participated on terms identical to those applicable to other holders in the June 2019 Warrant Tender Offer.

On July 31, 2019, the Company concluded an additional warrant tender offer on terms identical to the June 2019 Warrant Tender Offer (the “July 2019 Warrant Tender Offer”). Dr. Welch tendered warrants beneficially owned by him, covering an aggregate of 1,000,000 shares of common stock, and received 500,000 Additional Shares. Dr. Welch participated on terms identical to those applicable to other holders in the July 2019 Warrant Tender Offer”).

On September 30, 2019, an entity controlled by Dr. Welch exchanged a 2019 Short-term Convertible Note in the principal amount of $1 million and accrued but unpaid interest of $75,343, for an Exchange Note (

~~as defined in Note 5~~

) in the principal amount of $1,075,343 and a warrant to purchase 1,000,000 shares of common stock. The terms of the exchange, the Exchange Note and the related warrant are further described in Note 5. The entity controlled by Dr. Welch participated on terms identical to the other holders in the exchange.

Directors.

Note ~~15 –~~15. Subsequent Events

~~In March 2020, the World Health Organization declared~~

~~COVID-19~~

~~a pandemic.~~

The Company ~~could be negatively affected~~and the holder of the November 2020 Note agreed to defer its February 2021 required Monthly Debt Reduction Amount of $7.5 million to March 12, 2021. On March 12, 2021, in satisfaction of the February 2021 Monthly Debt Reduction amount, the Company and the July 2020 Note holder entered into a separately negotiated exchange agreement, pursuant to which the July 2020 Note was partitioned into a new note (the “ February 2021 Partitioned Note”) with a principal amount equal to $7.5 million. The outstanding balance of the July 2020 Note was reduced by the ~~widespread outbreak of an illness or any other communicable disease, or any other public health crisis that results in economic~~February 2021 Partitioned Note, and ~~trade disruptions, including the disruption of global supply chains. The~~

~~COVID-19~~

pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The Company’s operational and financial performance has already been affected by the impact of the

~~COVID-19~~

~~pandemic; clinical trials have experienced delays in patient enrollment, potentially due to prioritization of hospital resources toward the~~

~~COVID-19~~

~~pandemic, or concerns among patients about participating in clinical trials during a public health emergency and the~~

~~COVID-19~~

~~pandemic is affecting the operations of government entities, such as the FDA, as well as contract research organizations, third-party manufacturers, and other third-parties upon whom~~ the Company ~~relies. As a result of~~

~~“shelter-in-place”~~

~~orders, quarantines or similar orders or restrictions to control~~and the ~~spread of~~

~~COVID-19,~~

~~our Company has implemented work-from-home policies~~investor exchanged the February 2021 Partitioned Note for ~~employees. The effects of these stay at home orders and work-from-home policies may be negatively impacting productivity, resulting in delays in clinical programs and timelines. The extent~~approximately 3.6 million shares of the ~~impact of~~Company’s common stock $0.001 par value. Following this payment, the

~~COVID-19~~

~~pandemic~~ outstanding balance on the ~~Company’s operational~~July 2020 Note, including accrued interest, was approximately $15.2 million.

On March 3, 2021, the Company filed a “universal shelf” registration statement on Form S-3 with the U.S. Securities and ~~financial performance, including~~Exchange Commission to replace its previous shelf registration originally filed with the SEC on February 23, 2018 and which was set to expire on March 7, 2021. The new registration statement includes a base prospectus that covers the ~~Company’s ability to execute its business strategies~~offering, issuance and ~~initiatives in the expected time frame, will depend on future developments, including the duration and spread~~sale of such indeterminate number of shares of the ~~pandemic~~registrant’s common stock, preferred stock, warrants, overallotment purchase rights, debt securities, rights and ~~related restrictions on travel~~units, which together shall have an aggregate initial offering price not to exceed $200.0 million and ~~transports, all~~includes the registration of which are uncertain and cannot be predicted. An extended period of global supply chain and economic disruption could materially affect the Company’s business, results of operations, access to sources of liquidity and financial condition.

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~~On September 3, 2020 and September 21, 2020, the Company granted stock option awards to~~

~~Company newly hired~~

~~employees covering a total of 100,000~~approximately 13.6 million shares of common stock ~~with exercise prices ranging from $3.41~~underlying previously issued and unexercised warrants. The new registration statement is not yet effective.

On March 11, 2021, the Company appointed Dr. Christopher P. Recknor, M.D. as COO. See Note 14 above for a description of related party transactions involving Dr. Recknor.

On March 18, 2021, the Company entered into a private warrant exchange in which an accredited investor purchased unregistered common stock at a range of $0.60 to ~~$3.88. The awards vest annually over three years and have a~~

~~ten-year~~

~~contractual term.~~

~~On August 3, 2020, 2020, in light of increasing personal and professional commitments, director David F. Welch, Ph.D. informed the Board of Directors that he would not be seeking~~

~~re-election~~

$0.90 per share as compared to the ~~Board~~stated exercise price on their warrant, which ranged from $0.30 to $0.45 per share of ~~Directors at~~common stock. The Company issued approximately 0.9 million shares of common stock, as well as approximately 0.4 million additional shares as an inducement to exercise their warrants, for a total of approximately 1.3 million shares of common stock, $0.001 par value. Aggregate gross proceeds from the ~~2020 Annual Meeting of Stockholders on September 30, 2020.~~

private warrant exchange were approximately $0.8 million.

During ~~September 2020,~~March 2021, the Company issued ~~818,241~~approximately 0.1 million shares of common stock, $0.001 par value, in connection with the exercise of

outstanding warrants

and stock

options

covering ~~822,895~~approximately 0.1 million shares. The stated exercise prices ranged from ~~$0.50~~$0.75 to $1.35 per share, which resulted in aggregate gross

proceeds to the Company

of approximately ~~$0.6~~$0.1 million.

On ~~September 30, 2020~~April 2, 2021, the ~~Company’s stockholders approved~~

Company entered into a private warrant exchange in which an accredited investor purchased unregistered common stock at $0.90 per share as compared to the ~~amendment and restatement~~stated exercise price on the warrants of ~~the Company’s 2012 Equity Incentive Plan (the “A&R 2012 EIP”). As a result~~$0.45 per share of ~~this approval, the total number of~~common stock. The Company issued approximately 0.8 million shares of common stock, ~~available~~as well as approximately 0.3 million additional shares as an inducement to exercise their warrants, for ~~grant under the A&R 2012 Plan was increased from~~

~~25,000,000~~

~~shares to~~

~~50,000,000~~

shares, the number of shares available to be issued will be increased on the last day of each fiscal year in an amount equal to 1% of the total outstanding shares on the last day of the prior fiscal year, and the term of the plan was extended for an additional ten years to September 30, 2030.

On June 15, 2020 and June 25, 2020, the Compensation Committee of the Board approved grants of non-qualified stock options and restricted stock unit grants to certain of the Company’s executives and directors, which grants were made conditional upon stockholder approval of the A&R 2012 EIP. As a result of the September 30, 2020 stockholder approval of the A&R 2012 EIP, the Company issued to executives of the Company non-qualified stock options covering

~~3,350,000~~ ~~shares of common~~

~~stock, time-vesting~~

~~restricted stock units (“RSUs”) covering 1,120,000 shares of~~

~~common stock, and performance based RSUs (“PSUs”) covering 4,350,000.~~

~~The stock options have a per share exercise price of $3.12 and vest equally over three years. The RSUs vest equally over~~

~~three years, and the PSUs will vest over the next fiscal year only if certain performance conditions set forth in the awards are met.~~

~~Concurrent with the stockholder approval, the Company also~~

~~issued to its three non-employee directors~~

~~stock options covering~~ a total of ~~506,250~~approximately 1.1 million shares of common stock, ~~or 168,750 shares for each director,~~$0.001 par value. Aggregate gross proceeds from the private warrant exchange were approximately $0.7 million.

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On April 2, 2021, the Company entered into a securities purchase agreement pursuant to which ~~represented~~ the ~~remaining portion~~Company issued a secured convertible promissory note with a two-year term to an institutional accredited investor and the lender under the November 2020 Note in the initial principal amount of $28.5 million (the “April 2021 Note”). The April 2021 Note is secured by all of the

~~annual~~

~~director compensation~~ assets of the Company, excluding the Company’s intellectual property, bears interest at 10% per annum, with a conversion rate of $10.00 per share. The investor agreed to give consideration of $25.0 million, reflecting original issue discount of $3.4 million and $0.1 million of debt issuance costs. The Company anticipates using the proceeds to accelerate manufacturing of leronlimab inventory and for general corporate purposes.

The last day of employment of Chief Scientific Officer, Mahboob U. Rahman, M.D., Ph.D., was April 5, 2021.

On April 6, 2021, the Company entered into an Exclusive Supply and Distribution Agreement (the “Agreement”) with Biomm S.A., a Brazilian pharmaceutical company engaged in the business of manufacturing and distributing pharmaceutical products in Brazil (“Biomm”), pursuant to which Biomm would hold the exclusive right to distribute and sell the Company’s product, Vyrologix™ (leronlimab), in Brazil, once regulatory approval has been received. The Agreement provides for the ~~fiscal year beginning June 1, 2020.~~

~~The~~

~~options were issued with a per share exercise price~~sale of ~~$6.15~~Vyrologix™ upon approval by the Brazilian National Health Surveillance Agency or Agência Nacional de Vigilância Sanitária.

The Company and ~~vest~~

~~equally over three quarterly installments beginning November 30, 2020.~~

~~On October 1, 2020, the Company received a redemption notice from~~ the holder of the ~~Company’s March~~November 2020 Note ~~requesting~~agreed to defer its March 2021 required Monthly Debt Reduction Amount of $7.5 million to April 8, 2021. On April 8, 2021, in satisfaction of the March 2021 Monthly Debt Reduction Amount, the Company and the July 2020 Note holder entered into a ~~redemption~~separately negotiated exchange agreement, pursuant to which the July 2020 Note and was partitioned into a new note (the “March 2021 Partitioned Note”) with a principal amount equal to $7.5 million. The outstanding balance on the July 2020 Note was reduced by the March 2021 Partitioned Note, and the Company and the investor exchanged the March 2021 Partitioned Note for approximately 2.5 million shares of ~~$950,000, which was paid in cash on October 6, 2020.~~the Company’s common stock $0.001 par value. Following this ~~redemption,~~payment, the outstanding balance on the ~~Marc~~

July 2020 Note, including accrued interest, was approximately ~~$7.3~~$7.9 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of 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 Securities Exchange Act of 1934. 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 sufficiency of the Company’s cash position, (ii) the Company’s ability to raise additional capital to fund its operations, (iii) the Company’s ability to meet its debt obligations, if any, (iv) the Company’s ability to enter into 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 Company’s ability to achieve approval of a marketable product, (vii) the design, implementation and conduct of the Company’s clinical trials, (viii) the results of the Company’s clinical trials, including the possibility of unfavorable clinical trial results, (ix) the market for, and marketability of, any product that is approved, (x) the existence or development of vaccines, drugs, or other treatments that are viewed by medical professionals or patients as superior to the Company’s products, (xi) regulatory initiatives and compliance with governmental regulations ~~the sufficiency of the Company’s cash position~~ and the ~~ability to raise additional capital, clinical priorities,~~regulatory approval process, (xii) litigation affecting the ~~results of clinical trials for the Company’s drug candidate,~~Company or its products; (xiii) general economic and business conditions, (xiv) changes in foreign, political, and social conditions, and (xv) various other matters, many of which are beyond our 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, 2020, filed with the SEC on August 14, 2020, and in our subsequent filings with the SEC, including those risks and uncertainties identified in Part II, Item 1A of this Quarterly Report.

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

Unless the context otherwise requires, references in this annual report to “CytoDyn,” the “Company,” “we,” “our,” or “us” are to CytoDyn Inc. and its ~~subsidiaries~~

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subsidiaries.

Overview

We are a late-stage biotechnology company focused on the clinical development and potential commercialization of leronlimab ~~(PRO 140)~~(“PRO 140”), a CCR5 antagonist to treat HIV infection, with the potential for multiple therapeutic indications. Our current business strategy is to resubmit our Biologics License Application ~~or BLA~~(“BLA”) filing for leronlimab as a combination therapy for highly ~~treatment experienced~~treatment-experienced HIV patients ~~as soon as possible.~~in the first half of the calendar year 2021 or shortly thereafter. In addition, we ~~will~~are also ~~pursue~~pursuing approval for leronlimab as a potential therapeutic benefit for

COVID-19

patients, cancer, and other indications. ~~Currently, we~~We are currently also engaged in conducting clinical trials, inof leronlimab including a Phase ~~1b/~~2 clinical trial for metastatic triple-negative breast cancer, a Phase 2 trial for 22 solid tumor cancers, a Phase 2 NASH (nonalcoholic steatohepatitis) clinical trial ~~for graft-versus-host disease (“GvHD”)~~ and a Phase 2 ~~NASH~~investigational trial for ~~which the first patient has not yet been enrolled.~~

post-acute sequelae of SARS COV-2 (PASC), also known as COVID-19 Long-Haulers.

During the quarter ended ~~August 31, 2020,~~February 28, 2021, we have continued to work on the resubmission of our BLA filing with the FDA for leronlimab as a combination therapy for highly treatment-experienced HIV patients, and to advance our clinical trials to evaluate the safety and efficacy of leronlimab as a ~~treatment~~therapeutic for ~~HIV,~~COVID-19, and as a ~~therapeutic for~~

~~COVID-19,~~

as treatment for various forms of ~~cancers and for GvHD.~~cancers. An update of the status of our completed and ongoing clinical trials is below.

~~Clinical Trials Updates for~~

HIV Applications

Phase ~~2b/~~3 Pivotal Trial for HIV, as Combination Therapy

This trial was successfully completed and is the basis for our current BLA filing with the FDA. ~~The~~We submitted the last two portions of the BLA ~~was initially submitted with~~(clinical and manufacturing) to the FDA in April 2020 and completed the ~~BLA~~ submission ~~was completed~~ on May 11, 2020. In July 2020, however, the Company received a Refusal to File letter from the FDA regarding its BLA filing requesting additional ~~information,~~information. In August and the Company requested a Type A meeting to discuss the FDA’s request for additional information. The FDA did not schedule a Type A meeting, but requested the Company submit all questions regarding the filing in writing. In September 2020, the ~~Company submitted questions~~FDA provided written responses to the ~~FDA, received written responses,~~Company’s questions and ~~held a telephonic meeting~~met telephonically with Company key personnel and its clinical research organization concerning its recent BLA for this HIV combination therapy to expedite the ~~FDA to obtain further clarity on what additional information was required with respect to the~~resubmission of its BLA ~~filing.~~filing for this indication. The Company ~~is working to provide the information required by the FDA in order~~expects to resubmit its BLA filing in the ~~BLA, which it anticipates could occur before the end~~first half of the calendar year ~~2020.~~ 2021 or shortly thereafter.

This trial for leronlimab as a combination therapy to existing ~~HAART~~highly active antiretroviral therapy (“HAART”) drug regimens for ~~highly treatment~~highly-treatment experienced HIV patients achieved its primary endpoint with

a p-value of

0.0032. Most of the patients who have completed this trial have transitioned to a

an FDA-cleared

rollover study, as requested by the treating physicians to enable ~~the patients~~them to have continued access to leronlimab.

Rollover Study for HIV as Combination Therapy

This study is designed for patients who successfully completed the pivotal Phase 3 Combination Therapy trial and for whom the treating physicians request a continuation of leronlimab therapy to maintain suppressed viral load. This extension study will be discontinued upon any FDA approval of leronlimab.

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Phase 2b Extension Study for HIV, as Monotherapy

~~Currently, there~~

There are five patients in this ongoing extension study, and each has surpassed at least six and one-half years of suppressed viral load with leronlimab as a single agent therapy. This extension study will be discontinued upon any FDA approval of leronlimab.

~~Rollover Study for HIV as Combination Therapy~~

This study is designed for patients who successfully completed the pivotal Phase 2b/3 Combination Therapy trial and for whom the treating physicians request a continuation of leronlimab therapy in order to maintain suppressed viral load. This extension study will be discontinued upon any FDA approval of leronlimab.

Phase 2b/3 Investigative Trial for HIV, as Long-term Monotherapy

Enrollment for this trial is closed after reaching over ~~500~~560 patients. This trial assesses the subcutaneous use of leronlimab 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 the proportion of participants with a suppressed viral load to those who experienced virologic ~~failure.~~failure (virologic failure defined as two consecutive viral load readings over 200 cp/mL). The secondary endpoint is the length of time to virologic failure. We completed the evaluation with two higher-dose arms, one with a 525 mg dose (a 50% increase from the original dosage of 350 mg), as well as a 700 mg ~~dose.~~dose (a 100% increase from the original dosage of 350 mg). We reported in August 2019 that interim data suggested both the 525 mg and the 700 mg dosages ~~are~~were achieving a responder rate of approximately 90% after the initial 10 ~~weeks.~~weeks of monotherapy (defined as induction period). This trial has also been used to provide safety data for ~~the~~our BLA filing for leronlimab as a combination therapy. ~~In view of~~Given the high responder rate at the increased dosage levels, coupled with the newly developed CCR5 occupancy test, we filed a pivotal trial protocol with the FDA for leronlimab as a monotherapy in May 2019. Many patients who completed the Phase 2b/3 trial and requested continued access to leronlimab are continuing in an extension study.

~~Table~~

Phase 2b/3 Extension of ~~Contents~~

the Investigative Trial for HIV, as Long-term Monotherapy

Many patients requested to continue on monotherapy with leronlimab upon successful completion of Phase 2b/3, 48-week trial. Over 40 patients were given access to this trial and many are continuing on this protocol for more than three years.

COVID-19

Indication

Phase 2 Trial to Evaluate the Efficacy and Safety of

Leronlimab

for ~~Mild to Moderate~~Mild-to-Moderate Coronavirus Disease 2019
(COVID-19)

This

two-arm,

randomized, ~~double blind, placebo controlled~~double-blind, placebo-controlled multicenter study to evaluate the safety and efficacy of leronlimab in patients with

mild-to-moderate

symptoms of respiratory illness caused by coronavirus 2019 infection was completed in July 2020. Patients were randomized to receive weekly doses of 700 mg leronlimab or placebo for two weeks. Leronlimab and placebo were administered via subcutaneous injection. The study ~~has~~had three phases: Screening Period, Treatment Period, and

Follow-Up

Period. A total of 86 subjects were randomized 2:1 (active drug to placebo) in this study. The primary outcome measures are a clinical improvement as assessed by a change in total symptom score (for fever, myalgia, dyspnea, and cough). Secondary outcome measures include: (1) time to clinical resolution, (2) change from baseline in National Early Warning Score 2 (NEWS2), (3) change from baseline in pulse oxygen saturation, (4) change from baseline in the patient’s health status on a

7-category

ordinal scale, (5) incidence of hospitalization, (6) duration (days) of hospitalization, (7) incidence of mechanical ventilation supply, (8) duration (days) of mechanical ventilation supply, (9) incidence of oxygen use, (10) duration (days) of oxygen use, (11) mortality rate, and (12) time to return to normal activity. Enrollment was completed in July 2020, and the Company reported positive safety results. The topline report from the trial, including efficacy and complete safety data, demonstrated clinically significant results for the primary endpoint and statistically significant results for the secondary outcome for NEWS2 was submitted to the FDA in August 2020. ~~The Company is currently exploring various forms of authorizations for use and potential approvals with several countries.~~

Phase 3 Trial to Evaluate the Efficacy and Safety of Leronlimab for Patients ~~With Severe or Critical~~with Severe-to-Critical Coronavirus Disease 2019

(COVID-19).

This iswas a

two-arm,

randomized, ~~double blind, placebo controlled,~~double-blind, placebo-controlled, adaptive design multicenter study to evaluate the safety and efficacy of leronlimab in patients with ~~severe or critical~~severe-to-critical symptoms of respiratory illness caused by ~~coronavirus 2019 infection.~~

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COVID19. Patients ~~are~~were randomized to receive weekly doses of 700 mg leronlimab or placebo for two weeks. Leronlimab and placebo ~~will be~~were administered via subcutaneous injection. The study ~~will have~~had three phases: Screening Period, Treatment Period, and

Follow-Up

Period. The primary outcome measured in this study ~~is:~~

was all-cause

mortality at Day 28. Secondary outcomes measured are:

(1) all-cause

mortality at Day 14, (2) change in clinical status of subject at Day 14, (3) change in clinical status of subject at Day 28, and (4) change from baseline in Sequential Organ Failure Assessment (SOFA) score at Day 14. ~~Recently,~~In August 2020, the Data Safety Monitoring Committee, ~~for the ongoing Phase 3 trial completed its first safety review of patients with severe and critical~~

~~COVID-19~~

~~and reported it saw no cause to modify the study. In August, 2020, the~~or DSMC, reviewed compiled safety data from 149 of the 169 patients enrolled in the Phase 3 trial. The DSMC did not raise any safety concerns ~~regarding safety~~ and recommended the trial continue without ~~any~~ modification. ~~As such,~~In October, the ~~Company is continuing to enroll patients in this~~DSMC for the ongoing Phase 3 trial ~~and is currently in the process of a full~~completed its interim analysis ofon the data from the first 195 patients ~~enrolled.~~

and recommended the trial continue without modification to achieve the primary endpoint and requested another interim analysis when enrollment reaches 75% level to review patient mortality and other clinical outcome data between the two study arms. The Company completed enrollment in December 2020 with 394 patients and, accordingly, the last patient enrolled reached 28 days in mid-January 2021. The results from the Phase 3 severe-to-critical trial were reported in a Current Report on Form 8-K on March 8, 2021, and the results for a sub-population of this trial of 384 patients (mITT, modified intent to treat) serves as the basis for a potential approval in one or more countries. The FDA requested an additional study of a larger population of mechanically ventilated critically ill COVID-19 patients. The Company has also supplied trial results to health authorities in Canada, the U.K., Philippines and Brazil. The Company is seeking EUA with Health Canada (via a request for Interim Order) and in the U.K. pursuant to an accelerated rolling review provided by the MHRA. In April 2021, the Company received its first approval of leronlimab for the treatment of COVID-19 from the Philippines under CSP (Compassionate Special Permit) and has since delivered leronlimab to a Philippine hospital to be administered to an additional 28 patients under a new CSP.

Phase 2 Investigational Trial to Evaluate the Efficacy and Safety of Leronlimab for Patients with Post-acute Sequelae of SARS COV-2 (PASC), also known as COVID-19 Long-Haulers.

The Company initiated a Phase 2 investigative trial for post-acute sequelae of SARS COV-2 (PASC), also known as COVID-19 Long-Haulers. This trial will evaluate the effect of leronlimab on clinical symptoms and laboratory biomarkers to further understand the pathophysiology of PASC. It is currently estimated that between 10-30% of those infected with COVID-19 develop long-term sequelae. Common symptoms include fatigue, cognitive impairment, sleep disorders, and shortness of breath. If this trial is successful, the Company plans to pursue clinical trials to evaluate leronlimab’s effect on immunological dysregulation in other post-viral syndromes, including myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS).

Cancer and Immunological ~~Applications~~Indications for Leronlimab

We are continuing to explore opportunities for clinical ~~applications~~indications for leronlimab involving the CCR5 receptor, other than

HIV-related

treatments, such as inflammatory conditions, autoimmune diseases, and cancer.

The target of leronlimab is the immunologic receptor CCR5. We believe that the CCR5 receptor is more than the door for HIV to enter

T-cells:

it is also a crucial component in inflammatory responses. This could ~~open~~present the potential for multiple pipeline opportunities for leronlimab.

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 ~~MOA,~~mechanism of action (“MOA”), we believe leronlimab may have significant advantages in ~~terms of reduced~~reducing side effects over other CCR5 antagonists. Prior studies have demonstrated that leronlimab does not cause direct

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activation of

T-cells. We

have reported encouraging human safety data for our clinical trials with leronlimab in

HIV-infected

patients.

~~We initiated our first clinical trial with leronlimab in an immunological indication in March 2020 – a~~

Phase 2 clinical trial with leronlimab for GvHD in reduced intensity conditioning (“RIC”) patients with acute myeloid leukemia (“AML”) or myelodysplastic syndrome (“MDS”) who are undergoing bone marrow stem cell transplantation. GvHD represents an unmet medical need, with patients who contract GvHD during stem cell transplant having a significantly decreased

~~1-year~~

~~survival rate with relapsed GvHD as the leading cause of death. Our~~
~~pre-clinical~~
study in GvHD has been published in the peer-reviewed journal Biology of Blood and Marrow Transplantation. In October 2017 the FDA has granted orphan drug designation to leronlimab for the prevention of acute GvHD. The next review of data by the independent data monitoring committee (iDMC) will occur following enrollment of 10 patients under the amended protocol after each patient has been dosed for 30 days.

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GvHD is a risk when patients receive bone marrow stem cells donated from another person. GvHD is a serious complication that limits the use of Bone Marrow Stem Cell (“BMSC”) transplantation in patients with blood cancers. GvHD occurs when the donor’s immune cells attack the patient’s normal tissues (skin, liver, gut). GvHD can be acute or chronic. Its severity depends on the differences in tissue type between patient and donor. Acute GvHD can occur soon after the transplanted cells begin to appear in the recipient and can range from mild to severe and can be life-threatening.
The CCR5 receptor, the target for leronlimab, appears to be an important mediator of GvHD, especially in the organ damage that is the usual cause of death. We believe that the CCR5 receptor on engrafted cells is critical for the development of acute GvHD and by blocking this receptor from recognizing certain immune signaling molecules could be a viable approach to mitigating acute GvHD. The potential of leronlimab to prevent this life-threatening condition could help extend the use of BMSC transplantation to effectively treat more patients.
~~Phase 1b/~~2 Trial for Triple-Negative Breast Cancer

This trial ~~is to evaluate~~evaluates the feasibility of leronlimab combined with carboplatin in patients with CCR5+ metastatic ~~triple negative~~triple-negative breast ~~cancer.~~cancer (mTNBC). The first portion is a ~~dose escalation~~dose-escalation phase with three dose levels (cohorts) of leronlimab ~~in combination~~combined with a fixed dose of carboplatin. The second portion is a single arm study with 30 patients to test the hypothesis that the combination of carboplatin intravenously and maximum tolerated dose of leronlimab subcutaneously will increase progression free survival. In May 2019, the FDA granted leronlimab Fast Track designation for use in combination with carboplatin. The change in circulating tumor cells (“CTCs”) ~~number~~ will be evaluated every 21 days during treatment and will be used as an initial prognostic marker for efficacy. The first patient was treated in September 2019, and the Company reported encouraging initial results from the first patient in November 2019. In January 2020, the Company filed for Breakthrough Therapy ~~designation (BTD)~~Designation (“BTD”) with the ~~U.S. Food and Drug Administration (FDA) for the~~FDA to use of leronlimab as an adjuvant therapy for the treatment of ~~metastatic triple-negative breast cancer (mTNBC).~~

~~Breakthrough Therapy designation~~mTNBC. The FDA requested the Company to file for a pre-BTD meeting due to the small number of patients.

BTD is a process designed to expedite the development and review of drugs ~~that are~~ intended to treat a serious condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). In addition, ~~the breakthrough therapy~~BTD should have a compelling scientific rationale and promising ~~mechanism of action (MOA),~~MOA, such as targeting a molecular driver of disease. If ~~the~~ BTD is granted, it will fall under one of three subcategories that (a) address a serious condition with poor outcomes for which there is no Standard of Care (SoC), (b) provide substantial efficacy improvement of a ~~well characterized~~well-characterized SoC for a serious condition with poor outcomes, or (c) provide substantial therapeutic index advantage over a well characterized SoC for a serious condition with poor outcomes. If a BTD is granted, the possible outcomes are (a) conditional or full approval, (b) expedited development, (c) rolling submission, or (d) review shortened.

To determine whether the improvement over available therapy is substantial is a matter of judgment and depends on ~~both~~ the magnitude of the treatment effect, ~~which could include~~including the duration of the effect and the importance of the observed clinical outcome. In general, ~~the~~ preliminary clinical evidence should show a clear advantage over available therapy. A breakthrough therapy is a drug:

~~intended alone or in combination with one or more other drugs to treat a serious or life threatening disease or condition, and~~

●

intended alone or in combination with one or more other drugs to treat a serious or life-threatening disease or condition, and

●

preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

In 2019, the FDA’s Center for Drug Evaluation and Research (CDER) approved 29 of 48 novel drugs that used at least one expedited approval method. ~~Thirteen~~13 of these drugs approved originated from a ~~Breakthrough Therapy designation which represents~~BTD, representing 27% of the drugs approved during the year.

Compassionate Use Study of Leronlimab in Breast Cancer

This is a ~~single arm,~~single-arm, compassionate use study with 30 patients for leronlimab combined with a treatment of ~~physician’s choice~~Physician’s Choice (TPC) in patients with CCR5+ mTNBC. Leronlimab will be administered subcutaneously asat a weekly dose of 350 mg until disease progression or intolerable toxicity. Based on our success in the Phase 1b/2 mTNBC trial with 350 mg dose, we were able to transition ~~all of~~ the compassionate use patients to 525 mg ~~dose, Treatment of Physician’s Choice (TPC)~~dose. TPC is defined as one of the following single-agent chemotherapy drugs administrated according to local practice: eribulin, gemcitabine, capecitabine, paclitaxel,

nab-paclitaxel,

vinorelbine, ixabepilone, or carboplatin. In this study, patients will be evaluated for tumor response approximately every 3three months or according to the institution’s standard practice by CT, PET/CT or MRI with contrast (per treating investigator’s discretion) using the same method as at baseline.

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Basket Trial for 22 Solid Tumor Cancers

This is a Phase 2 study to test the safety and efficacy of leronlimab on 22 different solid tumor cancers, including brain-glioblastoma, melanoma, lung, breast, ovarian, pancreas, bladder, throat, stomach, colon, testicular, uterine, among other indications. The first patient was treated in April 2020, and enrollment is ongoing.

~~Pre-clinical~~

~~Studies~~ Currently, 10 Stage 4 patients have included leronlimab in their therapy for ~~Multiple Cancer Indications~~

~~We are initiating multiple~~

~~pre-clinical~~

~~studies~~7 to 12 months.

Phase 2 Trial and IND for NASH

In October 2019, the FDA granted clearance to CytoDyn to proceed with a Phase 2 study to test whether leronlimab ~~for melanoma, pancreatic, breast, prostate colon, lung,~~may control the devastating effects of liver fibrosis associated with nonalcoholic steatohepatitis (NASH). This trial is designed to be a 60-patient, multi-center, randomized, double-blind, placebo-controlled Phase 2 clinical study of the safety and ~~stomach cancers. An ongoing~~

~~pre-clinical~~

~~study conducted by the Company reported~~efficacy of leronlimab in ~~May 2019 that leronlimab reduces by more than 98% human breast cancer metastasis~~adult patients with NASH. The first patient was enrolled in ~~a murine xenograft model. Based upon these strong results, we filed for Orphan Drug Designation for leronlimab for use in triple-negative breast cancer. In addition,~~

~~pre-clinical~~

~~results in a colorectal cancer study are likewise encouraging.~~

December 2020.

Phase 2 Trial for Metastatic Colorectal Cancer

~~The~~

In early September 2019, the FDA ~~recently~~ granted clearance to proceed with Phase 2 studies of leronlimab and regorafenib as a combination therapy for metastatic colorectal ~~cancer in early September 2019.~~cancer. This Phase 2 study will enroll 30 patients and is designed to test the hypothesis that the combination of leronlimab, administered as a subcutaneous injection, and regorafenib, administered orally, will increase progression-free survival in patients with CCR5-positive metastatic colorectal cancer. We have not initiated this trial ~~due~~ because metastatic colorectal cancer patients can also enroll in the Phase 2 basket trial.

~~Phase 2 Trial~~

Pre-clinical Studies for ~~Graft-versus-Host Disease~~

~~This Phase 2 multi-center~~
~~100-day~~
Multiple Cancer Indications

An ongoing pre-clinical study ~~with 60 patients is designed to evaluate~~conducted by the ~~feasibility of the use of leronlimab as an~~

~~add-on~~

therapy to standard GvHD prophylaxis treatment for prevention of acute GvHD in adult patients with AML or MDS undergoing allogeneic hematopoietic stem cell transplantation (“HST”). Enrollment of the first patient was announcedCompany reported in May ~~of 2017. On October 5, 2017, we announced~~2019 that ~~the FDA had~~leronlimab reduces by more than 98% human breast cancer metastasis in a murine xenograft model. We were granted ~~orphan drug~~Fast Track designation ~~to leronlimab (PRO 140) for the prevention of GvHD. In March 2018, we announced that the Independent Data Monitoring Committee (“IDMC”)~~ for leronlimab ~~(PRO 140) Phase 2 trial~~for use in ~~GvHD had completed~~mTNBC. In addition, pre-clinical results in a planned interim analysis of trial data on the first 10 patients enrolled. Following this review of data from the first 10 patients in the Phase 2 trial, we filed amendments to the protocol with the FDA. The amendments included switching the pretreatment conditioning regimen from aggressive myeloablative (“MA”) conditioning to a reduced intensity conditioning (“RIC”), and switching from a blinded

~~one-for-one~~

randomized placebo-controlled design to an open-label design under which all enrollees receive leronlimab. The amendments also provide for a 100% increase in the dose of leronlimab, to 700 mg, to more closely mimic

~~pre-clinical~~

dosing. The next review of data by the IDMC will occur following enrollment of 10 patients under the amended protocol after each patient has been dosed for 30 days. Due to the necessary prioritization of limited capital, enrollment under the amended protocol has been temporarily delayed.

~~Phase 2 Trial and IND for NASH~~

The FDA recently granted clearance to CytoDyn to proceed with Phase 2 studies to test whether leronlimab may control the devastating effects of liver fibrosis associated with Nonalcoholic steatohepatitis (“NASH”). This trial is designed to be a

~~60-patient,~~

~~multi-center, randomized, double blind, placebo-controlled Phase 2~~colorectal cancer study ~~of the safety and efficacy of leronlimab in adult patients with NASH. The first patient is expected to be treated in the fourth quarter of 2020.~~

~~Scientific Advisory Board~~

On September 1, 2020, we announced the formation of a scientific advisory board, formed to advise the Company on the development of leronlimab for multiple therapeutic indications. The initial members of the scientific advisory board including leading HIV, NASH, Oncology, and Rheumatological clinical experts and researchers, including Gero Hütter, M.D., Ph.D., German hematologist, best known for the bone marrow transplant resulting in the cure of the first HIV patient; Hope S. Rugo, M.D., Professor, Department of Medicine (Hematology/Oncology) and Director of the Breast Oncology Clinical Trials Education Program at University of California San Francisco; Richard T. Maziarz, M.D., Professor, Medical Director of the Adult Blood and Marrow Stem Cell Transplant and Cellular Therapy Program Knight Cancer Institute at Oregon Health & Science University (OHSU); Jonah B. Sacha, Ph.D., Professor, VGTI-Vaccine and Gene Therapy Institute at OHSU; Mazen Noureddin, M.D., a hepatologist and Director, Cedars-Sinai Liver Transplant Program in Los Angeles; Norman B. Gaylis, M.D., nationally and internationally recognized specialist in rheumatology and autoimmune diseases; Eric D. Mininberg, M.D., Oncology Specialist, Piedmont Cancer Institute, a member of the MD Anderson Cancer Network; and Lishomwa Ndhlovu, M.D., Ph.D., Assistant Professor, Immunology, Department of Medicine, Division of Infectious Disease at Weill Cornell Medicine in New York.

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are likewise encouraging.

We will require a significant amount of additional capital to complete the foregoing clinical trials for HIV and complete our BLA submission, as well as to advance our trials in the oncology and immunology space, including but not limited to ~~triple-negative breast cancer,~~mTNBC, certain other cancer indications, NASH and ~~GvHD.~~COVID-19 Long-Haulers. See “Liquidity and Capital Resources” below.

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Results of Operations

Results of Operations for the three and nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020

The following table sets forth our consolidated operating results for the three and ~~2019 are as follows:~~

nine months ended February 28, 2021 compared to the three and nine months ended February 29, 2020, respectively (in thousands):


	Three Months Ended				Change				Nine Months Ended				Change
	February 28,		February 29,						February 28,		February 29,
	2021		2020		$		%		2021		2020		$		%
Operating expenses:
General and administrative	$	7,902	$	6,465	$	1,437	22	%	$	25,328	$	12,605	$	12,723	101	%
Research and development		12,323		15,109		(2,786)	(18)	%		44,061		32,691		11,370	35	%
Amortization and depreciation		511		501		10	2	%		1,522		1,532		(10)	(1)	%
Intangible asset impairment charge		10,049		—		10,049	1	%		10,049		—		10,049	100	%
Total operating expenses		30,785		22,075		8,710	39	%		80,960		46,828		34,132	73	%
Operating loss		(30,785)		(22,075)		(8,710)	39	%		(80,960)		(46,828)		(34,132)	(73)	%
Other income		—		500		(500)	(100)	%		—		500		(500)	(100)	%
Interest income		1		3		(2)	(67)	%		2		5		(3)	-60	%
Change in fair value of derivative liabilities		—		(2,934)		2,934	100	%		—		(2,105)		2,105	100	%
Loss on extinguishment of convertible notes		(7,625)		—		(7,625)	(100)	%		(11,794)		—		(11,794)	-100	%
Interest expense:
Finance charges		(2)		(61)		59	97	%		(140)		(1,619)		1,479	91	%
Amortization of discount on convertible notes		(157)		—		(157)	(100)	%		(2,739)		(1,470)		(1,269)	(86)	%
Amortization of debt issuance costs		(21)		—		(21)	(100)	%		(40)		(404)		364	90	%
Inducement interest expense		(4,139)		(5,163)		1,024	20	%		(11,242)		(7,876)		(3,366)	(43)	%
Interest on convertible notes payable		(1,257)		(6,038)		4,781	79	%		(2,870)		(6,995)		4,125	59	%
Total interest expense		(5,576)		(11,262)		5,686	50	%		(17,031)		(18,364)		1,333	7	%
Loss before income taxes		(43,985)		(35,768)		(8,217)	(23)	%		(109,783)		(66,792)		(42,991)	(64)	%
Income tax benefit		—		—		—	—			—		—		—	—
Net loss	$	(43,985)	$	(35,768)	$	(8,217)	(23)	%	$	(109,783)	$	(66,792)	$	(42,991)	(64)	%
Basic and diluted loss per share	$	(0.08)	$	(0.08)	$	—	3	%	$	(0.18)	$	(0.17)	$	(0.01)	(7)	%
Basic and diluted weighted average common shares outstanding		577,854		432,112		145,742	34	%		595,226		396,641		198,585	50	%

Revenues

For the three and nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ we had no activities that produced revenues from operations.

Net loss

For the three months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ we had a net loss of approximately ~~$30.8~~$44.0 million and ~~$16.2~~$35.8 million, respectively. The increase in net loss of approximately ~~$14.6~~$8.2 million, or 23%, was due to the intangible asset impairment charge offset by lower interest expenses, a decrease in loss on change of fair value of derivative liabilities and lower Research and Development (“R&D”) expenses.

For the nine months ended February 28, 2021 and February��29, 2020, we had incurred a net loss of approximately $109.8 million and $66.8 million, respectively. The increase in net loss of approximately $43.0 million, or 64%, was due largely to the higher ~~general~~intangible asset impairment charge, higher General and ~~administrative~~Administrative (“G&A”) expenses, higher ~~research and development (“~~R~~&D”)~~&D expenses, and higher ~~interest expense.~~non-cash debt extinguishment losses.

Loss per share

For the three months ended February 28, 2021 and February 29, 2020, we had loss per share of $0.08. The loss per share remained flat as compared to a year ago due to a significant increase in the number of weighted average common shares outstanding, offset by the increase in net loss of approximately $8.2 million over the comparable period in 2020.

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The increase in common stock was due to common stock issuances associated with the exercise of warrants and stock options, settlement of convertible notes with shares, and a private placement of equity.

For the nine months ended February 28, 2021 and February 29, 2020, we had loss per share of $0.18 and $0.17. The increase in loss per share of ~~$(0.06) as~~$0.01 compared to ~~$(0.04)~~ a year ago ~~was~~is due to ~~a higher~~an increase in net loss of ~~$14.6~~approximately $43.0 million, ~~over the comparable period last year~~ partially offset by a significant increase in the number of weighted average common shares ~~outstanding.~~

outstanding over the comparable period in 2020. The increase in common stock was due to common stock issuances associated with the exercise of warrants and stock options, settlement of convertible notes with shares, and a private placement of equity.

Operating expenses

For the three months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and 2019,~~ operating expenses totaled approximately ~~$25.6~~$30.8 million and ~~$12.6~~$22.1 million, respectively, consisting of G&A expenses, R&D expenses, ~~and~~ amortization and ~~depreciation.~~depreciation, and an intangible asset impairment charge. The increase in operating expenses of approximately ~~$13.0~~$8.7 million, or ~~102%~~39%, from the 2020 period was attributable to ~~increased~~the increase in the intangible asset impairment charge of approximately $10.0 million, increase in G&A expenses of approximately ~~$6.9~~$1.4 million, ~~and increased~~offset in part by a decrease in R&D expenses of approximately ~~$6.1~~$2.8 million.

~~G&A~~

For the nine months ended February 28, 2021 and February 29, 2020, operating expenses totaled approximately ~~$9.9~~$81.0 million ~~for the three months ended August 31, 2020,~~ and ~~were comprised~~$46.8 million, respectively, consisting of ~~salaries~~G&A expenses, R&D expenses, amortization and ~~benefits,~~

~~non-cash~~

~~stock-based compensation expense, professional fees, insurance~~depreciation, and ~~various other expenses.~~an intangible asset impairment charge. The increase in ~~general and administrative~~operating expenses of approximately ~~$6.9~~$34.1 million, or 224%, for the three months ended August 31, 2020 was due to higher salaries and benefits attributable to increased compensation and additional number of employees, increased stock-based compensation, increased professional service fees, coupled with increases in other corporate and administrative expenses.

~~R&D expenses, which totaled approximately $15.2 million for the three months ended August 31, 2020, increased approximately $6.1 million, or 68%~~73%, over the comparable ~~2019 quarter due to an increase of $3.4 million in manufacturing activity related~~2020 nine-month period was attributable to the ~~BLA, an~~ increase in the intangible asset impairment charge of ~~$1.8~~approximately $10.0 million, the increase in ~~clinical trial costs related to~~

~~COVID-19,~~

G&A expenses of approximately $12.7 million, and an increase ~~of $0.9 million related to~~

~~non-clinical~~

studies. For the quarter ended August 31, 2020, R&D expenditures continue to be primarily devoted to: (1) increased CMC (chemistry, manufacturing and controls) activities related to clinical and commercial inventories, (2) three HIV extension studies, which continue to provide leronlimab to patients who have successfully completed a trial,

~~(3) COVID-19~~

~~clinical trials and (4) increased clinical trials for oncology and immunology indications.~~

~~We expect future~~in R&D expenses to be dependent on the timing of FDA approval of our BLA filing, the timing of FDA clearance of our pivotal trial protocol for leronlimab as a monotherapy for HIV patients, the clinical and regulatory progression of our

~~COVID-19,~~

~~oncology and immunology trials, along with the outcome of the~~

~~pre-clinical~~

~~studies for several other cancer indications. R&D expenses are also expected to increase due to CMC activities in preparation for approval and commercialization of leronlimab.~~

Amortization and depreciation expenses totaled approximately $0.5 million, which was flat when compared to the comparable 2019 period. This expense is primarily attributable to the amortization of intangible assets recognized with the acquisition of ProstaGene, LLC.

~~For the three months ended August 31, 2020, no unrealized~~

~~non-cash~~

~~benefit from the change in fair value of derivative liabilities was recognized, as compared to a~~

~~non-cash~~

~~charge~~ of approximately $0.6 in the comparable 2019 period, related to certain warrants which originated in September 2016 and to two convertible note instruments originated in June 2018 and January 2019 containing contingent cash settlement provisions that gave rise to a derivative liability. For each reporting period, we determine the fair value of the derivative liability and record a corresponding

~~non-cash~~

~~benefit or~~

~~non-cash~~

~~charge, as a consequence of a decrease or increase, respectively, in the calculated derivative liability.~~

~~Interest expense for the three months ended August 31, 2020 totaled approximately $5.3~~$11.4 million. The increase of approximately $1.1 million over the comparable quarter in 2019 was driven primarily by an increase in non-cash inducement interest expense related to a private warrant exchange of approximately $0.9 million, an increase in non-cash amortization of discount on convertible notes of approximately $0.3 million, an increase in interest on convertible notes payable of $0.2 million and a decrease in debt issuance costs of $0.3 million.

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The future trends in expenses will be driven, in large part, by the future outcomes of

~~pre-clinical~~

~~studies and~~ clinical trials and their related effect on research and development expenses, ~~and~~ general and administrative expenses, and the manufacturing of new commercial leronlimab. We require a significant amount of additional capital and our ability to continue to fund operations will continue to depend on our ability to raise such capital. See in particular, “Capital Requirements” and “Going Concern” below and Item 1A. Risk Factors in our Annual Report on

Form 10-K for

the year ended May 31, 2020.

General and administrative expenses

G&A expenses totaled approximately $7.9 million and $6.5 million for the three months ended February 28, 2021 and February 29, 2020, respectively, and were comprised of salaries and benefits, non-cash stock-based compensation expense, professional fees, insurance, and various other expenses. The increase in G&A expenses of approximately $1.4 million, or 22%, for the three months ended February 28, 2021 over the comparable period a year ago was due to higher salaries and benefits of approximately $1.0 million attributable to increased compensation and an increase in the number of employees, increased professional service fees of $1.7 million, and increased insurance expense of $0.2 million, offset by decreased non-cash stock-based compensation expense of approximately $1.4 million and decreases in other corporate and administrative expenses of $0.1 million.

G&A expenses totaled approximately $25.3 million and $12.6 million for the nine months ended February 28, 2021 and February 29, 2020, respectively, and were comprised of salaries and benefits, non-cash stock-based compensation expense, professional fees, insurance, and various other expenses. The increase in G&A expenses of approximately $12.7 million, or 101%, for the nine months ended February 28, 2021 over the same period last year was due to increased non-cash stock-based compensation expense of approximately $4.7 million, higher salaries and benefits of approximately $4.4 million attributable to increased compensation and an increase in the number of employees, increased professional service fees of $2.6 million, increased insurance expense of approximately $0.6 million, coupled with increases in other corporate and administrative expenses of approximately $0.4 million.

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Research and development expenses

R&D expenses totaled approximately $12.3 million and $15.1 million for the three months ended February 28, 2021 and February 29, 2020, respectively. The decrease of approximately $2.8 million, or 18%, over the comparable 2020 period was due to a decrease of $6.7 million in manufacturing activity related to the commercialization of leronlimab, a decrease of $2.0 million in extension studies related to HIV, offset by an increase of $5.3 million in clinical trial costs related to COVID-19, and an increase of $0.6 million in clinical trial costs related to oncology and immunology indications. For the quarter ended February 28, 2021, R&D expenditures continue to be primarily devoted to: (1) increased CMC (chemistry, manufacturing, and controls) activities related to clinical and commercialization inventories, (2) three HIV extension studies, which continue to provide leronlimab to patients who have successfully completed a trial, (3) COVID-19 clinical trials and (4) increased clinical trials for oncology and immunology indications.

R&D expenses totaled approximately $44.1 million and $32.7 million for the nine months ended February 28, 2021 and February 29, 2020, respectively. The increase of approximately $11.4 million, or 35%, over the comparable 2020 period was due to an increase of $13.5 million in clinical trial costs related to COVID-19, an increase of $4.4 million in manufacturing activity related to the commercialization of leronlimab, an increase of $2.6 million in clinical trial costs related to oncology and immunology indications, and an increase of $0.2 million related to non-clinical studies, offset by a decrease of $9.3 million in extension studies related to HIV. For the nine months ended February 28, 2021, R&D expenditures continue to be primarily devoted to: (1) increased CMC (chemistry, manufacturing, and controls) activities related to clinical and commercialization inventories, (2) three HIV extension studies, which continue to provide leronlimab to patients who have successfully completed a trial, (3) COVID-19 clinical trials and (4) increased clinical trials for oncology and immunology indications.

We expect future R&D expenses to be dependent on the timing of our BLA filing and FDA approval, the timing of FDA clearance of our pivotal trial protocol for leronlimab as a monotherapy for HIV patients, the clinical and regulatory progression related to COVID-19, oncology and immunology trials, along with the outcome of the studies for several other cancer indications. R&D expenses are also expected to increase due to CMC activities in preparation for approval and commercialization of leronlimab.

Amortization and depreciation expenses

Amortization and depreciation expense for the three and nine months ended February 28, 2021 was approximately $0.5 million and $1.5 million, respectively, and was relatively flat compared to the respective 2020 comparable periods. This expense is primarily attributable to the amortization of intangible assets recognized with the acquisition of assets of ProstaGene, LLC in November 2018 and patents acquired in 2012 from Progenics.

Intangible asset impairment

For the three and nine months ended February 28, 2021, the Company recorded an intangible asset impairment charge of approximately $10.0 million, which represents an increase of approximately $10.0 million, or 100%, when compared to the same periods in 2020. This charge is attributable to the full impairment of the net carrying value of approximately $10.0 million of the proprietary algorithm the Company acquired in connection with the acquisition of assets of ProstaGene, LLC in November 2018.

Other income

For the three and nine months ended February 28, 2021, other income decreased $0.5 million, or 100%, when compared to the same periods in 2020. The other income for the three and nine months ended February 29, 2020, of $0.5 resulted from the execution of an agreement in which the Company granted an exclusive royalty-bearing license to a third-party to commercialize, use, and sell leronlimab for HIV in the U.S. upon BLA approval.

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Change in fair value of derivative liabilities

For the three and nine months ended February 28, 2021, we realized a decrease in change in fair value of derivative liabilities of approximately $2.9 million and $2.1 million, or 100%, respectively, when compared to the same periods in 2020, due to the originating instruments were exercised and settled during the fiscal year ended May 31, 2020. The originating underlying instruments were certain warrants that originated in September 2016 and two convertible note instruments originated in June 2018 and January 2019 containing contingent cash settlement provisions, which gave rise to a derivative liability. For each reporting period, the Company determined the fair value of the derivative liability and recorded a corresponding non-cash benefit or non-cash charge, due to a decrease or increase, respectively, in the calculated derivative liability.

Loss on extinguishment of convertible notes

For the three and nine months ended February 28, 2021, we recognized a non-cash loss on the extinguishment of convertible notes of approximately $7.6 million and $11.8 million, respectively. We did not recognize any losses on the extinguishment of debt during the same comparable periods in 2020. The losses resulted from separately and independently negotiated note payment settlements in which certain debt was agreed to be settled in exchange for shares issued at a price less than the closing price for the date of the respective transactions. The originating underlying convertible notes were entered into on March 31, 2020, July 29, 2020, and November 10, 2020.

Interest expense

Interest expense for the three months ended February 28, 2021 and February 29, 2020 totaled approximately $5.6 million and $11.3 million, respectively. The decrease of approximately $5.7 million, or 50%, from the comparable period in 2020 was driven primarily by a decrease in interest on convertible notes payable of approximately $4.8 million, a decrease in non-cash inducement interest expense related to private warrant exchanges of approximately $1.0 million, and a decrease of approximately $0.1 million related to financing of charges by trade vendors, offset by an increase in non-cash amortization of discount on convertible notes of approximately $0.2 million.

Interest expense for the nine months ended February 28, 2021 totaled approximately $17.0 million and $18.4 million, respectively. The increase of approximately $1.3 million, or 7%, from the comparable period in 2020 was driven primarily by an increase in non-cash inducement interest expense related to private warrant exchanges of approximately $3.4 million, an increase in non-cash amortization of discount on convertible notes of approximately $1.3 million, offset by a decrease in interest on convertible notes payable of approximately $4.1 million, a decrease of approximately $1.5 million related to financing charges by trade vendors and a decrease in amortization of debt issuance costs of approximately $0.4 million.

Liquidity and Capital Resources

Cash

The Company’s cash position of approximately ~~$18.2~~$14.3 million at ~~August~~February 28, 2021 remained flat when compared to the balance of approximately $14.3 million at May 31, ~~2020~~2020.

Inventory

The Company’s inventory position of approximately $93.5 million at February 28, 2021 increased approximately ~~$3.9~~$74.4 million as compared to a balance of approximately ~~$14.3~~$19.1 million at May 31, ~~2020. The~~2020 as the Company increased inventory in preparation for commercialization. This inventory increase is related to raw materials purchased for commercial production and work-in-progress inventory related to the substantially completed commercial production of pre-launch inventories of leronlimab, in anticipation of regulatory approval of the product as a combination therapy for HIV patients in the United States. During the quarter ended February 28, 2021, the Company was notified by a third-party contract manufacturing partner that due to an operational error committed by the contract manufacturer one of the batches of a multiple-batch manufacturing campaign failed to meet quality standards, and thus would not be saleable

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upon regulatory approval. In accordance with the agreement, the contract manufacturer assumed liability for the failure, all costs to manufacture the batch, and committed to remanufacture the batch at a future date. As a result, the Company reduced work-in-progress inventory and the related amounts due to the contract manufacturer by $6.1 million. No other inventory was affected by this manufacturing issue, and all other inventory has successfully passed quality standards. As of February 28, 2021 the raw materials balance was $29.0 million and the total work-in-progress was $64.5 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 $34.9 million and $29.6 million, respectively, of work-in-progress inventory. See “Capital Requirements—Contract Manufacturing” below for a further discussion of commitments with third-party contract manufacturing partners.

Cash flows

For the nine months ended February 28, 2021, there was no net change in cash, which was attributable to net cash provided by financing activities of approximately ~~$44.9~~$84.9 million exceeding net cash used in operating activities of approximately ~~$40.9~~$84.8 million and cash used in investing activities of approximately $0.1 million. ~~Despite the Company’s small negative working capital position, vendor relations remain accommodative and we do not currently anticipate delays~~


	Nine Months Ended
	February 28,		February 29,		Change
(in thousands)	2021		2020		$
Net cash (used in) provided by:
Net cash used in operating activities	$	(84,767)	$	(39,492)	$	(45,275)
Net cash used in investing activities	$	(100)	$	(38)	$	(62)
Net cash provided by financing activities	$	84,866	$	43,121	$	41,745

Cash used in ~~our business initiatives due to liquidity constraints.~~

~~Cash Flows~~

operating activities

Net cash used in operating activities totaled approximately ~~$40.9~~$84.8 million during the ~~three~~nine months ended ~~August 31, 2020, which reflects~~February 28, 2021 representing an increase of approximately ~~$25.8~~$45.3 million ~~of net cash used in operating activities~~ over the ~~three~~nine months ended ~~August 31, 2019.~~February 29, 2020. The increase in net cash used in operating activities was due to ~~$39.3~~an approximate $58.6 million increase of cash used to procure ~~inventory in the three months ended August 31, 2020,~~raw materials and manufacture leronlimab prelaunch inventories, an approximate increase in net loss of ~~$14.6~~approximately $43.0 million, offset in part by ~~an increase in accrued liabilities~~the intangible asset impairment charge of ~~$20.1~~approximately $10.0 million, an increase in ~~noncash stock-based compensation~~accounts payables and accrued liabilities of ~~$3.1~~approximately $33.9 million, ~~and~~ an increase in non-cash ~~inducement interest expense~~loss on extinguishment of ~~$0.9 million.~~

debt of approximately $11.8 million, when compared to the changes in the comparable period in 2020.

Cash used in investing activities

Net cash used in investing activities was approximately $0.1 million during the ~~three~~nine months ended ~~August 31, 2020,~~February 28, 2021, which reflects an ~~immaterial~~insignificant increase over a year ago attributable to the purchase of office equipment and furniture.

Cash provided by financing activities

Net cash provided by financing activities oftotaled approximately ~~$44.9~~$84.9 million during the ~~three~~nine months ended ~~August 31, 2020, increased~~February 28, 2021, an increase of approximately ~~$31.4~~$41.7 million over net cash provided by financing activities during the ~~three~~nine months ended ~~August 31, 2019.~~February 29, 2020. The increase in net cash provided from financing activities was primarily attributable to an increase in net proceeds of ~~$25~~approximately $51.2 million from convertible note related activity, an increase in net proceeds of warrant and option exercise related activity of approximately $14.7 million, offset by a decrease in net proceeds from the ~~issuance~~sale of ~~a convertible promissory note~~common and ~~increased warrant exercises~~preferred stock of approximately $24.2 million when compared to the same period in the prior year.

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Convertible debt

A summary of our various 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 Quarterly Report on Form 10-Q.

November 2020 Note

In November 2020, we issued a convertible note with a principal amount of $28.5 million resulting in net cash proceeds of $25.0, 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 November 2022. The November 2020 Note requires monthly debt reduction payments of $7.5 million for the six months beginning in November 2020 which can also be satisfied by payments on the July 2020 Note and/or March 2020 Note, the latter of which has been paid in full, discussed below. After six months past the issuance date, the noteholder can request monthly redemptions of up to $3.5 million. The outstanding balance of the November 2020 Note, including accrued interest, was approximately $21.7 million as of February 28, 2021.

July 2020 Note

In July 2020, we issued a convertible note with a principal amount of $28.5 million resulting in net cash proceeds of $25.0, 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 July 2022. Beginning six months after the issuance date, the noteholder can request monthly redemptions up to $3.5 million. The outstanding balance of the July 2020 Note, including accrued interest, was approximately $22.7 million as of February 28, 2021.

March 2020 Note

During the quarter ended November 30, 2020, this note was fully retired as a result of the noteholder exercising the monthly redemption provision and the Company satisfying the monthly Debt Reduction Amount required under the November 2020 Note by making payments on the March 2020 Note. There was no balance outstanding under this note as of February 28, 2021.

Common stock

We have 800.0 million authorized shares of common stock. As of February 28, 2021, we had approximately 609.0 million shares of common stock outstanding, approximately 45.3 million shares of common stock issuable upon the exercise of warrants, approximately 32.2 shares of common stock issuable upon conversion of convertible preferred stock and undeclared dividends, approximately 23.5 million shares of common stock issuable upon the exercise of outstanding stock options or the vesting of outstanding restricted stock, approximately 15.4 million shares of common stock reserved for future issuance under our equity compensation plan, and approximately 12.0 million shares of common stock reserved and issuable upon conversion of outstanding convertible notes. As a result, as of February 28, 2021, we had approximately 62.6 million authorized shares of common stock available for issuance.

Capital Requirements

We have not generated revenue to date, and we do not expect to generate product revenue until ~~FDA~~we receive regulatory approval for commercialization of leronlimab as a combination therapy for HIV, ~~unless~~or upon receipt of various approvals for

~~COVID-19~~

~~are realized sooner.~~ use of leronlimab as a therapeutic for COVID-19. We expect to continue to incur operating losses as expenses continue to increase as we proceed with preparation for commercialization of leronlimab and continue our

~~pre-clinical~~

~~and~~ clinical trial programs. The future trends of all expenses will be driven, in large part, by the timing of the anticipated approval of our BLA or other regulatory approvals, the magnitude of our commercialization readiness, future clinical trial strategy and timing of the commencement of our future revenue stream.

To date, we have not seen any impact due to

COVID-19

on our ability to access capital. However, the spread of

COVID-19

has led to disruption and volatility in the global capital markets, which increases the cost of, and adversely

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affects access to, capital and increases economic uncertainty, and may also affect our ability to access capital and obtain financing, which could in the future negatively affect our liquidity and ability to continue as a going concern.

Contract Manufacturing

~~During the fourth quarter of fiscal~~

In April 2019, the Company entered into ~~a Master Services Agreement and Product Specific Agreement (collectively, the “Samsung Agreement”)~~an agreement with Samsung, ~~BioLogics Co., Ltd. (“Samsung”),~~ pursuant to which Samsung will perform technology transfer, process validation, manufacturing and supply services for the commercial supply of ~~leronlimab. Through the end of the first quarter ended August 31, 2020, the Company delivered to Samsung purchase orders totaling $45 million related to the manufacture of~~ leronlimab ~~and payments totaling $34 million with additional payments scheduled to be made throughout~~effective through calendar ~~2020.~~

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Under the Samsung Agreement, a purchase order is binding and the Company is obligated to pay the full amount of the purchase order. Under the terms of the Samsung Agreement, the Company is obligated to make specified minimum purchases of leronlimab from Samsung pursuant to forecasted requirements, which the Company is required to provide to Samsung. The first forecast schedules 11 manufacturing batches which began during the three months ended August 31, 2020, setting forth the total quantity of commercial grade leronlimab that the Company expects to require in the following years. The Company estimates that initial

~~ramp-up~~

costs to manufacture commercial grade leronlimab at scale could total approximately $112 million, with approximately $65 million payable over the course of calendar 2020, of which $37 million has been paid as of the date of this filing, and approximately $24 million payable during calendar 2021, and approximately $23 million payable in January 2022. Thereafter, the Company will pay Samsung per 15,000L batch according to the pricing terms specified in the Samsung Agreement.

~~The Samsung Agreement has an initial term ending in December 2027 and will be automatically extended for additional two~~ year periods unless either party gives notice of termination at least six months prior to the then current term. Either party may terminate the Samsung Agreement in the event of the other party’s insolvency or uncured material breach, and the Company may terminate the agreement in the event of a voluntary or involuntary complete market withdrawal of leronlimab from commercial markets, with one and half year’s prior notice. Neither party may assign the agreement without the consent of the other, except in the event of a sale of all or substantially all of the assets of a party to which the agreement relates.

~~On May 22,~~2027. In 2020, the Company entered into ~~a Drug Product Manufacturing Services Agreement with Samsung (the “Samsung Vial Filling Agreement”),~~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. ~~Under the terms of the~~ Samsung ~~Vial Filling Agreement, the Company~~ is obligated to ~~have~~procure necessary raw materials for the Company and manufacture a specified minimum ~~quantities~~number of ~~vials filed with leronlimab by Samsung pursuant to forecasted requirements which~~batches, and the Company is required to provide ~~to Samsung. The Company has not provided~~ a rolling three-year forecast of future estimated manufacturing requirements to Samsung ~~however, based on~~

~~set-up~~

~~related costs and manufacturing~~which are binding. The future commitments pursuant to ~~the Samsung Agreement, the Company expects to deliver commitments of approximately $2.6 million in the form of purchase orders related to the Samsung Vial Filling Agreement through January 2021.~~

~~In addition to the Samsung Agreement, the Company has also previously entered into an arrangement~~these agreements are estimated as follows (in thousands):


Fiscal Year	Amount
2021 (3 months remaining)	$	9,062
2022		7,288
2023		137,112
2024		51,211
2025		—
Thereafter		—
Total	$	204,673

Management maintains relationships with another third-party contract manufacturer to provide process transfer, validation and manufacturing services for leronlimab. In the event that the Company terminates the agreement with this manufacturer, the Company may incur certain financial penalties which would become payable to the manufacturer. Conditioned upon the timing of termination, the financial penalties may total approximately $2.1 million. These amount and timing of the financial commitments under an agreement with our secondary contract manufacturer will depend on the timing of the anticipated approval of our BLA and the initial product demand forecast, which is critical to align the timing of capital resources in order to ensure availability of sufficient quantities of commercial product.

~~Management believes~~ two contract manufacturers which it believes best ~~serve~~serves our strategic objectives for the anticipated BLA filing and, if approved, the long-term commercial manufacturing capabilities for leronlimab. Management will continue to assess manufacturing capacity requirements as new market information becomes available regarding anticipated demand, subject to FDA approval.

Legal Proceedings

From time to time the Company is a party to various legal proceedings. As of the quarter ended February 28, 2021, we were not party to any material pending legal proceedings, except those described in Note 10 to the Consolidated Financial Statements. 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 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 had not been made, could be material to the Company’s consolidated financial statements. The Company did not record any material accruals for the matters described below in our Consolidated Balance Sheets as of February 28, 2021 and May 31, 2020. See Note 10 to the Consolidated Financial Statements for further discussion of legal proceedings.

Distribution

In December 2019, the Company entered into a supply agreement with Vyera Pharmaceuticals for the sale of leronlimab for HIV in the United States, see ”Licensing” below for further discussion of the agreement. On July 2, 2020, the Company entered into an exclusive ~~Distribution~~distribution and ~~Supply Agreement (the “Distribution Agreement”)~~supply agreement with American Regent ~~Inc. (“American Regent”)~~ with respect to the distribution of the Company’s leronlimab ~~(PRO140)~~ drug for the treatment of

COVID-19

in the United States. ~~Under the Distribution Agreement,~~On April 6, 2021, the Company ~~appointed American Regent as~~entered into an exclusive supply and distribution agreement with, Biomm S.A., a Brazilian pharmaceutical company, granting the ~~sole~~exclusive right to distribute and ~~exclusive authorized distributor~~sell leronlimab in ~~the United States of any subcutaneous injectable biopharmaceutical drug product labeled for treating~~

~~COVID-19~~

that contains CytoDyn’s leronlimab as the only active pharmaceutical ingredient (the “Product”). The grant of exclusive distribution rights to American Regent does not extend to any intravenous or infusible biopharmaceutical drug product, or any other product of CytoDyn containing leronlimab that is not labeled for treating

~~COVID-19.~~

Under the Distribution Agreement, American Regent shall, at its cost, use commercially reasonable efforts to market the Product in the United States, and the Company remains responsible, at its cost, to pursue, own and maintain the applicableBrazil upon Brazilian regulatory approvals necessary to market and manufacture the Product. The term of the Agreement extends for three years after the date of the first commercial sale of the Product, and will renew by mutual agreement of the parties for one additional

~~one-year~~

term, unless American Regent notifies the Company of its intention to have the Agreement terminate at the end of the initial term at least six (6) months prior to the end of the initial term. The Agreement also permits each party to terminated the agreement for certain events of default by the other party, as enumerated in teh Distribution Agreement, and the Company may terminate the Agreement at any time after the first Commercial Sale upon six (6) months advance written notice to American Regent, or upon ninety (90) days written notice to American Regent following American Regent’s change of control.approval.

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~~As described above, the Company is currently conducting a Phase 2b/3 clinical trial for 390~~

~~severe-to-critically~~

~~ill~~

~~COVID-19~~

~~patients. If results from this trial indicates statistically significant clinical outcomes for the~~

~~COVID-19~~

~~patients to sufficiently meet the primary and secondary endpoints for the trials, the Company expects to seek FDA approval.~~

Contract Research

Organization (CRO)

The Company has entered into project work orders for each of our clinical trials with our CRO and related laboratory vendors. Under the terms of these agreements, the Company has prepaid certain execution fees for direct services costs. In connection with our clinical trials, the Company has entered into separate project work orders for each trial with our CRO. In the event that the Company terminates any trial, certain financial penalties may be incurred which would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range up to ~~$0.7~~approximate $3.4 million. In the remote circumstance that all clinical trials are terminated, the collective financial penalties may range from an approximate low of ~~$1.9~~$2.0 million to an approximate high of $3.7 million.

Licensing

Under the Progenics Purchase Agreement, we are required to pay Progenics the following ongoing milestone payments and royalties: (i) $5.0 million at the time of the first U.S. new drug application approval by the FDA or other

non-U.S.

approval for the sale of leronlimab (PRO 140); and (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 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 a

country-by

country basis. In addition, 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, we are required to pay AbbVie Inc. additional milestone payments and royalties as follows: (i) $0.5 million upon filing a BLA with the FDA or

non-U.S.

equivalent regulatory body; (ii) $0.5 million upon FDA approval or approval by another

non-U.S.

equivalent regulatory body; and (iii) royalties of up to 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 previously reported, the Company received a Refusal to File letter from the FDA in July 2020. In response to this letter, the Company expects to resubmit the BLA in the middle of ~~the date of this filing, while we have completed and filed the first of three portions of our BLA, it remains uncertain as to when the remaining two portions will be filed. Further,~~calendar year 2021 or shortly thereafter. 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 the future milestone payments payable to Progenics and its

sub-licensors

are deemed contingent consideration and, therefore, are not currently accruable.

In December ~~17,~~ 2019, the Company entered into a Commercialization and License Agreement and a Supply Agreement with Vyera Pharmaceuticals, LLC. Pursuant to the License Agreement, 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.

Pursuant to the terms of the License Agreement, and subject to the conditions set forth therein, Vyera will incur the cost of, and be responsible for, among other things, commercializing the product in the territory and will use commercially reasonable efforts to commercialize the product in the field in the territory. Under the terms of the License Agreement, CytoDyn is permitted to license the product outside of the territory for uses in the field or outside the field or for uses inside the territory ~~for uses~~ outside of the field.

In consideration of the license and other rights granted by the Company, Vyera has agreed to pay the Company, within three business days of the effective date of the License Agreement, a $0.5 million license issue fee, with additional payments totaling up to approximately $87.0 million to be made upon the achievement of certain sales and regulatory milestones. Certain milestones are subject to reduction if not achieved within an agreed-upon timeframe. Vyera may also pay the Company additional potential milestone payments upon the regulatory approval of the Product for certain subsequent indications in the field. Whether a particular subsequent indication qualifies for an additional milestone payment shall be determined in good faith by the parties. In addition, during the Royalty Term (as defined below), Vyera is obligated to pay the Company a royalty equal to 50% of Vyera’s gross profit margin from product sales (defined in the License Agreement as “Net Sales”) in the territory. The royalty is subject to reduction during the Royalty Term after patent expiry and expiry of regulatory exclusivity. Following expiration of the Royalty Term, Vyera will continue to maintain

non-exclusive

rights to commercialize the ~~Product.~~product.

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Regulatory Matters

In July 2020, the Company received a Refusal to File letter from the FDA regarding its BLA submission ~~in April and May of 2020~~ for leronlimab as a combination therapy with HAART for highly treatment experienced HIV patients. The FDA informed the Company its 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 third-party laboratory’s receptor occupancy analysis was not properly performed, and would be required to be resubmitted, and the Company would need to correct certain administrative submission deficiencies. The FDA’s request does not require any additional clinical trials to be conducted, ~~rather that~~nor has the drug’s efficacy or safety been questioned. Subsequent to the Refusal to File letter, the Company ~~conduct specifically requested additional analysis of~~received further clarification on the ~~completed trials data.~~BLA’s deficiencies. The Company ~~requested~~has engaged a ~~Type A meeting~~leading a global healthcare diagnosis company, along with an expanded team of subject matter expert consultants, to ~~discuss~~conduct the FDA’s request for additional information. The FDA did not schedule a Type A meeting, but requested the Company submit all questions regarding the filing in writing. In September 2020, the Company submitted questions to the FDA, received written responses, and held a telephonic meeting with the FDA to obtain further clarity on what additional information was required with respect to the BLA filing. The Company is working to provide the information required by the FDAreceptor occupancy analysis necessary in order to resubmit the BLA, which it ~~anticipates will occur by~~currently expects to do in the ~~end~~first half of ~~the~~ calendar ~~year.~~

year 2021 or shortly thereafter.

Going Concern

As reported in the accompanying consolidated financial statements, for the ~~three~~nine months ended ~~August 31,~~February 28, 2021 and February 29, 2020, ~~and August 31, 2019, we~~the Company incurred net losses of approximately ~~$30.8~~$109.8 million and ~~$16.2~~$66.8 million, ~~respectively.~~respectively, and has an accumulated deficit of approximately of $466.0 million as of February 28, 2021. The Company has no activities that produced revenue in the periods presented and ~~have~~has sustained operating losses since inception.

The Company currently requires and will continue to require a significant amount of additional capital to fund operations and pay our accounts payables, and our ability to continue as a going concern is dependent upon ~~its~~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, it may need to scale back operations or slow CMO-related activities, which could materially delay commercialization initiatives, thereby deferring its ability to achieve profitability. The Company’s failure to raise additional capital could also affect its relationships with key vendors, disrupting its ability to timely execute ~~our~~its business plan. In extreme cases, itthe Company could be forced to file for bankruptcy protection, discontinue ~~our~~ operations or liquidate ~~our~~ assets.

Since inception, the Company has financed its activities principally from the sale of public and private 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 has approximately 7749.4 million shares of common stock authorized and remaining available for issuance under our certificate of incorporation, as ~~amended, and approximately $135 million available for future registered offerings of securities under our universal~~amended. The Company has filed a “universal shelf” registration statement on Form S-3 with the SEC to replace its previous shelf registration ~~statement~~originally filed with the SEC on

~~Form S-3,~~ February 23, 2018 and which

was ~~declared effective~~set to expire on March 7, ~~2018 (assuming~~2021, which includes a base prospectus that covers the ~~full exercise~~offering, issuance and sale of ~~outstanding~~such indeterminate number of shares of the registrant’s common stock, preferred stock, warrants, atoverallotment purchase rights, debt securities, rights and units, which together shall have an aggregate initial offering price not to exceed $200.0 million, and includes the ~~currently applicable exercise prices, that were~~registration of 13.6 million shares of common stock underlying previously issued ~~in registered transactions thereunder).~~

and unexercised warrants. The new registration statement is not yet effective.

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 preferred stock, convertible debt securities or other debt financing, these activities or other debt could contain covenants that would restrict its operations. On ~~March 31,~~July 29, 2020, November 10, 2020, and ~~July 29, 2020,~~April 2, 2021, the Company entered into long-term convertible notes, which are secured by all of its assets, except for its intellectual property and which also includes certain restrictive provisions, such as a limitation on 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 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 matters discussed under the heading “Risk Factors” in our annual report on Form

10-K

filed on August 14, ~~2020.~~2020 and under Item 1A. in Part II of this 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. We have incurred losses for all periods presented and have a substantial accumulated deficit. As of ~~August 31, 2020,~~February 28, 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 liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain a significant amount of additional operating capital, complete development of our product candidate, obtain ~~FDA~~regulatory approval, outsource manufacturing of our product, and ultimately to attain profitability. We intend to seek additional funding through equity or debt offerings, licensing agreements or strategic alliances to ~~implement~~advance our business plan. There are no assurances, however, that we will be successful in these endeavors.

Off-Balance

Sheet Arrangements

We do not have

any off-balance sheet

arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

~~Table~~

Critical Accounting Estimates

Our critical accounting estimates are those estimates which 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 ~~Contents~~our critical accounting policies is presented in Part II, Item 7, of our Annual Report on Form 10-K for the year ended May 31, 2020 and Note 2 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. There have been no material changes to our critical accounting policies during the three and nine months ended February 28, 2021.

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and judgements that affect reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses for the periods presented. Judgments must also be made about the disclosure of contingent liabilities. The Company’s estimates are based on historical experience and on various market and other relevant, appropriate assumptions. Actual results may differ from those estimates and under different assumptions or conditions.

Recent Accounting Pronouncements

On an ongoing basis, management reviews new accounting standards to determine the expected financial effect, if any, that the adoption of each such standard will have. For the recently issued accounting standards that management believes may have a material impact on our financial statements, see Note 2. Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q for additional information and Note 3. Recent Accounting Pronouncements of the Notes to the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2020 filed on August 14, 2020.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

~~Not applicable.~~

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, 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 our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~August 31, 2020~~February 28, 2021 (as defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act). Our management recognizes that 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 principal executive officer and principal financial officer have concluded, based upon the evaluation described above that, as of ~~August 31, 2020,~~February 28, 2021, our disclosure controls and procedures were effective at the reasonable-assurance level.

Changes in Internal Control Over Financial Reporting

During the quarter ended ~~August 31, 2020,~~February 28, 2021, there have been no changes in our internal control over financial reporting, as such term is defined in Rules

13a-15(f)

and

15(d)-15(f)

promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings.

For a description of ~~August 31, 2020, we were not a party~~any pending material legal proceedings, please see Note 10. Commitments and Contingencies of the Notes to ~~any material pending legal proceeds except as described below and as described~~Consolidated Financial Statements included in Part I, Item ~~3 of our~~

~~10-K~~

for the fiscal year ended May 31, 2020. From time to time, we may become involved in claims and suits that arise in the ordinary course of our business. Management currently believes that the resolution of any such claims against us, if any, will not have a material adverse effect on our business, financial condition or results of operations.

On June 29, 2020, the Company issued the note holder of our January 2019 note 4,000,000 shares of common stock with a settlement value of $22.5 million, in settlement of a claim filed by the note holder against the Company alleging that the note holder was owed additional shares upon conversion of the January 2019 Note.

On April 29, 2020, Torreya Capital LLC (“Torreya”) filed an arbitration claim against the Company demanding payment of a transaction fee in the amount of $600,000 plus attorney fees, for the Company’s alleged failure to pay a transaction fee to Torreya under the terms of the engagement letter with the Company. The Company denied Torreya’s right to a fee pursuant to the terms of the engagement. On September 17, 2020, Torreya amended its claim to add an additional transaction fee claim, increasing its demand to $1.74 million. The Company similarly denied Torreya’s contractual right to any fee. The parties filed dispositive motions in August and September, which the arbitrator denied on October 5, 2020. The Company continues to vigorously defend this action.

On July 26, 2019, our Board of Directors terminated the employment of Dr. Richard G. Pestell, our former Chief Medical Officer, for cause pursuant to the terms of his employment agreement. On August 22, 2019, we received notice that a lawsuit naming the Company and its Chief Executive Officer and the Chairman of the Board was filed by Dr. Pestell in the United States District Court for the District of Delaware, alleging breach of Dr. Pestell’s employment agreement, among other claims, and seeking damages in the amount of certain severance entitlements thereunder pertaining to

~~non-cause~~

termination, among other relief. The treatment of those entitlements and of certain previously granted unvested stock options and shares of restricted common stock, which were subject to a repurchase option, may be determined by the outcome1 of this litigation. On September 17, 2019, CytoDyn and the other defendants moved to dismiss the complaint. On September 27, 2019, Dr. Pestell amended his complaint. On October 10, 2019 the Company moved to dismiss certain wage and hour and defamation claims, and on June 12, 2020, the Court dismissed the wage and hour claims. Shortly thereafter, the Company filed an answer and counterclaims. On July 10, 2020, Dr. Pestell moved again to amend the dismissed wage claims, which the Company again moved to dismiss on July 24, 2020. The motion to dismiss the wage claims remains pending. The Company disputes all of Pestell’s claims and intends to vigorously defend the action.

Form 10-Q.

~~Table of Contents~~

Item 1A. Risk Factors.

We are subject to various risks, including those set forth below, and those risk factors identified in our Annual Report on Form

10-K

for the year ended May ~~30,~~31, 2020, filed with the SEC on August 14, 2020, 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 quarterly report.

Continued delays in regulatory approval for leronlimab as a combination therapy with ~~highly active antiretroviral therapy (HAART)~~HAART for HIV patients ~~will~~may have a material adverse effect on our business and financial condition.

In February 2018, we announced we had met the primary endpoint in our Phase 3 trial for leronlimab as a combination therapy with HAART for highly treatment experienced HIV patients and filed the

non-clinical

portion of our Biologics License Application (“BLA”) with the U.S. Food and Drug Administration (the “FDA”) on March 18, 2019. We subsequently filed ~~with the FDA~~ the clinical ~~along with the~~and Chemistry, Manufacturing, and Controls (“CMC”) portions of the BLA with the FDA in April 2020 and completed our submission with the FDA on May 11, 2020. In July 2020, we received a Refusal to File letter from the FDA regarding the BLA ~~filing, and requested a Type A meeting with the FDA to discuss the FDA’s request for additional information.~~filing. The FDA ~~did not schedule a Type A meeting, but requested the Company submit all questions regarding the filing in writing. In September 2020, we submitted our questions to the FDA, received~~has provided written responses to questions and held a telephonic meeting with the ~~FDA~~Company to ~~obtain~~discuss the filing and provided further clarity on ~~what~~the additional information ~~was~~ required ~~with respect to our~~for a successful BLA filing. ~~We understand that the FDA’s~~The FDA is not requiring additional trials but further analysis and results of completed ~~trials and results,~~trials. Specifically, the FDA has asked the Company to resubmit its receptor occupancy analysis to demonstrate why a higher dosage is more effective than the dose in the successful Phase 3 trial, which is currently contributing to the additional delay in the resubmission of our BLA. We have retained a leading global healthcare diagnostics company, along with an expanded team of subject matter expert consultants, to conduct the receptor occupancy analysis, and we are working ~~to provide the information required by the FDA in order~~diligently to resubmit our BLA byfor leronlimab as a combination therapy for highly treatment experienced HIV patients in the ~~end~~first half of ~~the~~ calendar ~~year.~~year 2021 or shortly thereafter. However, even upon submission of the additional information to the FDA, there can be no assurance as to if or when the FDA will declare the filing complete.

Failure to obtain regulatory approval for leronlimab for the foregoing or any other reasons will prevent us from commercializing such product candidate as a prescription product, could result in the write-down of a significant amount of prelaunch inventories held for sale, and our ability to generate revenue will be materially impaired.

Our debt service obligations and our need for additional funding to finance operations may cause additional dilution to our existing stockholders.

Since our inception, we have not achieved cash flows from revenues to cover basic operating costs. As a result, we have relied heavily on debt and equity financing. The terms of our recent convertible note financings require us to make debt repayments of $7.5 million per month to retire earlier incurred debt. As a result, we will be required to use a significant portion of our available cash to make these debt repayments, which will reduce the amount of capital available to finance our operations and other business activities. We have to date, and may continue to, negotiate with our noteholders to exchange all or part of our outstanding debt for shares of common stock, and through March 15, 2021 have issued an aggregate of approximately 11.9 million shares of our common stock in exchange for the retirement of outstanding convertible notes. If the Company enters into any future exchange offers they will likely be negotiated at a discount to the market price of our common stock and will cause additional dilution to our existing stockholders. If the convertible noteholders sell the common stock they receive in exchange for outstanding debt, this could result in a decline in our stock price. In addition, the exercise of our existing outstanding warrants and stock options, which are exercisable for or convertible into shares of our common stock, and which we have encouraged through private warrant

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exchange offers, would dilute our existing common stockholders. As a result of these or other factors, the issuance of additional equity or convertible debt securities could have an adverse effect on the market price of our common stock. For the foreseeable future, we will need to continue to rely upon debt and equity financing to maintain our operations.

Our business and operations continue to be affected by the ongoing COVID-19 pandemic.

Our operational and financial performance continues to be affected by the COVID-19 pandemic. We expect our clinical trial activity to continue to face challenges and delays in patient enrollment as a result of quarantines, site closures, travel limitations, and prioritization of hospital resources toward the COVID-19 pandemic. The COVID-19 pandemic is also affecting the operations of government entities, such as the FDA, as well as contract research organizations, third-party manufacturers, third-party laboratories, consultants and other third-parties upon whom we rely. We have experienced, and expect to continue to experience, delays in our operations and in the operations of our third-party service providers as a result of disruptions COVID-19 has had on normal business operations. We may also be affected by a downturn in the U.S. economy, which could have an adverse effect on our ability to raise capital and obtain financing, which could in the future negatively affect our liquidity and ability to continue as a going concern. The extent to which COVID-19 affects and continues to affect our business, financial condition, and results of operations will depend on future developments, which continue to evolve rapidly, and which are highly uncertain and subject to change.

We may not be able to receive Emergency Use Authorization (EUA) for leronlimab as a treatment for COVID-19, or approval may be delayed, which would materially affect our business, financial condition and stock price.

We recently completed a Phase 3 clinical trial to test the effectiveness of leronlimab as a treatment for patients with severe-to-critical COVID-19. The results from the Phase 3 severe-to-critical trial were reported in a Current Report on Form 8-K on March 8, 2021, and the results for a sub-population of this trial of 390 patients serves as the basis for a potential approval in one or more countries. Since the COVID-19 pandemic began, we have expended significant time and financial resources to evaluate leronlimab as a therapeutic treatment for COVID-19. If we are unable to receive an EUA from the FDA or other countries for treating COVID-19 patients, we will not be able to market leronlimab for COVID-19 in the U.S. or abroad for this condition, our ability to generate revenue will be adversely affected. Obtaining such authorization is dependent upon a number of factors, which are not under our control.

Since November 2020, several pharmaceutical companies have received EUA for their vaccines, which are currently being distributed in the US and abroad. According to the Centers for Disease Control, as of March 15, 2021, 40.8 million people in the U.S. have been fully vaccinated. Even if we are successful in receiving an EUA for leronlimab from the FDA to treat COVID-19 patients, if a vaccine is successfully distributed, administered to the population, and effective against COVID-19, the demand for leronlimab as a treatment for severe-to-critical COVID-19 patients may decline over time, which could materially affect our business.

Class-action litigation filed against us could harm our business, and insurance coverage may not be sufficient to cover all related costs and damages.

The market price of our common stock has historically experienced and may continue to experience significant volatility. On March 17, 2021, following a period of volatility in the market price for our common stock, a putative class action was filed in the U.S. District Court for the Western District of Washington, Tacoma against us and certain officers. In the complaint, Plaintiff cites the volatility in our common stock and alleges the defendants made or are responsible for false and misleading statements regarding leronlimab’s potential as a treatment for COVID-19. Plaintiff seeks a ruling that this case may proceed as a class action, and seeks unspecified damages, and attorneys’ fees and costs. A similar class-action lawsuit was filed by a second stockholder on April 9, 2021. The Company and the individual defendants deny any allegations of wrongdoing and intend to vigorously defend the lawsuits. However, litigation, whether or not successful, may result in diversion of our management’s attention and resources, and may require us to incur substantial costs, some of which may not be covered in full by insurance, which could harm our business and financial condition. During the course of litigation, there may be negative public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a further negative effect on the market price of our common stock.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On ~~June 17, 2020,~~January 28, 2021, the Company entered into ~~privately negotiated~~private warrant ~~exchange~~inducement agreements ~~with certain~~in which accredited investors ~~pursuant to which investors~~ purchased unregistered common stock ~~from the Company~~ at a range of ~~$0.21~~$0.90 to ~~$0.95~~$1.50 per share ~~in exchange for warrants with an~~as compared to the stated exercise price ~~ranging from $0.35~~on their warrant at a range of $0.45 to ~~$1.35~~$0.75 per share of common stock. The Company issued ~~16,543,539~~approximately 2.5 million shares of common stock, as well as approximately 1.0 million additional shares as an inducement to exercise their warrants, for a total of approximately 3.6 million shares of common stock, $0.001 par ~~value, in exchange for the exercise of warrants covering an identical number of shares generating aggregate~~value. Aggregate gross proceeds offrom the private warrant exchange were approximately ~~$7.8 million, which the Company will use for general corporate purposes. In connection with this transaction, the Company recognized approximately $3.3 million in inducement interest expense.~~$2.9 million. The Company relied upon the exemption provided for in Section 4(2) of, and Regulation D promulgated pursuant to, the Securities Act of 1933 for the private warrant exchange ~~transaction.~~

~~On June 16, 2020, in exchange for services two consultants~~transactions described above. In connection with the warrant inducement agreements, the Company paid Paulson Investment Company, LLC, a cash commission of 4.5% of the gross proceeds received by the Company.

On January 29, 2021, the Company ~~were granted warrants~~and the July 2020 Note holder entered into an exchange agreement, pursuant to ~~purchase an aggregate~~which the July 2020 Note was partitioned into a new note (the “Partitioned Note”) with a principal amount equal to the Debt Reduction Amount of ~~105,000~~$7.5 million, the outstanding balance of the July 2020 Note was reduced by the Partitioned Note, and the Company and the investor exchanged the Partitioned Note for approximately 1.8 million shares of the Company’s common stock with an exercise price of $3.07 per share and a five-year term. These warrants were accounted for as stock-based compensation and the grant date fair value related to these warrants was approximately $222,000. On June 25, 2020, in exchange for services a consultant of the Company was granted stock options to purchase of 105,000 shares of common stock with an exercise price of $6.15 per share and a five-year term. These warrants were accounted for as stock-based compensation and the grant date fair value related to these warrants was approximately $212,000.stock. The Company relied upon the exemption provided ~~for in~~by Section ~~4(2) of the Securities Act of 1933~~3(a)(9) for the ~~transactions~~exchange transaction described above.

On ~~August 31,~~March 12, 2020, the Company ~~approved~~and the ~~grant~~July 2020 Note holder entered into an exchange agreement, pursuant to which the July 2020 Note was partitioned into a new note (the “Partitioned Note”) with a principal amount equal to the Debt Reduction Amount of

~~non-qualified~~

~~options~~ $7.5 million, the outstanding balance of the July 2020 Note was reduced by the Partitioned Note, and the Company and the investor exchanged the Partitioned Note for approximately 3.6 million shares of the Company’s common stock. The Company relied upon the exemption provided by Section 3(a)(9) for the exchange transaction described above.

On March 18, 2021, the Company entered into a private warrant exchange in which certain accredited investors purchased unregistered common stock at a range of $0.60 to ~~purchase 50,000~~$0.90 per share as compared to the stated exercise price on their warrant, which ranged from $0.30 to $0.45 per share of common stock. The Company issued approximately 0.9 million shares of common stock, as well as approximately 0.4 million additional shares as an inducement to ~~each member~~exercise their warrants, for a total of ~~the Company’s newly established scientific advisory board, or options to purchase 400,000~~approximately 1.3 million shares of common ~~stock in~~stock. Aggregate gross proceeds from the ~~aggregate. The options have an exercise price of $3.36 and a ten year term, and~~private warrant exchange were ~~vested 50% upon grant, and 50% six months following the grant date.~~approximately $0.8 million. The Company relied upon the exemption provided for in Section 4(2) of, and Regulation D promulgated pursuant to, the Securities Act of 1933 for the ~~grant of options to its scientific advisory board members.~~

private warrant exchange transactions described above.

On ~~June 29, 2020,~~April 2, 2021, the Company entered into a private warrant exchange in which certain accredited investors purchased unregistered common stock at $0.90 per share as compared to the stated exercise price on their warrant of $0.45 per share of common stock. The Company issued ~~the note holder of the January 2019 Note 4,000,000~~approximately 0.8 million shares of common stock, ~~with a settlement value of $22.5 million. These~~as well as approximately 0.3 million additional shares ~~were issued~~ as ~~settlement~~an inducement to exercise their warrants, for a ~~claim filed by~~total of approximately 1.1 million shares of common stock. Aggregate gross proceeds from the ~~note holder against~~private warrant exchange were approximately $0.7 million. The Company relied upon the ~~Company alleging that the note holder was owed additional shares upon conversion~~exemption provided for in Section 4(2) of, ~~the January 2019 Note, compared~~and Regulation D promulgated pursuant to, the number of shares requested by the noteholder and issued by of the Company to the note holder upon conversion. The sale of the convertible notes and the issuance of the shares was made in reliance on Section 4(a)(2) of the Securities Act of 1933 for the private warrant exchange transactions described above.

On April 8, 2021, the Company and ~~Rule 506(b)~~the July 2020 Note holder entered into an exchange agreement, pursuant to which the July 2020 Note was partitioned into a new note (the “Partitioned Note”) with a principal amount equal to the Debt Reduction Amount of ~~Regulation D promulgated thereunder.~~

~~Table~~$7.5 million, the outstanding balance of ~~Contents~~the July 2020 Note was reduced by the Partitioned Note, and the Company and the investor exchanged the Partitioned Note for 2.5 million shares of the Company’s common stock. The Company relied upon the exemption provided by Section 3(a)(9) for the exchange transaction described above.

Item 3. Defaults Upon Senior Securities.

None.

~~None.~~

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Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

~~The Company is refiling its Certificate of Incorporation, as amended, with this~~

~~Form 10-Q,~~

~~which was previously filed as Exhibit 3.1 to the~~

~~Form 10-K~~

~~filed on August 14, 2020, solely to correct a typographical error in the version filed with the~~

~~Form 10-K.~~

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Item 6. Exhibits.

(a)Exhibits:

~~(a) Exhibits:~~


3.1** 4.1		~~Certificate of Incorporation of CytoDyn Inc., as amended.~~

~~4.1~~		Secured Convertible Promissory Note dated ~~July 29, 2020 between CytoDyn Inc. and Iliad Research and Trading, L.P.~~April 2, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed ~~July 31, 2020)~~April 8, 2021).

10.1		Securities Purchase Agreement between CytoDyn Inc. and ~~Iliad Research and Trading, L.P.~~Streeterville Capital, LLC, dated ~~July 29, 2020~~April 2, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed ~~July 31, 2020)~~April 8, 2021).

10.2		Security Agreement between CytoDyn Inc. and ~~Iliad Research and Trading, L.P.~~Streeterville Capital, LLC dated ~~July 29, 2020~~April 2, 2021 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed ~~July 31, 2020)~~April 8, 2021).

10.3		~~Distribution and Supply Agreement between CytoDyn Inc. and American Regent, Inc. dated July 2, 2020 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form~~ ~~8-K~~ ~~filed August 18, 2020).~~

10.4*		~~CytoDyn Inc. Amended and Restated 2012 Equity Incentive Plan (incorporated herein by reference to Appendix A to the Registrant’s Proxy Statement filed on September 1, 2020.)~~

10.5*		Form of ~~Stock Option Award~~Warrant Exercise Inducement Agreement ~~for Executive Employees under the 2012 Plan (incorporated herein by reference to Exhibit 10.43 to the Registrant’s Annual Form~~ ~~10-K~~ ~~filed on August 14, 2020.~~

10.6*		~~Form of Stock Option Award Agreement for Employees under the 2012 Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form~~ ~~8-K~~ ~~filed June 19, 2020).~~

10.7*		~~Form of Restricted Stock Unit Agreement under the 2012 Plan~~ (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed ~~June 19, 2020)~~on January 29, 2021).

10.8* 10.4+**		~~Form of Performance-Based Restricted Stock Unit Agreement under the 2012 Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form~~ ~~8-K~~ ~~filed June 19, 2020).~~

10.9*		~~Second Amended and Restated~~ Employment Agreement by and between CytoDyn Inc. and ~~Nader Pourhassan~~Christopher P. Recknor, M.D., dated ~~June 15, 2020 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form~~ ~~8-K~~March 11, 2021. ~~filed June 19, 2020).~~

10.10* 31.1**		Amended and Restated Employment Agreement by and between CytoDyn Inc. and Michael D. Mulholland dated June 15, 2020 (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form ~~8-K~~ ~~filed June 19, 2020).~~

10.11*		~~Amended and Restated Employment Agreement by and between CytoDyn Inc. and Nitya G. Ray, Ph.D., dated June 15, 2020 (incorporated by reference to Exhibit 10.58 to the Registrant’s Annual Form~~ ~~10-K~~ ~~filed on August 14, 2020.~~

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

31.2**		Rule 13a-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 **		Inline XBRL Instance Document.

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

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

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

~~Table of Contents~~


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

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

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

+Management contract or compensatory plan or arrangement.

**	Filed herewith.

*	~~Management contract or compensatory plan or arrangement.~~

**	~~Filed herewith.~~

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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: ~~October 9, 2020~~April 14, 2021		/s/ Nader Z. Pourhassan
		Nader Z. Pourhassan
		President and Chief Executive Officer
		(Principal Executive Officer)

Dated: ~~October 9, 2020~~April 14, 2021		/s/ Michael D. Mulholland
		Michael D. Mulholland
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

Large Accelerated Filer

Accelerated Filer

Non-accelerated
Filer

Smaller Reporting Company

Emerging Growth Company