UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~November 30, 2021~~August 31, 2022

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

For the transition period from to

Commission File Number: 000-49908

CYTODYN INC.

(Exact name of registrant as specified in its charter)


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)

Not applicable

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

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (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.


Large Accelerated Filer	☒	Accelerated Filer	☐

Non-accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐

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 ~~December 31, 2021,~~September 30, 2022, there were ~~690,233,504~~812,825,217 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	3
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3226
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4639
	ITEM 4. CONTROLS AND PROCEDURES	4739
PART II		4941
	ITEM 1. LEGAL PROCEEDINGS	4941
	ITEM 1A. RISK FACTORS	4941
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51
	~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~	51
	~~ITEM 4. MINE SAFETY DISCLOSURES~~	51
	~~ITEM 5. OTHER INFORMATION~~	5141
	ITEM 6. EXHIBITS	5242

Table of Contents

PART I. Financial Information

Item 1. Consolidated Financial Statements

CytoDyn Inc.

Consolidated Balance Sheets

~~(Unaudited)~~

(InUnaudited, in thousands, except par value)

November 30, 2021

May 31, 2021

(Revised) ⁽¹⁾
Assets




Current assets:




Cash

$
8,875

$
33,943
Accounts receivable

225

—
Inventories, net

88,557

93,479
Prepaid expenses

2,979

616
Prepaid service fees

1,174

1,543
Total current assets

101,810

129,581
Operating leases right-of-use asset

617

712
Property and equipment, net

119

134
Intangibles, net

1,153

1,653
Total assets

$
103,699

$
132,080
Liabilities and Stockholders’ (Deficit) Equity




Current liabilities:




Accounts payable

$
58,008

$
65,897
Accrued liabilities and compensation

6,654

19,073
Accrued interest on convertible notes

3,670

2,007
Accrued dividends on convertible preferred stock

3,481

2,647
Operating leases liabilities

149

175
Convertible notes payable, net

43,947

62,747
Total current liabilities

115,909

152,546
Long-term liabilities:




Operating leases liabilities

486

552
Total long-term liabilities

486

552
Total liabilities

116,395

153,098
Commitments and Contingencies (Note 10)




Stockholders’ (deficit) equity:




Preferred Stock, $0.001 par value; 5,000 shares authorized




Series D convertible preferred stock, $0.001 par value; 12 authorized; 9 issued and outstanding at November 30, 2021 and May 31, 2021

—

—
Series C convertible preferred stock, $0.001 par value; 8 authorized; 8 issued and outstanding at November 30, 2021 and May 31, 2021

—

—
Series B convertible preferred stock, $0.001 par value; 400 shares authorized, 19 and 79 shares issued and outstanding at November 30, 2021 and May 31, 2021, respectively

—

—
Common stock, $0.001 par value; 1,000,000 shares authorized, 685,861 and 626,123 issued and 685,418 and 625,680 outstanding at November 30, 2021 and May 31, 2021, respectively

686

626
Additional paid-in capital

589,971

512,796
Accumulated (deficit)

(603,353)

(534,440)
Treasury stock, $0.001 par value; 443 at November 30, 2021 and May 31, 2021

—

—
Total stockholders’ (deficit) equity

(12,696)

(21,018)
Total liabilities and stockholders' (deficit) equity

$
103,699

$
132,080

~~(1)~~

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


		August 31, 2022		May 31, 2022
Assets
Current assets:
Cash	$	4,676	$	4,231
Prepaid expenses		4,143		5,198
Prepaid service fees		1,038		1,086
Total current assets		9,857		10,515
Inventories, net		17,929		17,929
Other non-current assets		608		741
Total assets	$	28,394	$	29,185
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	68,991	$	67,974
Accrued liabilities and compensation		5,014		8,995
Accrued interest on convertible notes		7,120		5,974
Accrued dividends on convertible preferred stock		4,361		3,977
Convertible notes payable, net		36,833		36,241
Total current liabilities		122,319		123,161
Operating leases		387		422
Total liabilities		122,706		123,583
Commitments and Contingencies (Note 9)
Stockholders’ deficit:
Preferred stock, $0.001 par value; 5,000 shares authorized:
Series B convertible preferred stock, $0.001 par value; 400 authorized; 19 issued and outstanding at August 31, 2022 and May 31, 2022, respectively		—		—
Series C convertible preferred stock, $0.001 par value; 8 authorized; 6 and 7 issued and outstanding at August 31, 2022 and May 31, 2022, respectively		—		—
Series D convertible preferred stock, $0.001 par value; 12 authorized; 9 issued and outstanding at August 31, 2022 and May 31, 2022, respectively		—		—
Common stock, $0.001 par value; 1,350,000 shares authorized; 812,698 and 720,028 issued, and 812,255 and 719,585 outstanding at August 31, 2022 and May 31, 2022, respectively		813		720
Treasury stock, $0.001 par value; 443 at August 31, 2022 and May 31, 2022		—		—
Additional paid-in capital		687,732		671,013
Accumulated deficit		(782,857)		(766,131)
Total stockholders’ deficit		(94,312)		(94,398)
Total liabilities and stockholders' deficit	$	28,394	$	29,185

See accompanying notes to consolidated financial statements.

Table of Contents

CytoDyn Inc.

Consolidated Statements of Operations

~~(Unaudited)~~

(InUnaudited, in thousands, except per share data)


	Three months ended August 31,
	2022		2021
				(Restated) ⁽¹⁾
Revenue	$	—	$	41
Cost of goods sold		—		1
Gross margin		—		40
Operating expenses:
General and administrative		6,333		7,617
Research and development		576		12,020
Amortization and depreciation		99		276
Inventory charge		2,704		1,764
Total operating expenses		9,712		21,677
Operating loss		(9,712)		(21,637)
Interest and other expense:
Interest on convertible notes		(1,146)		(1,686)
Amortization of discount on convertible notes		(576)		(952)
Amortization of debt issuance costs		(16)		(28)
Loss on induced conversion		—		(18,530)
Finance charges		(940)		(35)
Inducement interest expense		—		(528)
Legal settlement		—		(1,941)
Loss on derivatives		(8,601)		—
Total interest and other expense		(11,279)		(23,700)
Loss before income taxes		(20,991)		(45,337)
Income tax benefit		—		—
Net loss	$	(20,991)	$	(45,337)
Basic and diluted:
Weighted average common shares outstanding		787,856		632,597
Loss per share	$	(0.03)	$	(0.07)

(1) See Note 2, Summary of Significant Accounting Policies.

See accompanying notes to consolidated financial statements.

Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ Deficit

(Unaudited, in thousands)

Three months ended November 30,

Six months ended November 30,


2021

2020

2021

2020

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾

Revenue:

Product revenue

$
225

$
—

$
266

$
—

Total revenue

225

—

266

—

Cost of goods sold:

Cost of goods sold

52

—

53

—

Total cost of goods sold

52

—

53

—

Gross margin

173

—

213

—

Operating expenses:









General and administrative

16,203

7,551

23,820

17,426

Research and development

9,040

16,446

22,824

31,738

Amortization and depreciation

252

506

528

1,011

Total operating expenses

25,495

24,503

47,172

50,175

Operating loss

(25,322)

(24,503)

(46,959)

(50,175)

Other income (expense):

Loss on extinguishment of convertible notes

(3,312)

(4,169)

(7,963)

(4,169)

Legal settlement

—

—

(1,941)

—

Interest expense:







Finance charges

(1,024)

(231)

(1,059)

(137)

Amortization of discount on convertible notes

(793)

(1,243)

(1,745)

(2,582)

Amortization of debt issuance costs

(23)

(15)

(51)

(19)

Inducement interest expense

(4,704)

(4,217)

(5,232)

(7,562)

Interest on convertible notes payable

(1,426)

(1,047)

(3,112)

(1,613)

Total interest expense

(7,970)

(6,753)

(11,199)

(11,913)

Loss before income taxes

(36,604)

(35,425)

(68,062)

(66,257)

Income tax benefit

—

—

—

—

Net loss

$
(36,604)

$
(35,425)

$
(68,062)

$
(66,257)

Basic and diluted loss per share

$
(0.06)

$
(0.06)

$
(0.11)

$
(0.12)

Basic and diluted weighted average common shares outstanding

662,600

577,945

647,517

566,677

~~(1)~~

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

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

~~Table of Contents~~

~~CytoDyn Inc.~~

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

~~(Unaudited)~~

~~(In thousands)~~


	Preferred stock			Common stock			Treasury stock			Additional		Accumulated		Total stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		deficit
Balance at May 31, 2022	35	$	—	720,028	$	720	443	$	—	$	671,013	$	(766,131)	$	(94,398)
Stock issued for compensation	—		—	879		1	—		—		344		—		345
Stock issued for private offerings	—		—	85,378		85	—		—		17,459		—		17,544
Issuance costs related to stock issued for private offerings	—		—	—		—	—		—		(6,289)		—		(6,289)
Conversion of Series C convertible preferred stock to common stock	(1)		—	1,136		1	—		—		(1)		—		—
Warrant exercises	—		—	657		1	—		—		263		—		264
Deemed dividend paid in common stock due to down round provision, recorded in additional paid-in capital	—		—	4,620		5	—		—		(5)		—		—
Accrued preferred stock dividends	—		—	—		—	—		—		(384)		—		(384)
Reclassification of warrants from liability to equity classified	—		—	—		—	—		—		8,601		—		8,601
Stock-based compensation	—		—	—		—	—		—		996		—		996
Reclassification to additional paid-in capital of prior period preferred stock dividends previously charged to accumulated deficit	—		—	—		—	—		—		(4,265)		4,265		—
Net loss	—		—	—		—	—		—		—		(20,991)		(20,991)
Balance at August 31, 2022	34	$	—	812,698	$	813	443	$	—	$	687,732	$	(782,857)	$	(94,312)


	Preferred stock			Common stock			Treasury stock			Additional		Accumulated		Total stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		deficit
										(Restated) ⁽¹⁾		(Restated) ⁽¹⁾		(Restated) ⁽¹⁾
Balance at May 31, 2021	96	$	—	626,123	$	626	443	$	—	$	532,031	$	(553,675)	$	(21,018)
Issuance of stock for convertible note repayment	—		—	11,816		12	—		—		13,832		—		13,844
Loss on induced conversion	—		—	—		—	—		—		18,530		—		18,530
Issuance of legal settlement warrants	—		—	—		—	—		—		1,744		—		1,744
Stock option exercises	—		—	300		—	—		—		189		—		189
Stock issued for compensation and tendered for income tax	—		—	1,014		1	—		—		(1)		—		—
Stock issued for private offerings	—		—	2,872		3	—		—		2,869		—		2,872
Private warrant exchanges	—		—	1,327		1	—		—		774		—		775
Warrant exercises	—		—	668		1	—		—		502		—		503
Inducement interest expense related to private warrant exchanges	—		—	—		—	—		—		528		—		528
Accrued preferred stock dividends	—		—	—		—	—		—		—		(420)		(420)
Stock-based compensation	—		—	—		—	—		—		2,597		—		2,597
Net loss	—		—	—		—	—		—		—		(45,337)		(45,337)
Balance at August 31, 2021	96	$	—	644,120	$	644	443	$	—	$	573,595	$	(599,432)	$	(25,193)

Preferred stock

Common stock

Treasury stock

Additional

Accumulated

Total stockholders'


Shares

Amount

Shares

Amount

Shares

Amount

paid-in capital

deficit

(deficit) equity

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾
Balance May 31, 2021

96

$
—

626,123

$
626

443

$
—

$
512,796

$
(534,440)

$
(21,018)
First Quarter Fiscal Year Ended May 31, 2022

Issuance of stock for convertible note repayment

—

—

11,816

12

—

—

18,483

—

18,495
Issuance of legal settlement warrants

—

—

—

—

—

—

1,744

—

1,744
Exercise of stock options

—

—

300

—

—

—

189

—

189
Stock issued for incentive compensation and tendered for income tax

—

—

1,014

1

—

—

(1)

—

—
Stock issued for private offering ($1.00 per share)

—

—

2,872

3

—

—

2,869

—

2,872
Private warrant exchange

—

—

1,327

1

—

—

774

—

775
Exercise of warrants

—

—

668

1

—

—

502

—

503
Inducement interest expense related to private warrant exchange

—

—

—

—

—

—

528

—

528
Dividends accrued on Series C and D preferred stock

—

—

—

—

—

—

—

(420)

(420)
Stock-based compensation

—

—

—

—

—

—

2,597

—

2,597
Net Loss August 31, 2021

—

—

—

—

—

—

—

(31,458)

(31,458)
Balance August 31, 2021

96

—

644,120

644

443

—

540,481

(566,318)

(25,193)
Second Quarter Fiscal Year Ended May 31, 2022

Issuance of stock for convertible note repayment

—

—

8,162

8

—

—

11,505

—

11,513
Exercise of stock options

—

—

210

—

—

—

200

—

200
Private warrant exchange

—

—

6,593

7

—

—

4,608

—

4,615
Stock issued for private offering ($1.00 - $1.80 per share)

—

—

25,178

25

—

—

27,282

—

27,307
Issuance costs related to stock issued for private offering

—

—

—

—

—

—

(1,418)

—

(1,418)
Conversion of Series B convertible preferred stock to common stock

(60)

—

600

1

—

—

—

—

1
Exercise of warrants

—

—

963

1

—

—

532

—

533
Inducement interest expense related to private warrant exchange

—

—

—

—

—

—

4,704

—

4,704
Dividend declared and paid in common stock on Series B preferred stock ($0.25 per share)

—

—

35

—

—

—

17

(17)

—
Dividends accrued on Series C and D preferred stock

—

—

—

—

—

—

—

(414)

(414)
Stock-based compensation

—

—

—

—

—

—

2,060

—

2,060
Net Loss November 30, 2021

—

—

—

—

—

—

—

(36,604)

(36,604)
Balance November 30, 2021

36

$
—

685,861

$
686

443

$
—

$
589,971

$
(603,353)

$
(12,696)

~~(1)~~

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

(1) See Note 2, Summary of Significant Accounting Policies.

See accompanying notes to consolidated financial statements.

Table of Contents

Preferred stock

Common stock

Treasury stock

Additional

Accumulated

Total stockholders'


Shares

Amount

Shares

Amount

Shares

Amount

paid-in capital

deficit

(deficit) equity

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾
Balance May 31, 2020

109

$
—

519,261

$
519

286

$
—

$
372,301

$
(375,301)

$
(2,481)
First Quarter Fiscal Year Ended May 31, 2021

Issuance of stock for convertible note repayment

—

—

2,119

2

—

—

9,535

—

9,537
Issuance of legal settlement warrants

—

—

4,000

4

—

—

(4)

—

—
Exercise of stock options

—

—

100

—

—

—

39

—

39
Stock issued for incentive compensation and tendered for income tax

—

—

323

—

156

—

828

—

828
Conversion of Series B preferred stock to common stock

(5)

—

50

—

—

—

—

—

—
Private warrant exchange

—

—

16,544

17

—

—

7,787

—

7,804
Exercise of warrants

—

—

27,928

28

—

—

13,441

—

13,469
Inducement interest expense related to private warrant exchange

—

—

—

—

—

—

3,345

—

3,345
Offering costs related to private warrant exchange

—

—

—

—

—

—

(364)

—

(364)
Dividend declared and paid on Series B preferred stock ($0.25 per share)

—

—

—

—

—

—

—

(243)

(243)
Dividends accrued on Series C and D preferred stock

—

—

—

—

—

—

—

(420)

(420)
Stock-based compensation

—

—

—

—

—

—

2,086

—

2,086
Net Loss August 31, 2020

—

—

—

—

—

—

—

(30,832)

(30,832)
Balance August 31, 2020

104

—

570,325

570

442

—

408,994

(406,796)

2,768
Second Quarter Fiscal Year Ended May 31, 2021

Issuance of stock for convertible note repayment

—

—

4,293

4

—

—

11,549

—

11,553
Exercise of stock options

—

—

10

—

—

—

10

—

10
Stock issued for private offering ($1.50 per share)

—

—

667

1

—

—

999

—

1,000
Private warrant exchange

—

—

12,480

13

—

4,583

4,596
Exercise of warrants

—

—

2,504

2

—

1,737

1,739
Inducement interest expense related to private warrant exchange

—

—

—

—

—

—

4,217

—

4,217
Dividends accrued on Series C and D preferred stock

—

—

—

—

—

—

—

(415)

(415)
Stock-based compensation

—

—

—

—

—

—

3,423

—

3,423
Net Loss November 30, 2020

—

—

—

—

—

—

—

(35,425)

(35,425)
Balance November 30, 2020

104

$
—

590,279

$
590

442

$
—

$
435,512

$
(442,636)

$
(6,534)

~~(1)~~

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

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

~~Table of Contents~~

CytoDyn Inc.

Consolidated Statements of Cash Flows

~~(Unaudited)~~

(InUnaudited, in thousands)


	Six months ended November 30,				Three months ended August 31,
	2021		2020		2022		2021
			(Revised) ⁽¹⁾					(Restated) ⁽¹⁾
Cash flows from operating activities:
Net loss	$	(68,062)	$	(66,257)	$	(20,991)	$	(45,337)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation		528		1,011		99		276
Amortization of debt issuance costs		51		19		16		28
Amortization of discount on convertible notes		1,745		2,582		576		952
Non-cash warrant issuance cost for legal settlement		1,744		—
Inducement interest expense		5,232		7,562
Inventory reserve and write-offs		3,357		4,835
Legal settlement						—		1,744
Loss on derivatives						8,601		—
Loss on induced conversion						—		18,530
Inducement interest expense and non-cash finance charges						—		528
Inventory charge						2,704		1,764
Stock-based compensation		4,657		7,115		1,341		2,597
Loss on extinguishment of convertible notes		7,963		4,169
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(225)		—
Decrease (increase) in inventories, net		1,565		(84,759)
(Increase) decrease in prepaid expenses		(1,994)		1,072
(Decrease) increase in accounts payable and accrued expenses		(17,193)		61,532
Increase in prepaid expenses and other assets						(1,601)		(2,370)
Decrease in accounts payable and accrued expenses						(1,819)		(10,453)
Net cash used in operating activities		(60,632)		(61,119)		(11,074)		(31,741)
Cash flows from investing activities:
Furniture and equipment purchases		(13)		(77)		—		(8)
Net cash used in investing activities		(13)		(77)		—		(8)
Cash flows from financing activities:
Proceeds from warrant transactions, net of offering costs		5,390		12,035		—		775
Proceeds from sale of common stock and warrants, net of issuance costs		28,761		1,000		11,255		2,872
Proceeds from warrant exercises		1,036		15,209		264		503
Payment on convertible notes		—		(950)
Release of restricted cash held in trust for warrant tender offer		—		(10)
Exercise of option to repurchase shares held in escrow						—		9
Proceeds from stock option exercises		390		48		—		189
Payment of payroll withholdings related to tender of common stock for income tax withholding		—		(778)
Proceeds from convertible notes payable, net		—		50,000
Dividend declared and paid on Series B preferred stock		—		(243)
Net cash provided by financing activities		35,577		76,311		11,519		4,348
Net change in cash		(25,068)		15,115
Cash and restricted cash, beginning of period		33,943		14,292
Cash and restricted cash, end of period	$	8,875	$	29,407
Net change in cash and restricted cash						445		(27,401)
Cash beginning of period						4,231		33,943
Cash end of period					$	4,676	$	6,542
Cash and restricted cash consisted of the following:
Cash	$	8,875	$	29,407	$	4,676	$	6,533
Restricted cash		—		—		—		9
Total cash and restricted cash	$	8,875	$	29,407	$	4,676	$	6,542
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	57	$	138
Supplemental disclosure:
Cash paid for interest					$	—	$	35
Non-cash investing and financing transactions:
Issuance of common stock for principal and interest of convertible notes	$	22,045	$	16,922	$	—	$	14,950
Accrued dividends on convertible Series C and D preferred stock	$	834	$	835
Dividend declared and paid in common stock on Series B preferred stock	$	17	$	—
Accrued dividends on convertible Series C and D Preferred Stock					$	384	$	420
Deemed dividend on common stock issued due to down round provision, recorded in additional paid-in capital					$	4,154	$	—

~~(1)~~

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

(1) See Note 2, Summary of Significant Accounting Policies.

See accompanying notes to consolidated financial statements.

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CYTODYN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF ~~NOVEMBER 30, 2021~~AUGUST 31, 2022

~~(UNAUDITED)~~(Unaudited)

Note 1. Organization

CytoDyn Inc. ~~(the~~(together with its wholly owned subsidiaries, the “Company”) was originally incorporated under the laws of Colorado on May 2, 2002, under the name RexRay Corporation and, effective August 27, 2015, reincorporated under the laws of Delaware. The Company is a ~~late-stage~~clinical-stage biotechnology company ~~developing~~focused on the clinical development of innovative treatments for multiple therapeutic indications based on its product candidate, leronlimab (PRO 140), a novel humanized monoclonal antibody targeting the CCR5 receptor. ~~Leronlimab is in a class of therapeutic monoclonal antibodies designed to address unmet medical needs for which the~~The Company is ~~focused on developing treatments~~studying leronlimab in ~~the areas of~~ human immunodeficiency virus (“HIV”), ~~cancer, immunology,~~oncology, and ~~novel coronavirus disease~~non-alcoholic steatohepatitis (“~~COVID-19”~~NASH”).

Leronlimab ~~belongs~~is being investigated as a viral entry inhibitor for HIV, believed to ~~a class~~competitively bind to the N-terminus and second extracellular loop of ~~HIV therapies known as entry inhibitors which block HIV from entering and infecting specific cells.~~the CCR5 receptor. For ~~cancer and~~ immunology, the CCR5 receptor ~~also appears~~is believed to be implicated ~~in human metastasis and~~ in immune-mediated illnesses such as ~~triple-negative breast cancer,~~NASH. Leronlimab is being studied in NASH, oncology, and other ~~metastatic solid tumor cancers, and non-alcoholic steatohepatitis (“NASH”). For COVID-19, the Company believes leronlimab may be shown~~therapeutic indications where CCR5 is believed to ~~provide therapeutic benefit by enhancing the immune response and also mitigating the “cytokine storm” that leads to morbidity and mortality in patients experiencing this syndrome.~~play an integral role.

The Company has pursued the regulatory approval of leronlimab in hopes that commercial sales will be obtained based on positive data from its Phase 2b/3 clinical trial for leronlimab as a combination therapy with highly active antiretroviral therapy (“HAART”) for highly treatment-experienced HIV patients, as well as information gathered from meetings with the U.S. Food and Drug Administration (“FDA”) related to its Biologic License Application (“BLA”) for this indication. In July 2020, the Company received a Refusal to File letter from the FDA regarding its BLA submission for leronlimab as a combination therapy with HAART for highly treatment-experienced HIV patients. The FDA informed the Company that the BLA did not contain certain information and data needed to complete a substantive review and therefore, the FDA would not file the BLA. The deficiencies cited by the FDA included administrative deficiencies, omissions, corrections to data presentation and related analyses, and clarifications regarding the manufacturing processes. In November 2021, the Company resubmitted the non-clinical and chemistry, manufacturing, and controls (“CMC”) sections of the BLA. As of March 2022, the FDA had commenced its review of the CMC section.

As described in Note 9, Commitments and Contingencies - Legal Proceedings, the Company is in dispute with its former contract research organization (“CRO”). In the context of the litigation, the Company obtained an order requiring the CRO to release the Company’s clinical data related to the BLA and other clinical trials, which the CRO had been withholding. Further, the order granted the Company the right to perform an audit of the CRO’s services.

Additionally, in March of 2022, the FDA placed the HIV program on a partial clinical hold, which may affect our ability to resubmit the BLA. The Company is in the process of evaluating the data, results of the audit, and implications of the partial clinical hold. The Company will update the feasibility of the resubmission of the clinical section of the BLA once it completes its evaluation.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The ~~accompanying~~ unaudited interim ~~Consolidated Financial Statements~~consolidated financial statements include the accounts of ~~the Company~~CytoDyn Inc. and its wholly owned ~~subsidiary,~~subsidiaries, CytoDyn Operations Inc., and ~~have been prepared~~Advanced Genetic Technologies, Inc. (“AGTI”); AGTI is a dormant entity. All intercompany transactions and balances are eliminated in ~~accordance with accounting principles generally accepted~~consolidation. The consolidated financial statements reflect all normal recurring adjustments which are, in the ~~United States~~opinion of ~~America (“U.S. GAAP”)~~management, necessary for a fair statement of the results of operations for the interim financial statements. The interim financial information and notes thereto should be read in conjunction with the ~~financial statements, summary of significant accounting policies and footnotes included in the~~Company's latest Annual Report on Form 10-K ~~as amended by Amendment No. 1 filed with~~for the ~~SEC on September 28, 2021, for the~~fiscal year ended May 31, ~~2021~~2022 (the ~~“2021~~“2022 Form 10-K”). Accordingly, certain disclosures required by U.S. GAAP and normally included in Annual Reports on Form 10-K have been condensed or omitted from this report; however, except as disclosed herein, there has been no material change in the information disclosed in the notes to Consolidated Financial Statements included in the 2021 Form 10-K. All intercompany transactions and balances have been eliminated.

~~It is the opinion~~ The results of management that all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of interim financial information, have been included. The Company has no items of other comprehensive income or loss; therefore, its net income or loss is identical to its comprehensive income or loss. Operating resultsoperations for the periods presented are not necessarily indicative of results to be expected ~~results~~ for the ~~full year.~~entire fiscal year or for any other future annual or interim period.

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Reclassifications

Certain prior year and prior quarter amounts shown in the accompanying ~~Consolidated Financial Statements~~consolidated financial statements have been reclassified to conform to the current period presentation. ~~These~~Such reclassifications did not have ~~any~~material effect on the Company’s previously reported financial position, results of operations, stockholders’ ~~(deficit) equity,~~deficit, or net cash ~~flows~~provided by operating activities.

During the quarter ended August 31, 2022, the Company reclassified amounts recorded as ~~previously reported.~~accumulated dividends for Series C and D preferred stockholders from accumulated deficit to additional paid-in capital. These reclassifications were made to reflect the proper presentation for accrued dividends when an entity has accumulated deficit.

Revision and Restatement of Financial Statements

During the preparation of the quarterly financial statements as of and for the period ended November 30, 2021, the Company identified an error in how non-cash inducement interest expense was calculated in previous reporting periods dating back to fiscal year 2018. The error resulted in an understatement of non-cash inducement interest expense and additional paid-in capital. For details, refer to Note 2, Summary of Significant Accounting Policies - Revision of Financial Statements in the 2022 Form 10-K. Also during the preparation and audit of the annual financial statements as of and for the fiscal year ended May 31, 2022, the Company concluded that a material error was identified in how the Company was accounting for common stock issued to settle certain convertible note obligations dating back to fiscal year 2021. For details, refer to Note 14, Restatement in the 2022 Form 10-K. Neither of the errors had impact on operating loss, cash, net cash used in or provided by operating, financing, and investing activities, assets, liabilities, commitments and contingencies, total stockholders’ deficit, number of shares issued and outstanding, basic and diluted weighted average common shares outstanding, and number of shares available for future issuance for any period presented, and are reflected in the accompanying statement of operations, changes in stockholders’ deficit, and statement of cash flows.

Going Concern

The accompanying 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~~presented in the accompanying ~~Consolidated Financial Statements,~~consolidated financial statements, the Company had losses for all periods presented. The Company

~~Table of Contents~~

incurred a net loss of approximately ~~$68.1~~$21.0 million for the ~~six~~three months ended ~~November 30, 2021~~August 31, 2022, and has an accumulated deficit of approximately ~~$603.4~~$782.9 million as of ~~November 30, 2021.~~August 31, 2022. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The ~~Consolidated Financial Statements~~consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain additional operating capital, complete the development of its product candidate, leronlimab, obtain approval to commercialize leronlimab from regulatory agencies, continue to outsource manufacturing of leronlimab, and ultimately achieve ~~substantial~~ revenues and attain profitability. The Company ~~continues~~plans to continue to engage in ~~significant~~ research and development activities related to leronlimab for multiple indications and expects to incur significant research and development expenses in the future primarily related to its regulatory compliance and approval, and 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~~primarily from the sale of equity and debt securities, combined with additional funding from other ~~traditional~~ sources. ~~There~~However, there can be no assurance ~~however,~~ that the Company will be successful in these endeavors.

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Use of Estimates

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

~~Correction~~Pre-launch Inventories

Pre-launch inventories are comprised of ~~Immaterial Misstatements~~raw materials required to commercially produce leronlimab and substantially completed commercially produced leronlimab in ~~Prior Period Financial Statements~~

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

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

~~Table of Contents~~

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

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

As of and For the Year Ended May 31, 2019
(in thousands)
As Previously Reported

Adjustments

As Revised
Inducement interest expense
$
(196)

$
(4,532)

$
(4,728)
Total interest expense
$
(3,313)

$
(4,532)

$
(7,845)
Loss before income taxes
$
(59,014)

$
(4,532)

$
(63,546)
Income tax benefit
$
2,827

$
—

$
2,827
Net loss
$
(56,187)

$
(4,532)

$
(60,719)
Basic and diluted loss per share
$
(0.21)

$
(0.02)

$
(0.23)
Additional paid-in capital ⁽¹⁾
$
220,120

$
5,057

$
225,177
Accumulated (deficit) ⁽¹⁾
$
(229,363)

$
(5,057)

$
(234,420)
^{(1) Includes adjustment of}^$525^{for the fiscal year ended May 31, 2018.}

As of and For the Year Ended May 31, 2020
(in thousands, except per share amount)
As Previously Reported

Adjustments

As Revised
Inducement interest expense
$
(7,904)

$
(15,533)

$
(23,437)
Total interest expense
$
(18,219)

$
(15,533)

$
(33,752)
Loss before income taxes
$
(124,403)

$
(15,533)

$
(139,936)
Net loss
$
(124,403)

$
(15,533)

$
(139,936)
Basic and diluted loss per share
$
(0.30)

$
(0.04)

$
(0.34)
Additional paid-in capital ⁽¹⁾
$
351,711

$
20,590

$
372,301
Accumulated (deficit) ⁽¹⁾
$
(354,711)

$
(20,590)

$
(375,301)
^{(1) Includes adjustments of}^$4,532^and^$525^{for the fiscal years ended May 31, 2019 and 2018, respectively.}

Three months ended November 30, 2020

Six months ended November 30, 2020
(in thousands, except per share amount)
As Previously Reported

Adjustments

As Revised


As Previously Reported

Adjustments

As Revised
Inducement interest expense
$
(3,758)

$
(459)

$
(4,217)

$
(7,103)

$
(459)

$
(7,562)
Total interest expense
$
(6,294)

$
(459)

$
(6,753)

$
(11,454)

$
(459)

$
(11,913)
Loss before income taxes
$
(34,966)

$
(459)

$
(35,425)

$
(65,798)

$
(459)

$
(66,257)
Net loss
$
(34,966)

$
(459)

$
(35,425)

$
(65,798)

$
(459)

$
(66,257)
Basic and diluted loss per share
$
(0.06)

$
—

$
(0.06)

$
(0.12)

$
—

$
(0.12)

Three months ended February 28, 2021

Nine months ended February 28, 2021
(in thousands, except per share amount)
As Previously Reported

Adjustments

As Revised


As Previously Reported

Adjustments

As Revised
Inducement interest expense
$
(4,139)

$
(1,221)

$
(5,360)

$
(11,242)

$
(1,680)

$
(12,922)
Total interest expense
$
(5,576)

$
(1,221)

$
(6,797)

$
(17,031)

$
(1,680)

$
(18,711)
Loss before income taxes
$
(43,985)

$
(1,221)

$
(45,206)

$
(109,783)

$
(1,680)

$
(111,463)
Net loss
$
(43,985)

$
(1,221)

$
(45,206)

$
(109,783)

$
(1,680)

$
(111,463)
Basic and diluted loss per share
$
(0.08)

$
—

$
(0.08)

$
(0.18)

$
—

$
(0.18)

~~Table of Contents~~

As of and For the Year Ended May 31, 2021
(in thousands, except per share amount)
As Previously Reported

Adjustments

As Revised
Inducement interest expense
$
(11,366)

$
(2,556)

$
(13,922)
Total interest expense
$
(19,556)

$
(2,556)

$
(22,112)
Loss before income taxes
$
(154,674)

$
(2,556)

$
(157,230)
Net loss
$
(154,674)

$
(2,556)

$
(157,230)
Basic and diluted loss per share
$
(0.27)

$
—

$
(0.27)
Additional paid-in capital ⁽¹⁾
$
489,650

$
23,146

$
512,796
Accumulated (deficit) ⁽¹⁾
$
(511,294)

$
(23,146)

$
(534,440)
^{(1) Includes adjustments of}^$15,533^,^$4,532^{, and}^$525^{for the fiscal years ended May 31, 2020, 2019 and 2018, respectively.}

As of and For the Three months ended August 31, 2021
(in thousands, except per share amount)
As Previously Reported

Adjustments

As Revised
Inducement interest expense
$
(9)

$
(519)

$
(528)
Total interest expense
$
(2,710)

$
(519)

$
(3,229)
Loss before income taxes
$
(30,939)

$
(519)

$
(31,458)
Net loss
$
(30,939)

$
(519)

$
(31,458)
Basic and diluted loss per share
$
(0.05)

$
—

$
(0.05)
Additional paid-in capital
$
516,816

$
23,665

$
540,481
Accumulated (deficit)
$
(542,653)

$
(23,665)

$
(566,318)

As Previously Reported

Adjustments

As Revised
(in thousands)
Additional paid-in capital

Accumulated (deficit)

Total stockholders' (deficit) equity

Additional paid-in capital

Accumulated (deficit)

Total stockholders' (deficit) equity

Additional paid-in capital

Accumulated (deficit)

Total stockholders' (deficit) equity
First Quarter Fiscal Year Ended May 31, 2021

Inducement interest expense related to private warrant exchange
$
3,345

$
—

$
3,345

$
—

$
—

$
—

$
3,345

$
—

$
3,345
Net Loss August 31, 2020

—

(30,832)

(30,832)

—

—

—

—

(30,832)

(30,832)
Balance August 31, 2020
$
388,404

$
(386,206)

$
2,768

$
20,590

$
(20,590)

$
—

$
408,994

$
(406,796)

$
2,768

Second Quarter Fiscal Year Ended May 31, 2021

Inducement interest expense related to private warrant exchange
$
3,758

$
—

$
3,758

$
459

$
—

$
459

$
4,217

$
—

$
4,217
Net Loss November 30, 2020

—

(34,966)

(34,966)

—

(459)

(459)

—

(35,425)

(35,425)
Balance November 30, 2020
$
414,463

$
(421,587)

$
(6,534)

$
21,049

$
(21,049)

$
—

$
435,512

$
(442,636)

$
(6,534)

Third Quarter Fiscal Year Ended May 31, 2021

Inducement interest expense related to private warrant exchange
$
4,139

$
—

$
4,139

$
1,221

$
—

$
1,221

$
5,360

$
—

$
5,360
Net Loss February 28, 2021

—

(43,985)

(43,985)

—

(1,221)

(1,221)

—

(45,206)

(45,206)
Balance February 28, 2021
$
449,759

$
(465,983)

$
(15,795)

$
22,270

$
(22,270)

$
—

$
472,029

$
(488,253)

$
(15,795)

Fiscal Year Ended May 31, 2021

Inducement interest expense related to private warrant exchange
$
11,366

$
—

$
11,366

$
2,556

$
—

$
2,556

$
13,922

$
—

$
13,922
Net Loss May 31, 2021

—

(154,674)

(154,674)

—

(2,556)

(2,556)

—

(157,230)

(157,230)
Balance May 31, 2021
$
489,650

$
(511,294)

$
(21,018)

$
23,146

$
(23,146)

$
—

$
512,796

$
(534,440)

$
(21,018)

First Quarter Fiscal Year Ended May 31, 2022

Inducement interest expense related to private warrant exchange
$
9

$
—

$
9

$
519

$
—

$
519

$
528

$
—

$
528
Net Loss August 31, 2021

—

(30,939)

(30,939)

—

(519)

(519)

—

(31,458)

(31,458)
Balance August 31, 2021
$
516,816

$
(542,653)

$
(25,193)

$
23,665

$
(23,665)

$
—

$
540,481

$
(566,318)

$
(25,193)

~~Table of Contents~~

~~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 as of November 30, 2021 and May 31, 2021 approximated $8.6 million and $33.7 million, respectively.

~~Identified Intangible Assets~~

~~The Company follows the provisions of ASC 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. During the three and six months ended November 30, 2021 and 2020, there were 0 impairment charges. The value of the Company’s patents would be significantly impaired by any adverse developments as they relate to the clinical trials pursuant to the patents acquired as discussed in Note 8.

~~Revenue Recognition~~

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

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

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

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

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

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~~Disaggregation of Revenue~~

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

~~Contract Assets and Liabilities~~

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

~~Performance Obligations~~

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

~~Research and Development~~

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

~~Inventory~~

~~Previously Expensed Inventory~~

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

~~Capitalized Pre-launch Inventories~~

~~The Company values inventory at the lower of cost or net realizable value using the average cost method. Inventories~~ consist of (1) raw materials purchased for commercial production, (2) work-in-progress materials which consist of bulk drug substance, which is the manufactured drug stored in bulk storage, and (3) drug product, which is the manufactured drug in unlabeled ~~vials to be used for commercialization of the Company’s biologic, leronlimab, which is in the regulatory approval process.~~vials. The consumption of raw materials during production is classified as work-in-progress until saleable. Once it is determined to be in saleable condition, following regulatory approval, inventory is classified as finished goods. Inventory is evaluated for recoverability by considering the likelihood that 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 for pre-launch inventory, the Company relies on

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

The Company capitalizes inventories procured or produced in preparation for product ~~launches sufficient to support estimated initial market demand.~~launches. Typically, capitalization of such inventory begins when the results of clinical trials have reached a status sufficient to support regulatory approval, uncertainties regarding ultimate regulatory approval have been significantly reduced, and the Company has determined it is probable that these capitalized costs will provide future economic benefit in excess of capitalized costs. The material factors considered by the Company in evaluating these uncertainties include the receipt and analysis of positive Phase 3 clinical trial results for the underlying product candidate, results from meetings with the relevant regulatory authorities prior to the filing of regulatory applications, and status of the Company’s regulatory applications. The Company closely monitors the status of the product within the regulatory review and approval process, including all relevant communications with regulatory authorities. If the Company isbecomes 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, it may make a determination that the related inventory no longer qualifies for capitalization.

As one stage of the manufacturing process, the Company produces work-in-progress materials which consist of bulk drug substance, which is the manufactured drug stored in bulk storage. The initial shelf-life of bulk drug substance is established based on prior experience and periodically performed stability studies and is set at four years from the date of manufacturing. Bulk drug substance is subject to deep freeze storage, and stability studies are performed on a periodic basis in accordance with the established stability protocols. If drug substance meets suitability criteria beyond the initial shelf-life, its shelf-life may be extended based on prior experience and stability trend analysis, and during the extension period periodic stability testing is performed on the drug substance. Regardless of the number of stability studies performed, if drug substance continues to meet prespecified suitability parameters it may be used in manufacturing; if drug substance fails to meet suitability criteria beyond its assigned shelf-life at that time, it may no longer ~~qualify~~be used and is considered to be expired.

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The Company utilizes resins, a reusable raw material, in its bulk drug manufacturing process. Shelf-life of a resin used in commercial manufacturing of biologics is determined by the number of cycles for ~~capitalization.~~which it has been validated to be used in a manufacturing process before it is considered unusable. Unpacked and unused resins have a manufacturer’s expiration date by which resins are expected to start being used in the manufacturing process without loss of their properties. Prior to a new manufacturing campaign, and between manufacturing campaigns, the resins are removed from storage, and are treated and tested for suitability. Once resins are used in the manufacturing process, their shelf-life is measured by a validated predetermined number of manufacturing cycles they are usable for, conditional on appropriate storage solution under controlled environment between production campaigns, as well as by performing pre-production usability testing. Before a manufacturing campaign, each resin is tested for suitability. Regardless of the number of cycles, if a resin fails to meet prespecified suitability parameters it may not be used in manufacturing; likewise, even if the resin meets suitability criteria beyond the lifetime cycles, it may no longer be used. The cost of the resins used in a manufacturing campaign is allocated to the cost of the drug product in vials.

The Company values its inventory at the lower of cost or net realizable value using the average cost method. Inventory is evaluated for recoverability by considering the likelihood that revenue will be obtained from the future sale of the related inventory considering 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 became obsolete, has a cost in excess of its expected net realizable value, or is in quantities in excess of expected requirements. In assessing the lower of cost or net realizable value for pre-launch inventory, the Company relies on independent analyses provided by third parties knowledgeable about the range of likely commercial prices comparable to current comparable commercial product. Quarterly, the Company also evaluates whether certain raw materials held in its inventory are expected to reach the end of their estimated shelf-lives based on passage of time, the number of manufacturing cycles they are used in and results of pre-production testing prior to the expected production date, or when resins used in the manufacturing process fail suitability tests. If any of such events occur, the Company may make a determination to record a charge if it is expected that such inventories will become obsolete prior to the expected production date.

Anticipated future sales, shelf lives, and expected approval date are considered when evaluating realizability of capitalized inventory. The shelf-life of a product is determined as part of the regulatory approval process; however, in assessing whether to capitalize pre-launch ~~inventory,~~inventories, the Company considers the product stability data offor all of the pre-approval inventory procured or produced to date to determine whether there is adequate ~~shelf life. As~~shelf-life. When the remaining shelf-life of drug product inventory is less than 12 months, it is likely that it will not be accepted by potential customers. However, as inventories approach their shelf-life expiration, the Company may perform additional stability testing to determine if the inventory is still viable, which can result in an extension of its ~~shelf-life.~~shelf-life and revaluation of the need for and the amount of the previously recorded reserves. Further, in addition to performing additional stability testing, certain raw materials inventory may be sold in its then current condition prior to reaching expiration.

~~Fair Value of Financial Instruments~~

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued liabilities, short-term and long-term lease liabilities, and short-term and long-term debt. As of November 30, 2021, If the ~~carrying value of~~Company determines that it is not likely that shelf-life may be extended or the ~~Company’s cash, accounts receivable, accounts payable, and accrued liabilities approximate their fair value due~~inventory cannot be sold prior to the short-term maturity of the instruments. Short-term and long-term debt are reported at amortized cost in the Consolidated Balance Sheets which approximate fair value. The remaining financial instruments are reported in the Consolidated Balance Sheets at amounts that approximate current fair values.

~~From time to time,~~expiration, the Company may ~~have derivative financial instruments which are recorded at fair value, as required by U.S. GAAP. Derivative financial instruments consist~~record a charge to bring inventory to its net realizable value.

For additional information about the Company’s significant accounting policies, refer to Note 2, Summary 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,~~Significant Accounting Policies, ~~as its instruments are typically recorded as derivative liabilities, at fair value, and ASC 480,~~ ~~Distinguishing Liabilities from Equity,~~ ~~as it relates to warrant liabilities, with changes in fair value reflected~~ in the ~~Consolidated Statement of Operations.~~2022 Form 10-K.

~~The fair value hierarchy specifies three levels of inputs that may be used to measure fair value 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.

~~Table of Contents~~

~~The Company did not have any assets or liabilities measured at fair value using the fair value hierarchy as of November 30, 2021 and May 31, 2021.~~
~~Stock-Based Compensation~~
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. In accordance with U.S. GAAP, for stock-based awards with defined vesting, the Company recognizes compensation expense over the requisite service periods, when designated milestones have been achieved or when pre-defined performance conditions are met. The Company estimates forfeitures at the time of grant and revises its estimates, if necessary, in subsequent periods if actual forfeitures differ from such estimates. Based on limited historical experience of forfeitures, the Company estimated future unvested forfeitures at 0% for all periods presented. Historically, the Company has issued restricted common stock units subject to vesting to executives or third parties as compensation for services rendered. Such stock awards are valued at fair market value on the effective date of the Company’s obligation.
The Company also issues stock options or warrants to directors, employees, consultants and advisors for various services. The Black-Scholes option pricing model, as described more fully above, is used to measure the fair value of the equity instruments on the date of issuance. The Company recognizes the compensation expense associated with the equity instruments over the requisite service or vesting period.
~~Debt~~
The Company has historically issued promissory notes at a discount and has incurred direct debt issuance costs. Debt discount and issuance costs are netted against the debt and amortized over the life of the convertible promissory note in accordance with ASC 470-35, ~~Debt Subsequent Measurement~~.
~~Offering Costs~~
The Company periodically incurs direct incremental costs associated with the sale of equity securities as fully described in Note 7. The costs are recorded as a component of equity upon receipt of the proceeds.
~~Loss per Common Share~~
Basic loss per share is computed by dividing the net loss adjusted for preferred stock dividends by the weighted average number of 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.
The table below shows the number of shares of common stock issuable upon the exercise, vesting or conversion of outstanding options, warrants, unvested restricted stock units (including those subject to performance conditions), convertible notes, and convertible preferred stock (including undeclared dividends) that were not included in the computation of basic and diluted weighted average number of shares of common stock outstanding for the three and six months ended November 30, 2021 and November 30, 2020:

Three and six months ended November 30,

(in thousands)

2021

2020

Stock options, warrants & unvested restricted stock units

73,223

82,796

Convertible notes payable

12,000

12,000

Convertible preferred stock

34,089

31,490

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

The Company’s net tax expense for the three and six months ended November 30, 2021 and November 30, 2020, was 0. The Company’s effective tax rate of 0% differed from the statutory rate of 21% because the Company has a full valuation allowance as of November 30, 2021 and May 31, 2021, as management does not consider it more likely than not that the benefits from the net deferred taxes will be realized.
Recently Adopted Accounting Pronouncements
~~In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12,~~ ~~Simplifying the Accounting for Income Taxes (Topic 740)~~. The standard improves areas of U.S. GAAP by removing certain exceptions permitted by ASC 740 and clarifying existing guidance to facilitate consistent application. The Company adopted ASU 2019-12 on June 1, 2021. The adoption of ASU 2019-12 did not impact the Company’s statement of financial condition, results of operations, cash flows, or 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—~~Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. Update 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 adopted ASU No. 2020-06 onas of June 1, ~~2021 and it was effective for~~2022, using the ~~fiscal year beginning June 1, 2021.~~modified retrospective method. The adoption of ASU No. 2020-06 ~~did not affect~~had no impact on the Company’s ~~statement of financial condition, results~~balance sheets, statements of operations, cash flows or ~~financial~~financials statement disclosures.

~~placeholder~~

~~Note 3. Inventories~~

~~The Company’s pre-launch inventories consist~~In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of raw materials purchased for commercial production and work-in-progress inventory related to the substantially completed commercial production of pre-launch inventories of leronlimab to support the Company’s expected approval of the product as a combination therapy for HIV patients in the United States. Work-in-progress consists of bulk drug substance, which is the manufactured drug stored in bulk storage, and drug product, which is the manufactured drug in unlabeled vials.

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

(in thousands)

November 30, 2021

May 31, 2021
Raw materials

$
22,536

$
28,085
Work-in-progress

66,021

65,394
Total

$
88,557

$
93,479

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

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Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses the accounting for certain modifications or exchanges of freestanding equity-classified written call options (e.g., warrants). Entities should treat a modification of the terms or conditions, or an exchange of a freestanding equity-classified written call option that remains equity-classified after modification or exchange, as an exchange of the original instrument for a new instrument. Guidance should be applied prospectively after the date of initial application. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted.

The Company adopted the new guidance prospectively as of June 1, 2022 and used the framework to record a modification to the exercise price of equity classified warrants during the three months ended August 31, 2022. The incremental value of modification to equity instruments as a result of a trigger of a down round provision was recorded as a deemed dividend in accordance with this guidance, resulting in an approximate $4.2 million charge to additional paid-in capital. The deemed dividend was included in the loss per share calculation; refer to Note 7, Loss per Common Share. Refer to Note 6, Equity Awards and Warrants for further information.

~~the Company’s questions and met telephonically with key Company personnel and its clinical research organization concerning its BLA to expedite the resubmission of its BLA.~~Note 3. Inventories, net

Inventories were as follows (in thousands):


	August 31, 2022		May 31, 2022
Raw materials	$	16,264	$	16,264
Work-in-progress		1,665		1,665
Total inventories, net	$	17,929	$	17,929

The ~~deficiencies cited by~~table below summarizes inventory that had been capitalized and subsequently charged off for accounting purposes. Work-in-progress and finished drug product inventories continue to be physically maintained, can be used for clinical trials, and can be commercially sold if the ~~FDA in its July 2020 Refusal to File letter consisted~~shelf-lives can be extended as a result of ~~administrative deficiencies, omissions, corrections to data presentation, and related analyses and clarifications~~the performance of ~~manufacturing processes.~~on-going stability tests.


			Raw Materials								Work-in-progress
(in thousands, Expiration period ending August 31,)	Remaining shelf-life (mos)		Specialized		Resins		Other		Total Raw Materials	Bulk drug product		Finished drug product		Total inventories
2023	0 to 12	$	3,658	$	-	$	1,421	$	5,079	$	1,824	$	-	$	6,903
2024	13 to 24		682		16,264		1,590		18,536		1,665		-		20,201
2025	25 to 36		2,099		-		-		2,099		-		29,142		31,241
2026	37 to 48		3,435		-		-		3,435		-		32,344		35,779
Thereafter	49 or more		-		-		-		-		-		-		-
Inventories, gross			9,874		16,264		3,011		29,149		3,489		61,486		94,124
Inventory charge			(9,874)		-		(3,011)		(12,885)		(1,824)		(61,486)		(76,195)
Inventories, net		$	-	$	16,264	$	-	$	16,264	$	1,665	$	-	$	17,929

The Company determines whether raw materials purchased for commercial production are usable for production based on the manufacturer’s assigned expiration date. In evaluating whether raw materials included in the pre-launch inventories will be usable for production, the Company takes into the account the shelf-life of raw materials at the time they are expected to be used in manufacturing. Any raw materials past expiration date at the time of the next manufacturing run are removed from inventory. Also, as one of the stages of the manufacturing process, the Company produces work-in-progress materials which consist of bulk drug substance, which is ~~working~~the manufactured drug stored in bulk storage. The initial shelf-life of bulk drug substance is established based on prior experience and periodically performed stability studies and is set at four years from the date of manufacturing. Bulk drug substance is subject to deep freeze storage, and stability studies performed on a periodic basis in accordance with the established stability protocols. If drug substance meets suitability criteria beyond the initial shelf-life, its shelf-life may be extended based on prior experience and stability trend analysis, and during the extension period periodic stability testing is performed on the drug substance. Regardless of the number of stability studies performed, if drug substance continues to meet prespecified suitability parameters it may be used in manufacturing; if drug substance fails to meet suitability criteria beyond its assigned shelf-life at that time, it may no longer be used and is considered to be expired. Further, the Company utilizes resins, a reusable raw material, in its bulk drug manufacturing process. Shelf-life of a resin used in commercial

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manufacturing of biologics is determined by the number of cycles for which it has been validated to be used in a manufacturing process before it is considered unusable. Unpacked and unused resins have a manufacturer’s expiration date by which resins are expected to start being used in the manufacturing process without loss of their properties. Prior to a new ~~consultants~~manufacturing campaign, and between manufacturing campaigns, the resins are removed from storage, treated and tested for suitability. Once resins are used in the manufacturing process, their shelf-life is measured by a validated predetermined number of manufacturing cycles they are usable for, conditional on appropriate storage solution under controlled environment between production campaigns, as well as by performing pre-production usability testing. Before a manufacturing campaign, each resin is tested for suitability. Regardless of the number of cycles, if a resin fails to ~~cure~~meet prespecified suitability parameters it may not be used in manufacturing; likewise, even if the resin meets suitability criteria beyond the lifetime cycles, it may no longer be used. The cost of the resins used in a manufacturing campaign is allocated to the cost of the drug product in vials.

During the fourth quarter of fiscal 2022, the Company concluded that a significant portion of inventories no longer qualify for capitalization as pre-launch inventories due to expiration of shelf-life prior to expected commercial sales and the ability to obtain additional commercial product stability data until after shelf-life expiration. This is due to delays experienced from the originally anticipated BLA ~~deficiencies~~approval by the FDA. Although these inventories are no longer being capitalized as pre-launch inventories for US GAAP accounting purposes, the inventories written-off for accounting purposes continue to be physically maintained, can be used for clinical trials, and ~~resubmit~~can be commercially sold if the ~~BLA in order to enable~~shelf-lives are extended as the ~~FDA to perform their substantive review.~~result of the performance of on-going stability testing of drug product. In the event the shelf-lives of these written-off inventories are extended, and the inventories are sold commercially, the Company will not recognize any costs of goods sold on the previously expensed inventories. The Company ~~commenced~~also concluded that, due to delays of future production, certain raw materials would expire prior to production and as such no longer qualify for capitalization. Specifically, the Company evaluated its ~~resubmission~~raw materials, which consist of specialized raw materials, resins, and other, against the ~~BLA in July 2021. In November 2021 it resubmitted~~anticipated production date and determined that while the ~~non-clinical~~next production date was indeterminable as of May 31, 2022, specialized raw materials have remaining shelf-lives ranging from 2023 to 2026. Therefore, a reserve of $10.2 million for the entire remaining value of specialized and ~~manufacturing sections~~other raw materials was recorded as of ~~the BLA, and currently expects to complete the resubmission process with the resubmission of the clinical section of the BLA in the first calendar quarter of~~May 31, 2022. The Company also concluded that approximately $29.1 million, composed of five batches of drug product, out of a total of nine manufactured, is likely to expire prior to the anticipated date the product may be approved for commercialization. Additionally, the Company anticipates that ~~when~~approximately $34.2 million of the ~~FDA completes their review, leronlimab will be approved and market acceptance~~drug product comprising the remaining four manufactured batches, with shelf-lives lasting into 2026, may expire prior to receiving approval for commercialization. The Company wrote-off the entire remaining balance of ~~leronlimab as a treatment for HIV will be forthcoming, enabling us to realize~~the drug product, in the amount of ~~pre-launch inventory on-hand prior to shelf-life expiration. Accordingly, management believes~~$63.3 million, as of May 31, 2022.

During the first quarter of fiscal 2023, the Company ~~will realize future economic benefit~~reviewed purchase commitments made by its manufacturing partner, Samsung BioLogics Co., Ltd. (“Samsung”), under the master agreement between the Company and Samsung, and its vendors for specialized raw materials for which the Company made a prepayment in ~~excess~~the amount of $2.7 million in the third quarter of fiscal 2022, which were recorded as other assets in the consolidated financial statements as of May 31, 2022. The Company and its manufacturing partner have been in discussions, among other things, about cancelling the commitments to the suppliers, which have been unsuccessful to date. These additional specialized raw materials are estimated to have shelf-lives ranging from 2023 to 2026. The entire amount was reserved for as of August 31, 2022.

During the fourth quarter of fiscal 2022, the Company completed its validation of the ~~carrying value~~resins’ properties based on the number of ~~its pre-launch inventory.~~

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

Expiration period ending November 30,

Remaining shelf-life

Raw materials

Work-in-progress bulk drug product

Work-in-progress finished drug product in vials

Total inventories
2022

0 to 12 months

$
21,014

$
-

$
-

$
21,014
2023

13 to 24 months

1,078

-

-

1,078
2024

25 to 36 months

1,902

-

29,143

31,045
2025

37 to 48 months

192

-

24,315

24,507
2026

49 to 60 months

695

-

-

695
Thereafter

61 or more months

157

12,563

-

12,720
Total inventories

25,038

12,563

53,458

91,059
Inventories reserved

(2,502)

-

-

(2,502)
Total inventories, net

$
22,536

$
12,563

$
53,458

$
88,557

~~When~~cycles they have been used for, and the remaining ~~shelf-life~~number of drug product inventory is less than 12 months, it is likely that it will not be accepted by potential customers. However, as inventories approach their shelf-life expiration, the Company may perform additional stability testing to determine if the inventory is still viable, which can result in an extension of its shelf-life. Further, in addition to performing additional stability testing, certain raw materials inventorymanufacturing cycles they may be sold in its then current condition prior to reaching expiration. If the Company determines it is not likely shelf-life will be able to be extended or the inventory cannot be sold prior to expiration, the Company will write-down the inventory to its net realizable value. During the three and six months ended November 30, 2021, the Company reserved for inventory write-downs of approximately $0.7 million and $1.8 million, respectively, which were related to current and future estimated obsolescence of raw materials. During the three and six months ended November 30, 2020,used for; the Company did not ~~reserve for~~identify any ~~write-down~~resins that failed suitability validation. As of ~~inventory. These expenses are included in research~~August 31, 2022, the remaining life of resins remained unchanged, ranging between 37 and ~~development expense.~~

~~In addition, during~~62 cycles. The Company will continue to present its resins inventory based on the ~~three and six months ended November 30, 2021,~~remaining shelf-lives until a new shelf-life is assigned based on the ~~Company wrote-off inventory which had not been previously reserved for~~results of approximately $1.0 million and $1.5 million, respectively, which related to expired raw materials not previously reserved for and untested vialed drug product used for clinical purposes. During the three and six months ended November 30, 2020, the Company recognized inventory write-offs of approximately $4.8 million, which related to abnormal spoilage and manufacturing errors committed by the contract manufacturer during the manufacturing process. These expenses are included in research and development expense.usability testing.

Note 4. Accounts Payable and Accrued Liabilities

As of ~~November 30, 2021~~August 31, 2022 and May 31, ~~2021,~~2022, the accounts payable balance was approximately ~~$58.0~~$69.0 million and ~~$65.9~~$68.0 million, ~~respectively. As of November 30, 2021~~respectively, with two vendors accounting for 69% and ~~May 31, 2021, 2~~73% of the ~~Company’s vendors accounted~~total balance of accounts payable at the respective dates.

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

The components of accrued liabilities ~~were~~are as follows ~~as of November 30, 2021 and May 31, 2021:~~(in thousands):

As of
(in thousands)

November 30, 2021

May 31, 2021
Accrued compensation and related expense

$
796

$
4,005
Accrued legal settlement and fees

1,401

11,008
Accrued other liabilities

4,457

4,060
Total accrued liabilities

$
6,654

$
19,073

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

	��
			August 31, 2022		May 31, 2022
Compensation and related expense		$	792	$	1,522
Legal fees and settlement			1,017		2,006
Clinical expense			311		3,727
Unbilled inventory			2,218		1,392
License fees			541		150
Lease payable			135		134
Other liabilities			-		64
Total accrued liabilities		$	5,014	$	8,995

Note 5. Convertible Instruments and Accrued Interest

Convertible Preferred Stock

The following table presents the number of potentially issuable shares of common stock should shares of preferred stock and amounts of undeclared and accrued preferred dividends be converted to common stock.


	August 31, 2022						May 31, 2022
(in thousands)	Series B		Series C		Series D		Series B		Series C		Series D
Shares of preferred stock		19		6		9		19		7		9
Total shares of common stock if converted		190		12,670		10,565		190		13,806		10,565
Undeclared dividends	$	11	$	-	$	-	$	10	$	-	$	-
Accrued dividends	$	-	$	2,186	$	2,175	$	-	$	2,014	$	1,963
Total shares of common stock if dividends converted		22		4,372		4,350		20		4,028		3,926

Under the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), dividends on its outstanding shares of Series DB Convertible Preferred Stock

As (the “Series B preferred stock”) may be paid in cash or shares of ~~November 30, 2021,~~ the ~~Company had authorized 11,737~~Company’s common stock at the option of the Company. Dividends on outstanding shares of Series C Convertible Preferred Stock (the “Series C preferred stock”) and Series D Convertible Preferred Stock ~~$0.001 par value per~~(the “Series D preferred stock”) are payable in cash or shares of common stock at the election of the holder. The preferred stockholders have the right to dividends only when and if declared by the Company’s Board of Directors. Under Section 170 of the Delaware General Corporation Law, the Company is permitted to pay dividends only out of capital surplus or, if none, out of net profits for the fiscal year in which the dividend is declared or net profits from the preceding fiscal year.

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Series B Convertible Preferred Stock

Each share (“of the Series ~~D Preferred Stock”),~~B preferred stock is convertible into ten shares of ~~which 8,452 shares were outstanding. The~~the Company’s common stock. Dividends are cumulative and payable to the Series ~~D Certificate of Designation provides, among other things, that holders of Series D Preferred Stock shall be entitled to receive,~~B preferred stockholders when and as declared by the Company’s Board of Directors (the “Board”) ~~and out of any assets at~~. Dividends on the ~~time legally available therefor, cumulative dividends~~Series B preferred stock accumulate at the rate of ~~ten percent (10%)~~$0.25 per share per annum, ~~of the stated value of the Series D Preferred Stock, which is $1,000 per share (the “Series D Stated Value”). Any dividends paid by the Company will first~~and may be paid, toat 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 are cumulative, and will accrue and be compounded annually, whether or not declared and whether or not there are any profits, surplus or other funds or assetsoption of the Company ~~legally available therefor. There are no sinking fund provisions applicable to~~at the ~~Series D Preferred Stock. The Series D Preferred Stock does not have redemption rights. Dividends, if declared by the Board, are payable to holders in arrears on December 31~~time of ~~each year. Subject to the provisions of applicable Delaware law, the holder may elect to be paid~~conversion, either in cash or ~~in restricted~~ shares of the Company’s common stock valued at ~~the rate of~~ $0.50 per share. ~~As of November 30, 2021 and May 31, 2021,~~The Series B preferred stock has liquidation preferences over the ~~accrued dividends were approximately $1.5 million, or approximately 3.0 million~~common shares ~~of common stock, and approximately $1.1 million, or approximately 2.2 million shares of common stock, respectively.~~

In the event of any liquidation, dissolution or winding up of the Company, the holders of Series D Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the Series C Convertible Preferred Stock, $0.001 par valueat $5.00 per share, (“Series C Preferred Stock”), and in preference to any payment or distribution to any holders of the Series B Convertible Preferred Stock, $0.001 par value per share (“Series B Preferred Stock”), or common stock, an amount per share equal to the Series D Stated Value plus ~~the amount of~~ any accrued and unpaid dividends. If, at any time while the Series D Preferred Stock is outstanding, the Company effects any reorganization, merger or consolidation of the Company, sale of substantially all of its assets, or other specified transaction (each, as defined in the Series D Certificate of Designation, a “Fundamental Transaction”), a holder of the Series D Preferred Stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series D Preferred Stock immediately prior to the Fundamental Transaction. Each share of Series D Preferred Stock is convertible at any time at the holder’s option into that number of fully paid and nonassessable shares of common stock determined by dividing the Series D Stated Value by the conversion price of $0.80 (subject to adjustment as set forth in the Series D Certificate of Designation). No fractional shares will be issued upon the conversion of the Series D Preferred Stock.

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Except as ~~otherwise~~ provided ~~in the Series D Certificate of Designation or as otherwise required~~ by law, the Series ~~D Preferred Stock has~~B preferred stockholders have no voting rights. The Company does not accrue dividends on Series B preferred stock until such dividends are declared.

Series C and Series D Convertible Preferred Stock

As of November 30, 2021, the Company had authorized 8,203 shares of Series C Convertible Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”), of which 8,203 shares were outstanding. The Series C ~~Certificate~~and Series D Certificates of Designation ~~provides,~~provide, among other things, that holders of Series C ~~Preferred Stock~~and Series D preferred stock shall be entitled to receive, when and as declared by the Board and out of any assets at the time legally available therefor, cumulative dividends at the rate of ten percent (10%) per share per annum of the stated value of the Series C ~~Preferred Stock,~~and Series D preferred stock, which is $1,000 per share (the ~~“Series C Stated~~“Stated Value”). ~~Any dividends paid by the Company will be paid to the holders of Series C Preferred Stock prior and in preference to any payment or distribution to holders of common stock.~~ Dividends on the Series C ~~Preferred Stock~~and Series D preferred stock are cumulative, and will accrue and be compounded annually, whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally available therefor. ~~There are no sinking fund provisions applicable to~~Dividends on the Series C ~~Preferred Stock. The~~and Series D preferred stock may be paid in cash or shares of the Company’s common stock at the option of the holder. Series C ~~Preferred Stock~~and Series D preferred stock does not have redemption rights. ~~Dividends, if declared by~~Each share of Series C and Series D preferred stock is convertible at the ~~Board, are payable to holders in arrears on December 31 of each year. Subject to the provisions of applicable Delaware law, the holder may elect to be paid in cash or in restricted~~holder’s option into shares of common stock, ~~at the rate~~with Series C stockholders having conversion price of $0.50 per ~~share. As~~share, and Series D stockholders having conversion price of ~~November 30, 2021~~$0.80 per share, together with accrued and ~~May 31, 2021,~~unpaid dividends payable, at the ~~accrued dividends were approximately $1.9 million,~~option of the holder, in cash or ~~approximately 3.9 million~~ shares of common stock based on the conversion price. Given the obligation to settle all dividends, including those in arrears, in cash at the election of the preferred stockholder upon conversion, whether or not declared by the Company, the Company accrues dividends on Series C and ~~approximately $1.5 million, or approximately 3.0 million shares of common~~D preferred stock ~~respectively.~~as a liability in its consolidated financial statements.

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

and Series ~~B Convertible Preferred Stock~~

As of November 30, 2021, the Company had authorized 400,000 shares of Series B Preferred Stock, of which 19,000 shares were outstanding. Each share of the Series B Preferred Stock is convertible into 10 (10) shares of the Company’s common stock. Dividends are payable to the Series B Preferred stockholders when and as declared by the Board 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 therefor. At the option of the Company, dividends on the Series B Preferred Stock may be paid in cash or shares of the Company’s commonD preferred stock valued at $0.50 per share. The holders of the Series B Preferred Stock can only convert their shares to shares of common stock if the Company has sufficient authorized shares of common stock at the time of conversion. The Series B Preferred Stock has liquidation preferences over the common shares at $5.00 per share, plus any accrued and unpaid dividends. Except as provided by law, the Series B holders have no voting rights. As of November 30, 2021 and May 31, 2021, the undeclared dividends totaled $7,316 or 14,631 shares of common stock, and approximately $17,800, or approximately 35,500 shares of common stock, respectively.

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Convertible Notes and Accrued Interest

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


For additional information about the Company’s debt policies, refer to Note 2, Summary of Significant Accounting Policies, of the 2022 Form 10-K. Outstanding balances associated with the Company’s convertible notes and related accrued interest are as follows:
	As of November 30, 2021									As of May 31, 2021								August 31, 2022						May 31, 2022
(in thousands)	November 2020 Note		April 2, 2021 Note			April 23, 2021 Note		Total		November 2020 Note		April 2, 2021 Note		April 23, 2021 Note		Total		April 2, 2021 Note		April 23, 2021 Note		Total		April 2, 2021 Note		April 23, 2021 Note		Total
Convertible notes payable outstanding principal	$	-	$	19,500		$	28,500	$	48,000	$	13,500	$	28,500	$	28,500	$	70,500	$	9,819	$	28,500	$	38,319	$	9,819	$	28,500	$	38,319
Less: Unamortized debt discount and issuance costs		-		(1,613)			(2,440)		(4,053)		(1,204)		(3,232)		(3,317)		(7,753)		(359)		(1,127)		(1,486)		(512)		(1,566)		(2,078)
Convertible notes payable, net		-		17,887	-		26,060		43,947		12,296		25,268		25,183		62,747		9,460		27,373		36,833		9,307		26,934		36,241
Accrued interest on convertible notes		-		1,866			1,804		3,670		1,258		447		302		2,007		2,920		4,200		7,120		2,599		3,375		5,974
Outstanding convertible notes payable, net and accrued interest	$	-	$	19,753		$	27,864	$	47,617	$	13,554	$	25,715	$	25,485	$	64,754	$	12,380	$	31,573	$	43,953	$	11,906	$	30,309	$	42,215

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

(in thousands)

November 2020 Note

April 2, 2021 Note

April 23, 2021 Note

Total
Outstanding balance May 31, 2021

$
13,554

$
25,715

$
25,485

$
64,754
Consideration received

-

-

-

-
Amortization of issuance discount and costs

98

821

877

1,796
Interest expense accrued

192

1,419

1,502

3,113
Cash repayments

-

-

-

-
Conversions

-

-

-

-
Fair market value of shares exchanged for repayment

(18,495)

(11,514)

-

(30,009)
Debt extinguishment loss

4,651

3,312

-

7,963
Outstanding balance November 30, 2021

$
-

$
19,753

$
27,864

$
47,617

~~Long-term Convertible Note—November 2020 Note~~

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

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


(in thousands)	April 2, 2021 Note		April 23, 2021 Note		Total
Outstanding balance at May 31, 2022	$	11,906	$	30,309	$	42,215
Amortization of issuance discount and costs		153		439		592
Interest expense		321		825		1,146
Outstanding balance at August 31, 2022	$	12,380	$	31,573	$	43,953

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

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

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

On July 14, 2021 and July 27, 2021, in partial satisfaction of the July 2021 debt reduction amount, the Company and the November 2020 Note holder entered into exchange agreements, pursuant to which the November 2020 Note was partitioned into new notes (the “July 2021 Partitioned Notes”) with a principal amount equal to $4.0 million. The Company and the holder of the November 2020 Note agreed to defer the remaining $3.5 million July 2021 debt redemption amount. The outstanding balance of the November 2020 Note was reduced by the July 2021 Partitioned Notes. The Company and the investor exchanged the July 2021 Partitioned Notes for approximately 3.3 million shares of common stock.

On August 4, 2021, August 16, 2021 and August 30, 2021, in partial satisfaction of the August 2021 debt reduction amount, the Company and the November 2020 Note holder entered into exchange agreements, pursuant to which the remaining principal and accrued balance of the November 2020 Note was partitioned into new notes (the “August 2021 Partitioned Notes”) with a principal amount equal to approximately $4.9 million. The Company and the holder of the November 2020 Note agreed to defer the remaining approximately $2.6 million August 2021 debt reduction amount. The Company and the investor exchanged the August 2021 Partitioned Notes for approximately 4.4 million shares of common stock. Following the redemption, the November 2020 Note was fully satisfied and there is no outstanding balance as of November 30, 2021.

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

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

Long-term Convertible ~~Note—~~Note – April 2, 2021 Note

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

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

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

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

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

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

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

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

~~On October 5, 2021 and October 21, 2021,~~five months. During fiscal 2022, in partial satisfaction of ~~the October 2021~~ debt reduction ~~amount,~~amounts, the Company and the April 2, 2021 Note holder entered into exchange agreements, pursuant to

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which the April 2, 2021 Note was partitioned into new notes (the ~~“October 2021 Partitioned~~“Partitioned Notes”) with aan aggregate principal amount ~~equal to $5.0 million. The Company and~~of $18.7 million, which were exchanged concurrently with the ~~holder~~issuance of ~~the April 2, 2021 Note agreed to defer the remaining October 2021 debt redemption amount~~approximately 25.3 million shares of ~~$2.5 million.~~common stock. The outstanding balance of the April 2, 2021 Note was reduced by the ~~October 2021 Partitioned Notes. The Company and the investor exchanged the October 2021~~ Partitioned Notes ~~for approximately 3.9 million shares of common stock.~~

~~On November 2, 2021 and November 16, 2021, in partial satisfaction of the November 2021 debt reduction amount, the Company and the April 2, 2021 Note holder entered into exchange agreements, pursuant~~ to ~~which the remaining principal and accrued balance of the April 2, 2021 Note was partitioned into new notes (the “November 2021 Partitioned Notes”) with~~ a principal amount ~~equal to approximately $4.0~~of $9.8 million. The Company and the holder of the April 2, 2021 Note agreed to defer the remaining approximately $3.5 million November 2021 debt reduction amount. The Company and the investor exchanged the November 2021 Partitioned Notesaccounted for ~~approximately 4.2 million shares of common stock.~~

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

~~Table of Contents~~

~~Modifications~~ and ~~Extinguishments. The Company concluded debt extinguishment accounting treatment to be necessary~~exchange settlements as induced conversion, and, accordingly, recorded an aggregate loss on convertible debt ~~extinguishment loss~~induced conversion of ~~approximately $3.3~~$18.8 million through May 31, 2022; none for the three months ended ~~November 30, 2021, as the difference between the fair market value of the shares issued~~August 31, 2022 and ~~the carrying value of the debt retired, which included the amortization of the relative debt discount and issuance costs.~~

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

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

Long-term Convertible ~~Note—~~Note – April 23, 2021 Note

On April 23, 2021, 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 affiliated with the holder of the ~~November 2020 and~~ April 2, 2021 ~~Notes~~Note in the initial principal amount of $28.5 million (the “April 23, 2021 Note”). The Company received consideration of $25.0 million, reflecting an original issue discount of $3.4 million and issuance costs of $0.1 million. ~~The April 23, 2021 Note is secured by all the assets~~Interest accrues at an annual rate of ~~the Company, excluding the Company’s intellectual property.~~

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

Pursuant to the terms of the April 23, 2021 Note, the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $75.0 million. In the event of any such approval, the outstanding principal balance of the April 23, 2021 Note will increase automatically by 5% upon the issuance of such additional debt. The investor may convert all or any part of the outstanding balance ~~of the April 23, 2021 Note~~ into shares of common stock at an initial conversion price of $10.00 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the April 23, 2021 Note. In addition to standard anti-dilution adjustments, the conversion price of the April 23, 2021 Note is subject to full-ratchet anti-dilution protection, pursuant to which the conversion price will be automatically reduced to equal the effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered under the Securities Act. The April 23, 2021 Note provides for liquidated damages upon failure to deliver common stock within specified timeframes and requires the Company to maintain a share reservation of 6.0 million shares of common stock.

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

Pursuant to the terms of the securities purchase agreement and the April 23, 2021 Note, the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $75.0 million. In the event of any such approval, the outstanding principal balanceThe holders of the April 2 and April 23 ~~2021 Note will increase automatically by 5% upon~~Notes waived provisions in the notes that could have triggered the imposition of a default interest rate, a downward adjustment of the conversion price, or specified other provisions relating to default, breach or imposition of a penalty. The related events included the grant of registration rights to investors in specified private offerings, the issuance of ~~such additional debt.~~warrants to purchase 30 million shares of common stock with registration rights to certain parties and potential incurrence of debt pursuant to a Surety Bond Backstop Agreement (the “Backstop Agreement”), and the grant of a security interest in the Company’s intellectual property to certain parties to the Backstop Agreement. Refer to Note 6, Equity Awards and Warrants.

Note 6. Equity Awards

Approval of Increase in Authorized Common Stock

On August 31, 2022, the stockholders’ of the Company, at a special stockholders’ meeting approved a proposal to increase the total number of authorized shares of common stock from 1.0 billion shares to 1.35 billion shares.

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~~The embedded conversion feature~~From June 24, 2022 through August 31, 2022, the Company had insufficient authorized common stock to reserve for the shares underlying the Surety Backstop warrants and warrants issued to a placement agent in connection with the ~~April 23, 2021 Note was analyzed~~June 2022 offering (Refer to Private Placement of Warrants under Surety Bond Backstop Agreement and Private Placement of Common Stock and Warrants through Placement Agent sections below.) On August 31, 2022, the stockholders of the Company approved an increase to the Company’s authorized common stock, after which sufficient shares were authorized, including those to cover the shares underlying the warrants. Given that the Company did not have a sufficient number of authorized shares for the two instruments at the time they were issued, the Company evaluated, and accounted for such warrants between June and August, as liability classified warrants consistent with ASC 815, Derivatives and Hedging.

In accordance with the prescribed accounting guidance, the Company measured fair value of liability classified warrants using fair value hierarchy which include:

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 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.

As of August 31, 2022, in accordance with ASC 815, Derivatives and Hedging,, the Company reclassified the warrants to ~~determine if it achieved~~ equity ~~classification or required bifurcation as~~due to having a ~~derivative instrument. The embedded conversion feature was considered indexed~~sufficient number of authorized shares upon receiving approval of an increase 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.~~authorized common stock. The Company ~~determined there was no beneficial conversion feature since~~recorded a loss on derivatives of approximately $8.6 million in the ~~effective conversion rate was greater than the~~quarter ended August 31, 2022 due to change in fair market value of the ~~Company’s common stock upon issuance. Certain default put provisions were not considered to be clearly~~liability classified warrants between June 24 and ~~closely related to~~August 31, 2022. The table below presents a reconciliation of the ~~host instrument, but~~beginning and ending balances for liabilities measured at fair value during the ~~Company concluded that~~three months ended August 31, 2022, and the ~~value of these default put provisions was de minimis.~~ year ended May 31, 2022:


(in thousands)		Liability Classified Warrants
Balance at May 31, 2022	$	—
Classified as liability due to lack of shares availability at issuance		14,522
Classified as equity upon increase in availability		(23,123)
Loss on derivative due to change in fair market value		8,601
Balance at August 31, 2022	$	—

The Company ~~evaluates~~used a Black Scholes valuation model to estimate the value of the ~~default put provisions each reporting period to determine if~~liability classified warrants using assumptions presented in the ~~value becomes material to~~table below. The Black Scholes valuation model was used because management believes it reflects all the ~~financial statements.~~

~~Amortization~~assumptions that market participants would likely consider in negotiating the transfer of ~~debt discounts and issuance costs associated with~~ the ~~April 23, 2021 Note during the three and six months ended November 30, 2021 was approximately $0.4 million and $0.9 million, respectively.~~warrant. The unamortized discount and issuance costs balance for the April 23, 2021 Note was approximately $2.4 million as of November 30, 2021. The accrued interest balance for the April 23, 2021 Note was approximately $1.8 million at November 30, 2021, which included approximately $1.5 million of interest expense for the six months ended November 30, 2021. The carrying value on the April 23, 2021 Note, including accrued interest, as of November 30, 2021, was approximately $27.9 million.Company’s derivative liability is classified within Level 3.



	Initial Fair Market Value At Issuance			Fair Market Value at August 31, 2022
	Backstop	Backstop	Placement	Backstop	Backstop	Placement
	Warrant #1	Warrant #2	Agent Warrants	Warrant #1	Warrant #2	Agent Warrants
Fair value of underlying stock	$ 0.44	$ 0.42	$ 0.44	$ 0.52	$ 0.52	$ 0.52
Risk free rate	3.17%	3.06%	3.13%	3.34%	3.31%	3.16%
Expected term (in years)	4.65	5.00	10.00	4.46	4.88	9.82
Stock price volatility	110.20%	109.49%	95.99%	117.29%	113.59%	95.87%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%

~~Note 6. Equity Awards and Warrants~~

The Company has 1 active stock-based equity plan at November 30, 2021, the CytoDyn Inc. Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”), and 1 stock-based equity plan that is no longer active, but under which certain prior awards remain outstanding. The 2012 Plan covered a total of 50 million shares of common stock at May 31, 2021. Effective June 1, 2021, the amount covered and available shares under the 2012 Plan increased by approximately 6.3 million shares due to a provision in the 2012 Plan under which the total number of shares available to be issued automatically increases on the first day of each fiscal year in an amount equal to 1% of the total outstanding shares on the last day of the prior fiscal year, unless the Board determines otherwise before the fiscal yearend. As of November 30, 2021, there were approximately 18.8 million shares remaining available for future stock-based grants under the 2012 Plan.

~~Stock Options and Other Equity Awards~~

During the six months ended November 30, 2021, the Company granted stock options covering a total of approximately 11.0 million shares of common stock to employees with exercise prices ranging from $1.32 to $2.23 per share. These stock options vest in three installments and have a ten-year term and a grant date fair value of between $0.93 and $1.71 per share.

During the six months ended November 30, 2021, the Company issued approximately 0.5 million shares of common stock in connection with the exercise of stock options. The stated exercise price was between $0.63 and $1.06 per share, which resulted in aggregate gross proceeds of approximately $0.4 million to the Company.

During the six months ended November 30, 2021, the Company issued approximately 0.4 million shares of common stock in connection with the vesting of performance stock units (“PSUs”) awarded in June 2020. The PSUs were subject to the Compensation Committee’s determination of the level of achievement of certain performance conditions set forth in the respective award agreements. The original awards covered a total of 4.35 million PSUs, of which approximately 3.9 million PSUs were forfeited. In connection with the approximate 0.4 million shares of common stock that vested, the Company recognized approximately $1.3 million in stock-based compensation expense in the fourth quarter of fiscal year 2021.

During the six months ended November 30, 2021, the Company issued approximately 0.4 million shares of common stock in connection with the time-based vesting of restricted stock units (“RSUs”). The Company incurred $0.3 million in stock-based compensation expense during the six months ended November 30, 2021 related to RSUs. Also, during the six months ended November 30, 2021, certain members of management received shares of fully vested common stock in lieu of a portion of their cash bonus for services in fiscal year 2021 totaling approximately 0.2 million

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Equity Incentive Plan

As of August 31, 2022, the Company had one active stock-based equity plan, the CytoDyn Inc. Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”), and one stock-based equity plan that is no longer active, but under which certain prior awards remain outstanding. As of May 31, 2022, the 2012 Plan covered a total of 34.3 million shares of common stock. As of May 31, 2022, the Board had released from reservation under the 2012 Plan a total of 22.0 million shares of common stock to permit their use for general purposes, leaving approximately 3.9 million shares available for future stock-based awards under the 2012 Plan. The Board also made a determination on May 31, 2022, to waive the “evergreen provision” that would have automatically increased the number of shares of common stock subject to the 2012 Plan by an amount equal to 1% of the total outstanding shares on that date. Following approval by the stockholders of the 350.0 million increase in authorized shares of common stock on August 31, 2022, the 22.0 million shares were restored for issuance under the 2012 Plan.

Stock Options, Equity Awards, Warrants, and Stock-Based Compensation

Stock option and warrants activity is presented in the table below:


				Weighted
				average
		Weighted		remaining	Aggregate
	Number of	average		contractual	intrinsic
(in thousands, except per share data)	shares	exercise price		life in years	value
Options and warrants outstanding at May 31, 2022	90,705	$	0.77	4.06	$	352
Granted	104,104	$	0.25
Exercised	(863)	$	0.49
Forfeited, expired, and cancelled	(484)	$	1.57
Options and warrants outstanding at August 31, 2022	193,462	$	0.48	4.36	$	36,758
Options and warrants outstanding and exercisable at August 31, 2022	187,896	$	0.45	4.24	$	36,717

As of August 31, 2022, approximately 11.9 million outstanding stock options were vested, approximately 5.3 million outstanding stock options were unvested, and all outstanding warrants were exercisable.

In the three months ended August 31, 2022 and 2021, stock-based compensation expense, inclusive of stock issued for compensation, presented in general and administrative expense in the Company’s consolidated statements of operations, totaled approximately $1.3 million and $2.6 million, respectively. For the three months ended August 31, 2022, approximately $5.3 million of stock-based compensation expense related to warrants issued under the Backstop Agreement, as amended, was recorded as a finance charge in the accompanying consolidated statement of operations; none in the three-month period ended August 31, 2021. Refer to Private Placement of Warrants under Surety Bond Backstop Agreement below for further information.

During the three months ended August 31, 2022, the Company granted stock options covering a total of approximately 0.2 million shares of common stock to employees with exercise prices ranging from $0.41 to $0.67 per share. The stock options vest over four years, have a ten-year term, and a grant date fair value between $0.33 and $0.54 per share. During the same period in the prior year, the Company also issued approximately 0.2 million shares of common stock in connection with the time-based vesting of restricted stock units (“RSUs”) for which it recognized $0.1 million in stock-based compensation expense; there were no issuances of shares of common stock in connection with the exercise of stock options or in connection with the vesting of performance stock units (“PSUs”) in the three months ended August 31, 2022.

Issuance of Shares to Former and Current Executives

During the fiscal year ended May 31, 2022, the employment of our CEO and General Counsel was terminated. Under the terms of their respective employment agreements, the Company was obligated to pay severance equal to 18 months of salary to our former CEO and 12 months of salary to our former General Counsel. As permitted by the

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employment agreements, in March 2022, the Board authorized the severance payments to our former CEO and the remaining severance payments to our former General Counsel to be made through the issuance of shares of common stock.

During the three months ended August 31, 2022, the Company issued to our former General Counsel a total of 79,391 shares of common stock to satisfy in full its obligation under the terms of the employment agreement. During the same period, consistent with the terms of our former CEO’s employment agreement, the Company also issued 88,983 shares of common stock in satisfaction of the severance amounts due for the months of June, July, and August 2022. The numbers of shares issued were based on the closing price of the common stock on the applicable date.

In order to preserve cash resources, in April 2022, the Board of Directors approved the issuance to then executive officers of shares of common stock with a value equal to 25 percent of salary in lieu of cash, net of payroll deductions and withholding taxes. During the three months ended August 31, 2022, a total of 235,676 shares of common stock were issued pursuant to this cash preservation program. The number of shares issued was based on the closing price of the common stock on each payroll date.

Private Placement of Warrants under Surety Bond Backstop Agreement

On February 14, 2022, the Company entered into the Backstop Agreement with an accredited investor in his individual capacity and as trustee of a revocable trust, as well as certain other related parties (collectively, the “Indemnitors”). Pursuant to the Backstop Agreement, the Indemnitors agreed to assist the Company in obtaining a surety bond (the “Surety Bond”) for posting in connection with the Company’s ongoing litigation with Amarex Clinical Research, LLC ("Amarex”) by, among other things, agreeing to indemnify the issuer of the Surety Bond (the “Surety”) with respect to the Company’s obligations under the Surety Bond through August 13, 2022. As consideration for the Indemnitors’ agreement to indemnify the Surety, the Company agreed (i) to issue to 4-Good Ventures LLC, an affiliate of the Indemnitors (“4-Good”), a warrant for the purchase of 15,000,000 shares of common stock as a backstop fee (the “Initial Warrant”), (ii) to issue to 4-Good a warrant for the purchase of an additional 15,000,000 shares, to be exercisable only if the Indemnitors were required to make any payment to the Surety (the “Make-Whole Warrant” and, together with the Initial Warrant, the “4-Good Warrants”), and (iii) if the Indemnitors are required to make a payment to the Surety, (A) within 90 days of such payment, to reimburse the Indemnitors for any amount paid to the Surety and (B) to pay to the Indemnitors an indemnification fee in an amount equal to 1.5 times the amount paid by the Indemnitors to the Surety. The payment obligations of the Company to the Indemnitors will bear interest at 10% per annum and are secured by substantially all of the patents held by the Company. The Company recognized a finance charge of approximately $6.6 million related to the warrant issuance for the year ended May 31, 2022.

Pursuant to an amendment to the Backstop Agreement executed on July 18, 2022 (the “Backstop Amendment”), among other matters: (i) the obligation of the Indemnitors to indemnify the Surety was extended from August 13, 2022 to November 15, 2022; (ii) each of the 4-Good Warrants has a five-year term from the date of issuance and an exercise price of $0.20 per share (reduced from $0.30 per share); (iii) the Make-Whole Warrant was amended to be fully exercisable immediately; (iv) the Indemnitors and 4-Good agreed to waive the requirement to reserve for issuance the shares subject to the Make-Whole Warrant pending stockholder approval of an increase in the authorized shares of common stock; and (v) upon the exercise in full of the 4-Good Warrants, the Company agreed to take reasonable steps to cause the Indemnitors to be released from their indemnity obligations by an amount equal to the exercise proceeds.

Private Placement of Common Stock and Warrants through Placement Agent

In April 2022, the Company initiated a private placement of common stock and warrants, completed in June 2022, to accredited investors through a placement agent. Between April and June 2022, the Company sold a total of approximately 85.4 million shares of common stock for a total of approximately $18.9 million of proceeds, net of issuance costs. Of these, approximately $7.7 million of proceeds, net of issuance costs, relating to approximately 34.6 million shares were remitted to the Company by May 31, 2022. Each unit sold included a fixed combination of one share of common stock and three-quarters of one warrant to purchase one share of common stock for a purchase price of $0.255 per unit. The Company issued approximately 64.0 million warrants to investors with each such warrant having a five-year term and an exercise price of 120% of the final unit price, or $0.306 per share, and are immediately exercisable. The Company paid the placement agent a total cash fee of approximately $2.8 million, equal to 13% of the gross proceeds of the offering, as well as a one-time fee for expenses of $50,000, and issued a total of approximately

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19.4 million warrants with an exercise price of $0.255 per share and a ten-year term, representing 13% of the total number of shares, including shares subject to warrants sold in the offering, to the placement agent and its designees. The issuance of the warrants to the placement agent was subject to the approval by the Company’s stockholders of an increase in authorized shares of common stock, which was approved on August 31, 2022.

Down Round Provision Issuance and Modification to Previous Private Offerings

During the three months ended August 31, 2022, common stock and warrants previously issued between February and April 2022 to accredited investors directly by the Company in a private placement became subject to a down round provision under the original purchase agreements requiring the Company to reduce the purchase price of common stock from the original price of $0.40 to $0.255 per share, to increase the percentage of the warrant coverage from 50% to 75% based on the revised amount of total shares issued, and to reduce the exercise price of the warrants from the original price of $0.40 to $0.255, the terms in the latest round of financing conducted by the Company through the placement agent as discussed above. As a result, an approximate additional 4.6 million shares of common stock and 5.5 million warrants were issued. The incremental fair value of the warrants were measured using the Black-Scholes pricing model, resulting in an approximately $4.2 million charge to additional paid-in capital which was accounted for as a deemed dividend.

Warrant Exercises

During the three months ended August 31, 2022, the Company issued approximately 0.5 million shares of common stock in connection with the exercise of an equal number of warrants. The stated exercise prices ranged from $0.45 to $0.75 per share, which resulted in aggregate gross proceeds of approximately $0.3 million. Additionally, during the three months ended August 31, 2022, the Company issued approximately 0.2 million shares of common stock in connection with the cashless exercise of approximately 0.3 million warrants with stated exercise prices ranging from $0.40 to $0.50 per share.

~~shares~~Note 7. Loss per Common Share

Basic loss per share is computed by dividing the net loss adjusted for preferred stock dividends by the weighted average number of common ~~stock. The Company recognized $0.3 million of expense for these~~ shares ~~in lieu of cash bonus~~outstanding during the ~~fourth quarter~~period. Diluted loss per share includes the weighted average common shares outstanding and potentially dilutive common stock equivalents. Because of ~~fiscal year 2021.~~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 loss per share. The reconciliation of the numerators and denominators of the basic and diluted net loss per share computations are as follows:

~~Warrants~~


	Three months ended August 31,
(in thousands, except per share amounts)	2022		2021
				(Restated) ⁽¹⁾
Net loss	$	(20,991)	$	(45,337)
Less: Deemed dividends due to down round provision		(4,154)		—
Less: Accrued preferred stock dividends		(385)		(425)
Net loss applicable to common stockholders	$	(25,530)	$	(45,762)
Basic and diluted:
Weighted average common shares outstanding		787,856		632,597
Loss per share	$	(0.03)	$	(0.07)

(1) See Note 2, Summary of Significant Accounting Policies.

~~In connection with private warrant exchange agreements entered into during~~The table below shows the ~~six months ended November 30, 2021, the Company issued a total~~approximate number of ~~approximately 7.9 million~~ shares of common stock ~~in connection with~~issuable upon the exercise, vesting or conversion of outstanding options, warrants, ~~for the purchase of 3.5 million shares issued~~unvested restricted stock units (including those subject to performance conditions), convertible notes, and convertible preferred stock (including undeclared dividends) that were not included in 2018 and 2019. The stated exercise prices of the original warrants ranged from $0.40 to $1.00 per share. Gross and net proceeds of the private warrant exchange transactions totaled approximately $6.4 million.

Compensation expense related to stock options and warrants for the three and six months ended November 30, 2021 totaled approximately $2.1 million and $4.7 million, respectively, and for the three and six months ended November 30, 2020 totaled approximately $3.4 million and $5.5 million, respectively. Additionally, during the six months ended November 30, 2021, the Company settled a dispute in part by the issuance of warrants covering 1.6 million shares of common stock that expire in seven years and have a stated exercise price of $0.40 per share.

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

Weighted

average

Weighted

remaining

Aggregate

Number of

average

contractual

intrinsic
(in thousands, except per share data)

shares

exercise price

life in years

value
Options and warrants outstanding May 31, 2021

61,573

$
0.95

4.40

$
68,756
Granted

20,151

$
1.97

—

—
Exercised

(5,654)

$
0.71

—

—
Forfeited or expired and cancelled

(6,443)

$
0.83

—

—
Options and warrants outstanding November 30, 2021

69,627

$
1.05

4.61

$
31,184
Outstanding exercisable November 30, 2021

59,807

$
0.87

3.51

$
30,747

As of November 30, 2021, approximately 13.9 million outstanding stock options were vested, approximately 13.7 million outstanding stock options were unvested, and all outstanding warrants were exercisable.

~~Note 7. Private Equity Securities Offerings~~

~~Private~~~~Warrant~~~~Exchanges~~

During the three and six months ended November 30, 2021, the Company entered into privately negotiated warrant exchange agreements with certain accredited investors, pursuant to which the investors purchased shares of common stock at exercise prices ranging from $0.40 to $1.00 per share. The Company issued approximately 3.5 million shares of common stock under the original warrants, as well as additional shares as an inducement to exercise their warrants, for a total of approximately 7.9 million shares of common stock. Aggregate gross and net proceeds from the private warrant exchange were approximately $6.4 million. In connection with these transactions, the Company recognized $4.7 million and $5.2 million of inducement interest expense for the three and six months ended November 30, 2021, respectively. Also see Note 6 above.

~~Private~~~~Placement~~of~~Shares~~of~~Common~~~~Stock~~~~and~~~~Warrants~~

~~During the six months ended November 30, 2021,theCompanyissued~~ina~~privateplacement~~to~~accreditedinvestors~~a~~total~~of~~approximately16.7millionshares~~of c~~ommonstock,togetherwithwarrants~~to~~purchase~~a~~total~~of~~approximately4.2millionshares~~of~~commonstock~~at~~exerciseprices ranging from~~ ~~$1.00 to $1.80pershare.Thewarrantshave~~a~~five-yeartermandareimmediatelyexercisable.Thesecuritieswereissuedwith~~a~~combinedpurchasepriceof between$1.00 and $1.80perfixedcombination~~of1~~share~~of~~commonstockandonequarter~~of~~onewarrant~~

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to~~purchaseoneshare~~of~~commonstock,fortotalgross and netproceeds~~to~~theCompany of approximately $18.8 million.~~

~~The representations, warrantiesand covenantscontained inthe subscriptionagreements weremade solelyfor thebenefit oftheparties tothesubscription agreements.~~In~~addition,such representations,warrantiesandcovenants(i) areintended~~as~~a way~~of~~allocatingtherisk betweenthepartiesto thesubscriptionagreementsandnot asstatements~~of~~fact,and(ii) mayapplystandards~~of~~materialitythat aredifferentfromwhatmay beviewed~~as~~material bystockholders of,or otherinvestors in,the Company.Accordingly, thesubscription agreementsonlyprovideinformation~~to~~investorsregardingtheterms~~of~~theprivateplacement,and~~do~~notprovideinvestorswithanyotherfactualinformation regardingtheCompany.Stockholdersshouldnotrely ontherepresentations,warrantiesandcovenantsor anydescriptionsthereof~~as~~characterizations of the actual stateof facts regarding orcondition of the Companyor any of its subsidiariesor affiliates.Moreover, informationconcerningthesubjectmatter~~of~~therepresentationsandwarrantiesmaychangeafterthedate~~of~~eachsubscriptionagreement,whichsubsequentinformation may or may not be fully reflected in public disclosures. A form of the subscription agreement was filed as~~ ~~Exhibit 10.1~~ ~~to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2021 and is incorporated herein by reference.~~

~~Private~~~~Placement~~~~of Common~~~~Stock and~~~~Warrants through~~~~Placement~~~~Agent~~

~~During the six months endedNovember 30, 2021,theCompanyissued~~ina~~privateplacement~~to~~accreditedinvestors~~an~~aggregate~~of~~approximately11.4millionshares~~of~~commonstock,togetherwithwarrants~~to~~purchase~~an~~aggregate~~of~~approximately5.0millionshares~~of~~commonstock~~atan~~exerciseprice~~of~~$1.00pershare.Thesecuritieswereissued~~ata~~combinedpurchaseprice~~of~~$1.00perfixedcombination~~of1~~share~~of~~commonstockandthree-tenths~~of~~onewarrant~~to~~purchaseoneshare~~of~~commonstock,foraggregategross~~ ~~and net~~ ~~proceeds~~to~~theCompany~~of~~approximately$11.4million and $10.0 million, respectively.Thewarrantshave~~a~~five-yeartermandareimmediatelyexercisable.~~A~~copy~~of~~theform~~of~~warrantwasfiled~~as~~Exhibit4.1~~to~~theCompany’sCurrentReport~~on~~Form8-KfiledwiththeSEC~~on~~September~~7,~~2021, and is incorporated herein by reference.See~~ ~~Exhibit10.1to this report for a copy of the form of subscription agreement used in the private placement.The foregoingsummary of theterms ofthe forms ofwarrant andsubscription agreement issubject to, andqualified inits entirety by,suchdocuments.~~

~~Therepresentations,warrantiesandcovenantscontained~~in~~thesubscriptionagreementsweremadesolelyforthebenefit~~of~~theparties~~to~~thesubscriptionagreements.~~In~~addition,suchrepresentations,warrantiesandcovenants(i)areintended~~asa~~way~~of~~allocatingtheriskbetweentheparties~~to~~thesubscriptionagreementsandnot~~as~~statements~~of~~factand(ii)mayapplystandards~~of~~materiality~~ina~~waythat~~is~~differentfromwhatmay~~be~~viewed~~as~~material~~by~~stockholdersof,~~or~~otherinvestorsin,theCompany.Accordingly,~~ ~~inclusion of~~ ~~theform~~of~~subscriptionagreement~~ ~~as an exhibit to~~ ~~thisreport~~ ~~is intended~~ ~~only~~to~~provideinvestorswithinformationregardingtheterms~~of~~transaction,andnot~~to~~provideinvestorswithanyotherfactualinformationregardingtheCompany.Stockholdersshouldnotrely~~on~~therepresentations,warrantiesandcovenants~~or~~anydescriptionsthereof~~as~~characterizationsof the actual stateof facts orcondition of theCompany orany of itssubsidiaries or affiliates.Moreover, information concerningthe subjectmatter of therepresentationsandwarrantiesmaychangeafterthedate~~of~~thesubscriptionagreements,whichsubsequentinformationmay~~or~~maynot~~be~~fullyreflected in public disclosures.~~

~~As afee~~to~~theplacementagent,theCompanyagreed~~to~~pay~~a~~cashfeeequal~~to~~12%~~of~~thegross proceedsreceivedfromqualifiedinvestors~~in~~theoffering, aswell asa one-timenon-accountable expensefeeof $50,000in theaggregate forall closings~~in~~this offering.TheCompanyalso agreed~~to~~grant theplacementagent,~~or~~itsdesignees,warrantswith~~an~~exerciseprice~~of~~$1.00pershareand~~a~~10-yearterm~~to~~purchase12%~~of~~thetotalnumber~~of~~shares of commonstock sold toqualified investors inthe offering.~~

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the computation of basic and diluted weighted average number of shares of common stock outstanding for the periods presented:


		Three months ended August 31,
(in thousands)	2022		2021
Stock options, warrants, and unvested restricted stock units	193,609		60,141
Convertible notes	12,000		12,000
Convertible preferred stock	32,170		33,858

Note 8. Income Taxes

The Company calculates its quarterly taxes under the effective tax rate method based on applying an anticipated annual effective rate to its year-to-date income, except for discrete items. Income taxes for discrete items are computed and recorded in the period that the specific transaction occurs. The Company’s net tax expense for the three months ended August 31, 2022 and 2021 was zero. The Company does not consider it more likely than not that the benefits from the net deferred taxes will be realized; therefore the Company maintains a full valuation allowance as of August 31, 2022 and May 31, 2022 thus creating a difference between the effective tax rate of 0% and the statutory rate of 21%.

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

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

(in thousands)

November 30, 2021

May 31, 2021
Leronlimab (PRO 140) patent

$
3,500

$
3,500
ProstaGene, LLC intangible asset acquisition, net of impairment

2,926

2,926
Website development costs

20

20
Gross carrying value

6,446

6,446
Accumulated amortization, net of impairment

(5,293)

(4,793)
Total amortizable intangible assets, net

$
1,153

$
1,653

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

~~The following table summarizes the estimated aggregate future amortization expense related to the Company’s intangible assets with finite lives as of November 30, 2021:~~

Fiscal Year (in thousands)

Amount
2022 (6 months remaining)

$
221
2023

217
2024

85
2025

85
Thereafter

545
Total

$
1,153

~~Note 9. License Agreements~~

The Company has 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 material. The Company accrues annual license fees of £0.6 million (approximately $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, utilizes the third-party licensor as a contract manufacturer, or utilizes an independent party as a contract manufacturer. The licensor does not charge an annual license fee when it serves as the manufacturer. In addition, the Company will incur royalties of up to 0.75% to 2.0% of net sales, depending on who serves as the manufacturer, when the Company commences its first commercial sale; such royalties will continue for the duration of the license agreement. As of November 30, 2021, the Company accrued expense of approximately $0.4 million related to this arrangement and as of May 31, 2021 the Company recorded a prepaid asset of approximately $0.1 million related to this agreement.

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

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

In April 2019, the Company entered into an agreement with Samsung, pursuant to which Samsung will perform technology transfer, process validation, manufacturing, pre-approval inspection and supply services for the commercial supply of leronlimab bulk drug substance effective through calendar year 2027. In 2020, the Company entered into an additional agreement, pursuant to which Samsung will perform technology transfer, process validation, vial filling and storage services for clinical, pre-approval inspection, and commercial supply of ~~leronlimab.~~leronlimab drug product. Samsung is obligated to procure necessary raw materials for the Company and manufacture a specified minimum number of batches, and the Company is required to provide a rolling three-year forecast of future estimated manufacturing requirements to Samsung that are binding.

On January 6, 2022, Samsung provided written notice to the Company alleging that the Company had materially breached the parties’ Master Services and Project Specific Agreements for failure to pay $13.5 million due on December 31, 2021. An additional $22.8 million became due under the agreements on January 31, 2022. Under the agreements, Samsung may be entitled to terminate its services if the parties cannot reach an agreement as to the past due balance. Management is in ongoing discussions with Samsung regarding potential approaches to resolve these issues, including proposals by both parties of a revised schedule of payments over an extended period of time, and proposals by the Company of satisfaction of a portion of the Company’s payment obligations in equity securities of the Company and postponing or cancelling the manufacturing of additional drug provided for in the agreements. As of August 31, 2022, the Company had past due balances of approximately $35.7 million due to Samsung which were included in accounts payable. As of August 31, 2022, the future commitments pursuant to these agreements were estimated as follows (in thousands):


Fiscal Year	Amount
2023 (9 months remaining)	$	34,638
2024		121,750
2025		76,400
2026 and thereafter		—
Total	$	232,788

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~~Samsung provided written notice to~~Operating Lease Commitments

We lease our principal office location in Vancouver, Washington. The Vancouver lease expires on April 30, 2026. Consistent with the ~~Company~~guidance in ASC 842, Leases, we have recorded this lease in our consolidated balance sheet as an operating lease. For the purpose of determining the right of use asset and associated lease liability, we determined that the renewal of the ~~Company’s material breach~~Vancouver lease was not reasonably probable. The lease does not include any restrictions or covenants requiring special treatment under ASC 842, Leases. During the three months ended August 31, 2022 and 2021, we recognized approximately $46.0 thousand and $48.9 thousand of ~~the parties’ Master Services and Project Specific Agreements for failure to pay approximately $13.5 million due on December 31, 2021. This amount was~~operating lease costs. Operating lease right-of-use assets are included in ~~accounts payable at November 30, 2021. Under~~other non-current assets and the ~~agreements,~~current portion of operating lease liabilities are included in accrued liabilities and compensation on the ~~Company has 45 days to make commercially reasonable efforts to commence curing~~consolidated balance sheets. The long-term operating lease liabilities are presented separately as operating lease on the ~~breach. If such steps have not been taken during~~consolidated balance sheets. The following table summarizes the cure period, Samsung may terminate the agreements upon 45 days’ notice. Management has communicated to Samsung its intent to commence curing the breach prior to the expiration of the cure period. The future commitments pursuant to these agreements are estimated as follows:operating lease balances.

Fiscal Year (in thousands)

Amount
2022 (6 months remaining)

$
21,271
2023

113,790
2024

106,140
2025

14,400
Total

$
255,601



(in thousands)	August 31, 2022		May 31, 2022
Assets
Right-of-use asset	$	502	$	536
Liabilities
Current operating lease liability	$	135	$	134
Non-current operating lease liability		387		422
Total operating lease liability	$	522	$	556

~~Commitments with Contract Research Organization (“CRO”)~~

The ~~Company has entered into project work orders,~~minimum (base rental) lease payments are expected to be as ~~amended,~~follows as of August 31, 2022 (in thousands):


Fiscal Year	Amount
2023 (9 months remaining)	$	133
2024		182
2025		185
2026		169
Total operating lease payments		669
Less: imputed interest		(147)
Present value of operating lease liabilities	$	522

Supplemental information related to operating leases was as follows:


	August 31, 2022
Weighted average remaining lease term	3.6	years
Weighted average discount rate	10.0	%

Distribution and Licensing Commitments

Refer to Note 10, Commitments and Contingencies, in the 2022 Form 10-K for each of 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 that would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range up to approximately $0.2 million. In the remote circumstance that the Company would terminate all clinical trials, the collective financial penalties may range from a low of approximately $20 thousand to an approximate high of approximately $0.6 million.information.

Legal Proceedings

~~The~~As of August 31, 2022, the Company ~~is a party to various~~did not record any legal ~~proceedings. The Company recognizes~~ accruals ~~for such proceedings~~related to the ~~extent a loss is determined to~~outcomes of the matters described below. It may not 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, ~~that have not been concluded,~~ including the defense and other litigation-related costs and expenses that may be incurred by the Company, as the outcomes of legal proceedings are inherently ~~uncertain and the outcomes could differ significantly from recognized accruals.~~uncertain. 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,~~any, could be material to the Company’s consolidated financial statements.

~~As of November 30, 2021, the Company did not record any legal accruals related to the outcomes of the matters described below.~~

~~September 2020 Washington Shareholder Derivative Lawsuit~~

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

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~~Pestell Employment Dispute~~

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

Securities Class Action Lawsuit

On March 17, 2021, a stockholder filed a putative class-action lawsuit (the “March 17, 2021 lawsuit”) in the U.S. District Court for the Western District of Washington against the Company and certain current and former officers. The complaint generally alleges the defendants made false and misleading statements regarding the viability of leronlimab as a potential treatment for COVID-19. On April 9, 2021, a second stockholder filed a similar putative class action lawsuit in the same court, which the plaintiff voluntarily dismissed without prejudice on July 23, 2021. On August 9, 2021, the court appointed lead plaintiffs for the March 17, 2021 lawsuit. On December 21, 2021, lead plaintiffs filed an amended complaint, which is brought on behalf of an alleged class of those who purchased the Company’s common stock between March 27, 2020 and May 17, 2021. The amended complaint generally alleges that the Company and certain current and former officers violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making purportedly false or misleading statements concerning, among other things, the safety and efficacy of leronlimab as a potential treatment for COVID-19, the Company’s CD10 and CD12 clinical trials, and its HIV BLA. The amended complaint also alleges that the individual defendants violated Section 20A of the Exchange Act by selling shares of the Company’s common stock purportedly while in possession of material nonpublic information. The amended complaint seeks, among other relief, a ruling that the case may proceed as a class action and unspecified damages and attorneys’ fees and costs. On February 25, 2022, the defendants filed a motion to dismiss the amended complaint. On June 24, 2022, lead plaintiffs filed a second amended complaint. The second amended complaint is brought on behalf of an alleged class of those who purchased the Company’s common stock between March 27, 2020 and March 30, 2022, makes similar allegations, names the same defendants, and asserts the same claims as the prior complaint, adds a claim for alleged violation of Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder, and seeks the same relief as the prior complaint. The Company and the individual defendants deny all allegations of wrongdoing in the complaint and intend to vigorously defend the matter. Since this case is in an early stage where the number of plaintiffs is not known, and the claims do not specify an amount of damages, the Company is unable to predict the ultimate outcome of the lawsuit and cannot reasonably estimate the potential loss or range of loss the Company may incur.

2021 Shareholder Derivative Lawsuits

On June 4, 2021, a stockholder filed a purported derivative lawsuit against certain of the Company’s current and former officers, certain ~~board~~current and former Board members, and the Company as a nominal defendant, in the U.S. District Court for the Western District of ~~Washington~~Washington. Two additional shareholder derivative lawsuits were filed against the same defendants in the same court on June 25, 2021 and August 18, 2021, respectively. The court has consolidated these three lawsuits for all purposes (“~~First~~Consolidated Derivative Suit”). On January 20, 2022, the plaintiffs filed a consolidated complaint. The consolidated complaint generally alleges that the director defendants breached their fiduciary duties ~~owed to the Company~~ by allowing the Company to make false and misleading statements regarding, among other things, the ~~viability~~safety and efficacy of leronlimab as a potential treatment for COVID-19, the Company’s CD10 and CD12 clinical trials, and its HIV BLA, and by failing to maintain an adequate system of oversight and ~~internal~~ controls. The consolidated complaint also asserts claims against one or more individual defendants for waste of corporate assets, unjust enrichment, contribution for alleged violations of the federal securities laws, and for breach of fiduciary duty ~~waste of corporate assets, and unjust enrichment, and seeks to recover on behalf of the Company for any liability the Company incurs as a result of the individual defendants’~~arising from alleged ~~misconduct.~~insider trading. The ~~complaint also seeks contribution on behalf of the Company from certain individual defendants for their alleged violations of federal securities laws. The~~consolidated complaint seeks declaratory and equitable relief, an unspecified amount of damages, and attorneys’ fees and costs. On June 25, 2021, a second shareholder derivative lawsuit was filed against the same defendants in the same court (“Second Derivative Suit”), which includes allegations and claims similar to those made in the First

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Derivative Suit, adding claims against certain individual defendants based on allegedly false and misleading proxy statement disclosures and for breach of fiduciary duty arising from alleged insider trading, and seeking similar relief as the First Derivative Suit. On August 18, 2021, a third shareholder derivative lawsuit was filed against the same defendants in the same court, which includes allegations and claims similar to those made in the First Derivative Suit and Second Derivative Suit. The court has consolidated these 3 lawsuits for all purposes (“Consolidated Derivative Suit”). The plaintiffs’ deadline to file a consolidated complaint is January 20, 2022. The Company and the individual defendants deny all allegations of wrongdoing in the complaints and intend to vigorously defend the litigation. In light of the fact that the Consolidated Derivative Suit is in an early stage and the claims do not specify an amount of damages, the Company cannot predict the ultimate outcome of the Consolidated Derivative Suit and cannot reasonably estimate the potential loss or range of loss the Company may incur.

Securities and Exchange Commission and Department of Justice Investigations

The Company has received subpoenas from the United States Securities and Exchange Commission (“SEC”) and the United States Department of Justice (“DOJ”) requesting documents and information concerning, among other matters, leronlimab, the Company’s public statements regarding the use of leronlimab as a potential treatment for COVID-19, HIV, and triple-negative breast cancer, related communications with the FDA, investors, and others, litigation involving former employees, the Company’s retention of investor relations consultants, and trading in the

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Company’s securities. Certain Company executives have received subpoenas concerning similar issues and may be interviewed by the DOJ or SEC in the future. The SEC informed the Company that its inquiry should not be construed as an indication that any violations of law have occurred or that the SEC has any negative opinion of any person, entity or ~~security.~~

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

~~September 2021 Delaware Court of Chancery Lawsuit~~

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

Amarex Dispute

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

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That case has been administratively closed. The Company simultaneously filed a demand for arbitration with the American Arbitration Association. The arbitration demand alleges that Amarex failed to perform services to an acceptable professional standard and failed to perform certain services required by the parties’ agreements. Further, the demand alleges that Amarex billed the Company for services it did not perform. The Company contends that, due to Amarex’s failures, it has suffered avoidable delays in obtaining regulatory approval of leronlimab and has paid for services not performed. Amarex has counterclaimed alleging that CytoDyn has failed to pay invoices due under the contract between the parties. In light of the fact that this dispute is in an early stage, the Company cannot predict the ultimate outcome of the lawsuit and cannot reasonably estimate the potential loss or range of loss that the Company may incur.

~~Proxy Contest and Lawsuits~~

On July 1, 2021, the Company received a notice of nomination dated June 30, 2021, from a group of activist stockholders, Paul A. Rosenbaum, Jeffrey P. Beaty and Arthur L. Wilmes (the “Activists”), purporting to nominate five individuals for election to the Company’s Board of Directors at its 2021 annual meeting of stockholders. On July 30, 2021, the Company informed the Activists that their notice of nomination was invalid due to its failure to comply with the Company’s Amended and Restated By-Laws. On August 5, 2021, the Company filed a lawsuit in the United States District Court for the District of Delaware against the Activists, seeking to enjoin the defendants from misleading stockholders and continuing to wage an illegal proxy contest in light of their faulty nomination notice and violation of various federal securities laws. On September 16, 2021, the Company and the Activists agreed to dismiss the litigation in the United States District Court for the District of Delaware without prejudice if certain additional disclosures about the Activists’ conflicts of interest, sources of funding and agenda were made, for which the Activists filed an amendment to their Schedule 13D. On September 20, 2021, the United States District Court for the District of Delaware ordered the dismissal without prejudice.

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

~~Note 11. Related Party Transactions~~

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

On September 23, 2021, Jordan G. Naydenov, a member of the Company’s Board of Directors, entered into a private warrant exchange in which he exercised warrants to purchase approximately 0.6 million shares of common stock, as well as approximately 0.6 million additional shares that were offered as an inducement to exercise his warrants, for a total of approximately 1.3 million shares of common stock. The terms and conditions of the investment totaling approximately $0.7 million made by Mr. Naydenov were identical to those offered to other investors. See also Note 12 below.

Note ~~12.~~10. Subsequent Events

~~On December 7, 2021, in partial satisfaction~~Issuance of Shares to Former CEO

During the fiscal year ended May 31, 2022, the employment of our CEO was terminated. Under the terms of the ~~December 2021 Debt Reduction Amount,~~employment agreement, the Company ~~and the April 2, 2021 Note holder entered into an exchange agreement, pursuant~~was obligated to ~~which the April 2, 2021 Note was partitioned into a new note (the “December 7, 2021 Partitioned Note”) with a principal amount~~pay severance equal to 18 months of ~~$2.0 million. The outstanding balance of the April 2, 2021 Note was reduced~~salary. As permitted by the ~~December 7, 2021 Partitioned Note. The Company and~~employment agreement, in March 2022, the ~~investor exchanged~~Board authorized the ~~December 7, 2021 Partitioned Note for approximately 2.4 million~~severance payments to be made through the issuance of shares of common stock.

~~On December 29, 2021,~~ During September and October, the Company issued a total of 80,816 shares of common stock in ~~partial~~ satisfaction of the ~~December 2021 Debt Reduction Amount,~~severance amounts due during September 2022. The numbers of shares issued were based on the closing price of the common stock on the applicable dates.

In September 2022, the Company appointed to its Scientific Advisory Board (“SAB”): Dr. Jordan Lake to assist with trial design for HIV/NASH and identifying collaborative opportunities, Dr. Stefan Glück to assist with identifying partners, trial design, identifying collaborations, and opportunities in oncology, and Dr. Nueto Ueno to assist with trial design and identifying opportunities for collaboration in oncology. The Company issued 50,000 options for shares of common stock to each SAB member in consideration for their annual service on the SAB.

On September 6, 2022, the Board’s Compensation Committee approved, under the Company’s 2012 Plan, grants of fully vested nonqualified stock options to purchase shares of common stock to three of the Company’s nonemployee directors for their service during the fiscal year ended May 31, 2022, as follows: Tanya Durkee Urbach, 112,500 shares; Lishomwa Ndhlovu, 112,500 shares; and Karen J. Brunke, 37,500 shares. The Compensation Committee also approved, under the 2012 Plan, grants of nonqualified stock options to purchase shares of common stock to the Company’s four nonemployee directors as of September 6, 2022, for service during the fiscal year ending May 31, 2023, as follows; each of Ms. Urbach, Dr. Brunke, and Dr. Ndhlovu, 247,111 shares, of which 25% were fully vested on the grant date and the ~~April 2, 2021 Note holder entered into an exchange agreement, pursuant~~balance will vest in nine equal monthly installments beginning on October 1, 2022, subject to ~~which~~continuous service (as defined in the ~~April 2, 2021 Note~~2012 Plan) through the applicable vesting date; and Ryan Dunlap, 185,333 shares, vesting in nine equal monthly installments beginning on October 1, 2022, subject to continuous service through the applicable vesting date. Dr. Ndhlovu was also granted a fully vested nonqualified stock option to purchase 50,000 shares of common stock for

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~~partitioned into a new note (the “December 29, 2021 Partitioned Note”) with a principal amount of $2.0 million. The outstanding balance~~service on the Company’s Scientific Advisory Board beginning in July 2021. All of the ~~April 2, 2021 Note was reduced by~~stock options have an exercise price of $0.50 per share and a 10-year term.

On September 20, 2022, the ~~December 29, 2021 Partitioned Note. The Company and~~Board’s Compensation Committee approved the ~~investor exchanged~~grant of equity awards under the ~~December 29, 2021 Partitioned Note for approximately 2.4 million~~Company’s 2012 Plan to its President in accordance with the terms of his employment agreement as follows: (i) nonqualified stock options to purchase 1,575,557 shares of common ~~stock.~~stock at an exercise price of $0.58 per share, with 25% of the options vesting on July 9, 2023, and the balance in 36 equal monthly installments thereafter, subject to continuous service through the applicable vesting date; (ii) RSUs relating to 646,552 shares of common stock vesting in four equal annual installments beginning July 9, 2023, also subject to continuous service through the applicable vesting date; and (iii) PSUs relating to 646,552 shares of common stock, with vesting subject to the attainment of performance goals approved by the Compensation Committee.

Also on September 20, 2022, the Compensation Committee approved the grant of nonqualified stock options under the 2012 Plan to the Company’s CFO to purchase 630,222 shares of common stock at an exercise price of $0.58 per share, with 25% of the options vesting on January 24, 2023, and the balance in 36 equal monthly installments thereafter, subject to continuous service through the applicable vesting date, as additional compensation for his service as interim President from January 24, 2022, through July 9, 2022.

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

Certain information included in this ~~Quarterly Report~~quarterly report on Form 10-Q contains, or incorporates by reference, forward-looking statements within the meaning of Section 21E of the Exchange Act. ~~The~~Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words ~~“anticipate,~~such as “believes,” ~~“believe,~~“hopes,” ~~“hope,~~“intends,” ~~“expect,~~“estimates,” ~~“intend,~~“expects,” ~~“predict,~~“projects,” ~~“plan,~~“plans,” ~~“seek,” “estimate,” “project,” “continue,” “could,” “may,”~~“anticipates” and ~~similar terms and expressions,~~variations thereof, or the use of future tense, ~~are intended to~~ identify forward-looking statements, but their absence does not mean that a statement is not forward-looking.

Our forward-looking statements are not guarantees of performance, and actual results could vary materially from those contained in or expressed by such statements. ~~These~~In evaluating all such statements, we urge you to specifically consider various risks identified in this quarterly report, and those set forth in Item 1A. Risk Factors in our 2022 Form 10-K, any of which could cause actual results to differ materially from those indicated by our forward-looking statements. Our forward-looking statements reflect our current views with respect to future events and are based on currently available financial, economic, scientific, and competitive data and information about current business plans. Forward-looking statements include, among others, statements about leronlimab, its ability to have positive health outcomes, the ~~impact of health epidemics including~~Company’s ability to resolve the ~~ongoing COVID-19 pandemic,~~clinical holds imposed by the U.S. Food and Drug Administration (the “FDA”) and information regarding future operations, future capital expenditures and future net cash flows. ~~Such~~You should not place undue reliance on our forward-looking statements, ~~reflect current views with respect~~which are subject to ~~future events and financial performance and involve~~ risks and uncertainties ~~including, without limitation, (i)~~relating to, among other things: the regulatory determinations of leronlimab’s ~~efficacy to treat human immunodeficiency virus (“HIV”) patients with multiple resistance to current standard of care, COVID-19 patients,~~safety and ~~metastatic Triple-Negative Breast Cancer (“mTNBC”), among other indications,~~effectiveness by the ~~U.S. Food and Drug Administration~~FDA and various drug regulatory agencies in other countries; ~~(ii)~~ the Company’s ability to raise additional capital to fund its operations; ~~(iii)~~ the Company’s ability to meet its debt and other payment obligations; ~~(iv)~~ the Company’s ability to enter into or maintain partnership or licensing arrangements with third-parties; ~~(v)~~ the Company’s ability to ~~identify patients to enroll in its clinical trials in a timely fashion; (vi)~~retain key employees; the timely and sufficient development, through internal resources or third-party consultants, of analyses of the data generated from the Company’s clinical trials required by the FDA or other regulatory agencies in connection with the Company’s ~~BLA~~Biologic License Application (“BLA”) resubmission or other applications for approval of the Company’s drug ~~product, (vii)~~product; the Company’s ability to achieve approval of a marketable product; ~~(viii)~~ the design, implementation and conduct of the Company’s clinical trials; ~~(ix)~~ the results of the Company’s clinical trials, including the possibility of unfavorable clinical trial results; ~~(x)~~ the market for, and marketability of, any product that is approved; ~~(xi)~~ the existence or development of vaccines, drugs, or other treatments that are viewed by medical professionals or patients as superior to the Company’s products; ~~(xii)~~ regulatory initiatives, compliance with governmental regulations and the regulatory approval process; ~~(xiii)~~ legal proceedings, investigations or inquiries affecting the Company or its products; ~~(xiv)~~ general economic and business conditions; ~~(xv)~~ changes in foreign, political, and social conditions; ~~(xvi)~~ stockholder actions or proposals with regard to the Company, its management, or its ~~board~~Board of ~~directors;~~Directors; and ~~(xvii)~~ various other matters, many of which are beyond the Company’s control. Should one or more of these risks or uncertainties ~~occur,~~develop, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated, or otherwise ~~indicated. Consequently, the~~indicated by our forward-looking statements. Except as required by law, we do not undertake any responsibility to update these forward-looking statements ~~made in~~to take into account events or circumstances that occur after the date of this ~~filing are qualified~~quarterly report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events that may cause actual results to differ from those expressed or implied by these cautionary statements and there can be no assurance of the actual results or developments. For a discussion of the risks and uncertainties that could materially and adversely affect the Company’s financial condition and results of operations, see “Risk Factors” set forth in our Annual Report on Form 10-K for the year ended May 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on July 30, 2021, as amended by Amendment No. 1 filed with the SEC on September 28, 2021 (the “2021 Form 10-K”), as well as those risks and uncertainties identified in Part II, Item 1A of this Form 10-Q.forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with ~~the 2021~~our Annual Report on Form 10-K (the “2022 Form 10-K”), and the other sections of this Form 10-Q, including our ~~Consolidated Financial Statements~~consolidated financial statements and related notes set forth in Part I, Item 1. This discussion and analysis contain forward-looking statements, including information about possible or assumed results of our financial condition, operations, plans, objectives and performance that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated and set forth in such forward-looking statements.

Overview ~~of Our Business~~

The Company is a ~~late-stage~~ biotechnology company focused on the clinical development and potential commercialization of its product candidate, leronlimab, ~~(PRO 140), a CCR5 antagonist to treat~~which is being studied for the treatment of HIV infection, NASH, and ~~multiple other potential therapeutic indications.~~solid tumors in oncology. Our current business strategy is to ~~resubmit our Biologics License Application (“BLA”)~~seek the removal of the partial and full clinical holds imposed by the US FDA in March 2022, evaluate the feasibility of the resubmission of the clinical section of the BLA for leronlimab as a

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combination therapy for highly treatment-experienced HIV patients, and to seek to further develop for leronlimab in NASH, NASH-HIV, and solid tumors in oncology.

As further discussed in Part I, Item 1, Note 2, Summary of Significant Accounting Policies - Inventories, Note 3, Inventories, net, and Note 9, Commitments and Contingencies, the Company capitalized procured or produced pre-launch inventories in preparation for product launches. The Company considers anticipated future sales, shelf-lives, and expected approval date when evaluating realizability of prelaunch inventories. The shelf-life of a product is determined as ~~soon~~part of the regulatory approval process; however, in assessing whether to capitalize pre-launch inventory, the Company considers the stability data of all inventories. As inventories approach their shelf-life expiration, the Company may perform additional stability testing to determine if the inventory is still viable, which may result in an extension of its shelf-life. Further, in addition to performing additional stability testing, certain raw materials inventory may be sold in its then current condition prior to reaching expiration. In determining whether pre-approval inventory remains salable, the Company considers a number of factors, including potential delays in obtaining regulatory approval, the introduction of competing products that may negatively impact the demand for our product, the likelihood that physicians would be willing to prescribe leronlimab to their patients, and whether the target patient population would be willing to try leronlimab as ~~possible,~~a new therapy.

First Quarter Overview

HIV BLA and Clinical Developments

The remaining BLA section to be completed and submitted remains in the clinical section as ~~well~~of the date of this report. The Company is in a dispute with its former contract research organization (“CRO”); the Company obtained an order requiring the CRO to release the Company’s clinical data related to the BLA and other clinical trials, which the CRO had been withholding, thereby preventing the Company from completing necessary clinical data submissions to the FDA. The order granted the Company access to the data and the right to perform an audit of the CRO’s services. In March 2022, the FDA notified the Company that it had placed a partial clinical hold on the Company’s HIV program; the Company was not enrolling any new patients in the trials placed on hold. The partial clinical hold on the HIV program impacted patients enrolled in HIV extension trials. The affected patients have been transitioned to other available therapeutics. No clinical studies can be initiated or resumed until the partial clinical hold is resolved, which may affect our ability to resubmit the BLA. The Company’s efforts are focused on activities that will allow us to resolve the partial clinical hold and potentially resume the BLA resubmission process. The Company will update the feasibility of the resubmission of the clinical section of the BLA once it completes its evaluation of the clinical data, results of the CRO audit, and the timelines of the clinical holds.

NASH Clinical Developments

Non-alcoholic steatohepatitis (NASH) is a chronic liver disease characterized by the presence of hepatic inflammation and cell. Patients with advanced fibrosis due to NASH are at significantly higher risk of liver‐related mortality. There is currently no approved drug for NASH. Liver disease is one of the leading causes of non-AIDS-related death in HIV patients. The Company is identifying the next steps in clinical development to continue the investigation of leronlimab in the NASH indication and HIV patients with NASH.

In NASH, liver homeostasis is impaired due to an accumulation of toxic lipids which can activate both Kupffer cells (KCs) and tissue-resident macrophages resulting in the production of fibrogenic cytokines and chemoattractant chemokines such as transforming growth factor-beta (TGF-β) and monocyte chemoattractant protein-1 (MCP-1). Not only do these cytokines/chemokines promote transdifferentiation of hepatic stellate cells (HSCs) into myofibroblasts (the primary source for fibrillary collagens), but they also amplify the immune response by recruiting additional cells into the damaged area. Recruitment of extra-hepatic inflammatory cells to the site of hepatic injury is typically mediated by interactions between cytokines/chemokines and their receptors. It has also been shown that patients with NASH also have high levels of C-C chemokine receptor 5 (CCR5) and the associated ligand, CCL5, thus demonstrating a potential role of CCR5 and its ligands in liver fibrosis.

The potential for leronlimab in the treatment of NASH was demonstrated in a pre-clinical model of fatty liver disease. Immunodeficient, NOD-SCID Gamma (NSG) mice were fed a high fat, NASH-inducing diet, transplanted with

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~~seek approval for other HIV-related indications. We will seek approval for~~human stem cells to repopulate the deficient immune system, and treated with leronlimab. Sixteen (16) male NOD.Cg-Prkdcscid Il2rgtm1Wjl/SzJ, commonly known as the NOD scid IL-2 receptor gamma knockout mice (NSG) were first humanized by intravenous inoculation with normal human umbilical cord blood cells (105). After 5 weeks on normal mouse chow, mice were successfully humanized, demonstrating >25% human CD45 cells in peripheral blood. Mice were switched to high fat (52%) high cholesterol (1.25%) diet (FPC diet: fructose, palmitate, cholesterol, trans-fat; Envigo-Teklad TD.160785). Leronlimab and control antibody (normal human IgG, Sigma) were administered i.p. at a dose of 2mg i.p. twice weekly, n=8 mice/group. The results showed that leronlimab inhibited fatty liver development, a key characteristic of early-stage NASH, such that treatment of humanized NSG mice with leronlimab caused a three fold reduction in hepatic steatosis compared to control in an animal model of high fructose, high palmitate, high cholesterol diet.

The Company has reported clinical data from patients with NASH from the CDI-NASH-01 trial which was designed as a ~~potential therapeutic benefit for severe-to-critical COVID-19 patients~~multi-center Phase 2a study and ~~COVID-19 long-hauler’s indications in~~was subsequently converted into an exploratory study to evaluate the ~~U.S.~~dose, efficacy, and ~~Brazil. We plan~~safety of leronlimab at 350 mg and 700 mg, versus placebo. The study also included an expansive biomarker program designed to ~~advance our~~inform future clinical trials ~~with leronlimab for various forms of cancer, including among others, our Phase 2 trial for metastatic triple-negative breast cancer (“mTNBC”)~~ and ~~Phase 2 basket trial for 22 solid tumor cancers. We also plan~~ to ~~complete our Phase 2 trial to evaluate NAFLD and liver fibrosis associated with nonalcoholic steatohepatitis (“NASH”) and concurrently explore other immunologic indications for leronlimab.~~

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

~~Due to~~more fully understand leronlimab’s mechanism of action ~~(“MOA”)~~within the NASH setting. CDI-NASH-01 was run in two parts, Part 1 of the study was to assess the efficacy of leronlimab 700 mg (n=22) in improving NAFLD/NASH measures in adult patients diagnosed with NASH compared to placebo (n=28). Part 2 was subsequently added to assess leronlimab 350 mg in improving NAFLD/NASH measures in adult patients diagnosed with NASH (n=22). In Part 1 of the study, eligible subjects were randomized 1:1 to one of the two study arms to receive either leronlimab 700mg (Group A), or placebo (Group B), given once per week (±1day) at the study site for up to 13 weeks during the treatment period (with up to 60 participants). In Part 2 of the study, eligible subjects enrolled to receive leronlimab 350 mg open-label given once per week (±1day) at the study site for up to 13 weeks during the treatment period (with up to 28 participants). The primary efficacy objective was percent change from baseline in hepatic fat fraction, as assessed by magnetic resonance imaging-derived proton density fat fraction (MRI-PDFF) at week 14. The secondary efficacy objective was absolute change from baseline in fibro-inflammatory activity in the liver as assessed by MRI-corrected T1 imaging (MRI-cT1) at week 14. MRI-cT1 is obtained by multiparametric magnetic resonance imaging of the liver and is a quantitative metric for assessing a composite of liver inflammation and fibrosis, expressed in milliseconds (msec). MRI-PDFF is being studied as an imaging surrogate endpoint for the fat density in the liver. MRI-cT1 is being studied as an imaging surrogate endpoint for hepatic fibro-inflammation. This is a critical unmet need in the NASH space, as many agents have been unable to show reductions in fibro-inflammation despite reductions in hepatic steatosis.

All analyses performed were exploratory. Treatment with leronlimab was well tolerated in both Part 1 and Part 2 compared to placebo. In Part 1 of the study, leronlimab 700 mg did not reduce mean change in PDFF and cT1 from baseline to week 14 vs. placebo. In Part 2, leronlimab 350 mg reduced mean change in PDFF and cT1 from baseline to week 14 vs. the placebo group from Part 1, despite increased degree of baseline fibro-inflammation. In the combined group of patients with moderate (≥ 875 msec) and severe (≥ 950 msec) cT1 values at baseline, leronlimab 350 mg reduced cT1 from baseline to week 14 vs. placebo. Based on post hoc CCR5 haplotype analysis of a small subgroup (n=5), we ~~believe~~are considering further investigation of the 700mg dose of leronlimab ~~may have significant advantages~~for specific haplotypes.

Cancer Clinical Developments

The Company is identifying the next steps in ~~reducing side effects over other CCR5 antagonists. Prior studies have demonstrated that~~clinical development and is exploring potential business opportunities to continue the investigation of leronlimab ~~does not cause direct activation~~for solid tumors in oncology based on data generated to date by the Company.

Summary of ~~T-cells.~~TNBC Data

~~We continue to evaluate strategic licensing opportunities~~To assess the impact of leronlimab treatment on mTNBC patients, we pooled the data from 3 studies: CD07_TNBC Phase 1b/2, CD07_TNBC_Compassionate Use, and ~~supply~~CD-09 Basket. The study population for pooled efficacy analysis was a total of 28 subjects (10 subjects from the Phase 1b/2 study, 16 subjects from the Compassionate Use Study, and distribution partnerships and conduct exploratory discussions with third parties for other potential strategies to monetize our assets. As recently completed license and supply and distribution agreements demonstrate, such agreements are country or region-specific and generally are limited to a specific clinical indication for leronlimab.

~~See~~ ~~Item 1. Business~~ ~~in our 2021 Form 10-K for more information.~~2 subjects were from the Basket Study).

To explore the impact of leronlimab in the mTNBC patients’ disease progression, investigator assessed Progression Free Survival (PFS) was analyzed in the 28 subjects. There was a total of 19 subjects dosed between 525 mg and 700 mg (4 subjects increased dose from 350 mg to 525 mg and were included in the higher dose cohort). The median PFS

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~~Business Highlights & Recent Developments~~(mPFS) for the 525 mg – 700 mg cohort was 6.2 months (95% CI 2.6 months - 7.5 months). There were 9 subjects dosed at 350 mg, mPFS was 2.2 months (95% CI 0.7 months - 12+ months). There was a meaningful PFS advantage at the higher doses when compared with the lower, 350 mg dose cohort.

Furthermore, the preliminary results of the leronlimab studies also showed similarity in the PFS outcomes of mTNBC patients treated with leronlimab + carboplatin compared to overall leronlimab treated population. Of the 28 subjects enrolled, 13 subjects received leronlimab + carboplatin treatment. The mPFS for leronlimab + carboplatin population was 3.9 months (95% CI 2.3 months - 6.0 months).

The subgroup analysis of PFS based on the individual subjects in each study were also reviewed. The mPFS for Phase 1b/2 study was 3.9 months (95% CI 2.3 months – 6.2 months), mPFS for the Compassionate Use study was 3.3 months (95% CI 1.3 months – 7.5 months), and mPFS for the Basket Study was 2.8 months (95% CI N/A).

Combined, the overall mPFS for all 28 patients treated with leronlimab in the population of mTNBC patients regardless of dosage, conjunction therapy type, brain or bone metastases that have failed more than one line of previous therapy was 4.1 months (95% CI 2.5 months – 7.0 months). The mean PFS was 3.7 ± 2.93 standard deviation (SD).

To explore the impact of leronlimab in the mTNBC patients’ disease progression, Overall Survival (OS) was analyzed in the same 28 subjects. The median OS (mOS) for leronlimab + carboplatin population was 12+ months (95% CI 5.4 months - 12+ months).

The mOS for the 350 mg cohort was 4.6 months (95% CI 1.1 months -12+ months). The mOS for the 525-700 mg cohort was 12+ months (95% CI 5.5 months – 12+ months).

The overall median OS for leronlimab treated population of mTNBC patients regardless of brain or bone metastases that have failed more than one line of previous therapy was 6.5 months (95% CI 5.0 months – 12+ months). The mean value for OS was 5.5 ±4.31 standard deviation (SD).

COVID-19 Clinical Developments

1^st ~~Quarter Developments~~

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

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

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

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

2^nd ~~Quarter Developments~~

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

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

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

●

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

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

~~HIV BLA & Clinical Developments~~

1^st ~~Quarter Developments~~

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

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

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

2^nd ~~Quarter Developments~~

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

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

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

~~Table~~The Company has made the business decision to currently discontinue its investigation of ~~Contents~~

●

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

~~Cancer Clinical Developments~~

1^st ~~Quarter Developments~~

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

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

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

2^nd ~~Quarter Developments~~

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

●

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

●

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

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

~~NASH Clinical Developments~~

2^nd ~~Quarter Developments~~

●

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

~~Other Clinical Developments~~

2^nd ~~Quarter Developments~~

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

leronlimab for the COVID-19 indications due to challenges in clinical enrollment in the severe/critical COVID-19 population, and the unclear path for regulatory approval of COVID-19 post-acute sequelae SARS-CoV-2 infection (PASC).

Corporate Developments

In June 2022, the Company concluded a private placement of common stock and warrants through a placement agent, selling approximately 50.7 million additional shares of common stock for gross proceeds of $12.9 million and net proceeds of $11.3 million. Refer to Note 6, 1Equity Awards and Warrants - Private Placement of Common Stock and Warrants through Placement Agent^st ~~Quarter Developments~~ for details.

●

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

Effective July 9, 2022, Cyrus Arman, Ph.D. was appointed President, and Antonio Migliarese ceased his role as interim President. Dr. Arman previously held positions with a number of biotechnology companies, most recently serving as Chief Business Officer of Nimble Therapeutics, Inc., a company focused on engineering peptides. Prior to Nimble he was Vice President of Corporate Development and Strategy of NEUVOGEN, Inc., an 29mmune-oncology company, developing therapeutic whole cell cancer vaccines, from 2019 until 2021. Beginning in 2017, he served as co-founder and managing partner of BioVega Capital, LLC, a life sciences hedge fund. From 2014 through 2019, he served in a variety of strategy roles at Amgen (NASDAQ: AMGN), a leading independent biotechnology company, including as Director of Corporate Strategy and Global Director and Head of Competitive Intelligence and Strategy. Prior to Amgen he was a Principal at Deallus Consulting, a global lifesciences competitive strategy consulting firm. He received an M.S. degree in biomedical engineering and a Ph.D. in neuroscience from the University of Southern California and an M.B.A from the UCLA Anderson School of Management.

On August 24, 2022, Ryan Dunlap was appointed to the Company Board of Directors and was subsequently appointed chair of the Audit Committee. Mr. Dunlap has over 25 years’ experience in accounting, finance and operations leadership, developing significant expertise in strategy setting, improving operational efficiency and effectiveness, fundraising and investor relations, financial reporting and compliance, and risk management. Mr. Dunlap currently serves as the CFO of Gurobi Optimization, a private, equity backed software company offering customers decision intelligence solutions utilizing mathematical optimization, where he started in October 2019. Prior to that, he spent 7

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years as a CFO in the biotech and life science industries, including at MolecularMD (now ICON Specialty Labs), a growth equity-backed molecular diagnostics company, and Galena Biopharma, a publicly-traded oncology drug development company. Earlier in his career, Mr. Dunlap held various financial and operational leadership roles in large, multinational organizations, and spent 11 years with public accounting firms such as PwC, KPMG, and Moss Adams, where he provided business assurance and advisory services to both public and private companies predominately in the software, technology, and life sciences industries. Mr. Dunlap earned a B.S. degree in Accounting from the University of Oregon and is an active licensed CPA in the state of Oregon.

On August 31, 2022, the Company’s stockholders approved a proposal to increase the total number of authorized shares of common stock from 1.0 billion shares to 1.35 billion shares at a special stockholders’ meeting.

Results of Operations

2^nd ~~Quarter Developments~~Fluctuations in Operating Results

●

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

●

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

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

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

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

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

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

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

●

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

●

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

The Company’s operating results may fluctuate significantly depending on the outcomes of clinical trials, patient enrollment and/or completion rates in clinical trials, entering into new clinical trial protocols, and their related effect on research and development expenses, regulatory and compliance activities, activities related to the HIV BLA, general and administrative expenses, professional fees, and legal proceedings and the related outcomes. We require a significant amount of capital to continue to operate; therefore, we regularly conduct offerings to raise capital, which can create various forms of non-cash interest expense or other expenses. Additionally, we periodically negotiate settlement of debt payment obligations in exchange for equity securities of the Company and enter into warrant exchanges or modifications that may create non-cash charges. Our ability to continue to fund operations will depend on our ability to raise additional capital. Refer to Risk Factors, Liquidity and Capital Resources, and Going Concern sections included in this quarterly report.

The results of operations were as follows for the periods presented:


	Three months ended August 31,				Change
(in thousands, except for per share data)	2022		2021		$		%
			(Restated) ⁽¹⁾
Revenue	$	—	$	41	$	(41)	(100)
Cost of goods sold		—		1		(1)	(100)
Gross margin		—		40		(40)	(100)
Operating expenses:
General and administrative		6,333		7,617		(1,284)	(17)
Research and development		576		12,020		(11,444)	(95)
Amortization and depreciation		99		276		(177)	(64)
Inventory charge		2,704		1,764		940	53
Total operating expenses		9,712		21,677		(11,965)	(55)
Operating loss		(9,712)		(21,637)		11,925	55
Interest and other expense:
Interest on convertible notes		(1,146)		(1,686)		540	32
Amortization of discount on convertible notes		(576)		(952)		376	39
Amortization of debt issuance costs		(16)		(28)		12	43
Loss on induced conversion		—		(18,530)		18,530	100
Finance charges		(940)		(35)		(905)	(2,586)
Inducement interest expense		—		(528)		528	100
Legal settlement		—		(1,941)		1,941	100
Loss on derivatives		(8,601)		—		(8,601)	(100)
Total interest and other expense		(11,279)		(23,700)		12,421	52
Loss before income taxes		(20,991)		(45,337)		24,346	54
Income tax benefit		—		—		—	—
Net loss		(20,991)		(45,337)		24,346	54
Basic and diluted:
Weighted average common shares outstanding		787,856		632,597	$	155,259	25
Loss per share	$	(0.03)	$	(0.07)		0.04	55

(1) See Note 2, Summary of Significant Accounting Policies.

Product revenue, Cost of goods sold (“COGS”) and Gross margin

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~~Results of Operations for~~We had no revenue in the three ~~and six~~ months ended ~~November 30, 2021 and November 30, 2020~~

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

Three months ended November 30,

Change

Six months ended November 30,

Change

(in thousands)

2021

2020

$

%

2021

2020

$

%

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾

Total revenue

$
225

$
—

$
225

100
%

$
266

$
—

$
266

100
%

Total cost of goods sold

52

—

52

100
%

53

—

53

100
%

Gross margin

173

—

173

100
%

213

—

213

100
%

Operating expenses:






General and administrative

16,203

7,551

8,652

115
%

23,820

17,426

6,394

37
%

Research and development

9,040

16,446

(7,406)

(45)
%

22,824

31,738

(8,914)

(28)
%

Amortization and depreciation

252

506

(254)

(50)
%

528

1,011

(483)

(48)
%

Total operating expenses

25,495

24,503

992

4
%

47,172

50,175

(3,003)

(6)
%

Operating loss

(25,322)

(24,503)

(819)

(3)
%

(46,959)

(50,175)

3,216

6
%

Other income (expense):

Loss on extinguishment of convertible notes

(3,312)

(4,169)

857

21
%

(7,963)

(4,169)

(3,794)

(91)
%

Legal settlement

—

—

—

—
%

(1,941)

—

(1,941)

(100)
%

Interest expense:

Finance charges

(1,024)

(231)

(793)

(343)
%

(1,059)

(137)

(922)

(673)
%

Amortization of discount on convertible notes

(793)

(1,243)

450

36
%

(1,745)

(2,582)

837

32
%

Amortization of debt issuance costs

(23)

(15)

(8)

(53)
%

(51)

(19)

(32)

(168)
%

Inducement interest expense

(4,704)

(4,217)

(487)

(12)
%

(5,232)

(7,562)

2,330

31
%

Interest on convertible notes payable

(1,426)

(1,047)

(379)

(36)
%

(3,112)

(1,613)

(1,499)

(93)
%

Total interest expense

(7,970)

(6,753)

(1,217)

(18)
%

(11,199)

(11,913)

714

6
%

Loss before income taxes

(36,604)

(35,425)

(1,179)

(3)
%

(68,062)

(66,257)

(1,805)

(3)
%

Income tax benefit

—

—

—

—

—

—

—

—

Net loss

$
(36,604)

$
(35,425)

$
(1,179)

(3)
%

$
(68,062)

$
(66,257)

$
(1,805)

(3)
%

~~(1)~~

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

~~Product revenue~~

~~Revenue recognized was approximately $225.0 thousand and $266.0 thousand for the three and six months ended November 30, 2021, respectively,~~August 31, 2022 as compared to ~~none~~approximately $41.0 thousand in the ~~same periods~~comparable period of ~~2020.~~the previous year. Revenue was related to the fulfillment of orders under a ~~CSP~~Compassionate Special Permit (“CSP”) in the Philippines for the treatment of COVID-19 ~~patients, pursuant to an~~patients. Sales were made under the April 2021 exclusive supply and distribution agreement granting Chiral the right to distribute and sell up to 200,000 vials of leronlimab through April 15, 2022.

~~Cost~~ At the time of ~~goods sold (“COGS”) and Gross margin~~

~~COGS was approximately $52.0 thousand and $53.0 thousand for~~ the three and six months ended November 30, 2021, respectively, compared to none in the comparable periods of 2020. This resulted in a 76.9% and 80.1% gross margin for the three and six months ended November 30, 2021, respectively.sales, FDA approval ~~has~~had not yet been received for

~~Table of Contents~~

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

~~Operating expenses~~

~~The future trends in expenses will be driven largely by the outcomes of clinical trials and their related effect on research and development expenses, general~~General and administrative expenses professional fees, legal proceedings, 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~~ ~~in our 2021 Form 10-K and Part II Item 1A in this Form 10-Q.~~

General and administrative ~~(“G&A”) expenses~~

~~G&A expenses consist of all employee-related costs, stock-based compensation expense, legal fees, professional fees, insurance, and other corporate expense. G&A~~ expenses consisted of the ~~following for the periods presented:~~following:


	Three months ended November 30,				Change				Six months ended November 30,				Change				Three months ended August 31,				Change
(in thousands)	2021		2020		$		%		2021		2020		$		%		2022		2021		$		%
Salaries, benefits, and other compensation	$	1,850	$	1,525	$	325	21	%	$	2,235	$	4,981	$	(2,746)	(55)	%	$	1,278	$	385	$	893	232
Stock-based compensation		2,060		3,423		(1,363)	(40)			4,657		7,115		(2,458)	(35)			1,341		2,597		(1,256)	(48)
Legal fees		9,206		1,359		7,847	577			11,557		2,580		8,977	348			1,453		2,351		(898)	(38)
Other		3,087		1,244		1,843	148			5,371		2,750		2,621	95			2,261		2,284		(23)	(1)
Total general and administrative	$	16,203	$	7,551	$	8,652	115	%	$	23,820	$	17,426	$	6,394	37	%	$	6,333	$	7,617	$	(1,284)	(17)

~~G&A~~General and administrative expenses ~~increased~~decreased approximately ~~$8.7~~$1.3 million, or ~~115%~~17%, for the three months ended ~~November 30, 2021~~August 31, 2022, compared to the same period ~~from 2020. The increase was primarily driven by increased legal and other fees, which were partially offset by decreased stock-based compensation expense. The increase~~ in ~~legal fees was primarily related to legal fees associated with~~ the ~~proxy contest and lawsuits, SEC and DOJ investigations, the Pestell employment dispute, and the Amarex dispute. Additionally, the increase in other G&A expense was~~prior year primarily due to ~~increased insurance premiums, costs associated with~~a reduction in stock-based compensation expense and legal fees, offset by an increase in salaries, benefits, and other compensation. The decrease in stock-based compensation expense was the ~~annual meeting, and outsourced consulting and recruiting services.~~

~~G&A expenses increased approximately $6.4 million, or 37%, for~~result of fewer equity awards granted during the ~~six~~three months ended ~~November 30, 2021 compared to the same period from 2020. The increase was primarily driven by increased legal~~August 31, 2022. Legal fees ~~and other G&A expense, which were partially offset by~~ decreased employee-related costs. The increase in legal fees was primarily related to the proxy contest, SEC and DOJ investigations, the Pestell employment dispute, and the Amarex dispute. The increase in other G&A expense was primarily due to ~~increased~~legal expenses paid by the Company’s insurance ~~premiums, costs associated with the annual meeting, and outsourced consulting and recruiting services.~~carrier. The ~~reduction~~increase in salaries, benefits, and other compensation was ~~attributable to~~the result of a ~~reduction~~reclassification in ~~bonuses and~~ the ~~reclassification~~three-months ended August 31, 2021 of approximately $1.6 million of previously accrued incentive compensation to stock-based compensation due to the compensation being issued in ~~stock, offset by an increase in severance costs~~shares of common stock.

Research and development expenses

Research and development expenses consisted of the following:


	Three months ended August 31,				Change
(in thousands)	2022		2021		$		%
Clinical	$	20	$	9,227	$	(9,207)	(100)
CMC		323		2,559		(2,236)	(87)
License and patent fees		233		234		(1)	(0)
Total research and development	$	576	$	12,020	$	(11,444)	(95)

For the three months ended August 31, 2022, research and development expenses decreased approximately $11.4 million, or 95%, compared to the same period last year, primarily due to lower clinical trial expenses as a result of clinical trials related to US COVID-19, oncology, and NASH having been completed that were active in the ~~termination~~same period last year; the pausing of ~~employees~~the Brazilian COVID-19 trials; and ~~salaries~~the closing of HIV extension studies in March 2022 due to clinical holds placed on the Company by the FDA. The future trend of such expenses is dependent on the timing of FDA clearance from the clinical holds, the future clinical development of leronlimab in the treatment of HIV, NASH, NASH-HIV and ~~benefits.~~oncology, the outcome of pre-clinical studies for additional cancer indications, the outcome or cessation of the Brazilian COVID-19 trials, and the feasibility of the resubmission of the clinical section of the BLA. The decrease in ~~stock-based compensation includes~~CMC-related expenses from the same period last year was the result of the Company having concluded the majority of its CMC manufacturing and HIV BLA related activities in the prior year.

Amortization and depreciation expenses

Amortization and depreciation expense totaled approximately $0.1 million for the three months ended August 31, 2022, a ~~partial offset related to~~decrease of approximately $0.2 million, or 64% from the ~~previously described reclassification.~~same period in the prior year. The decrease was

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Table of Contents

~~Research~~attributable to the intangible write-off of a proprietary algorithm intangible asset during the fiscal year ended May 31, 2021 and ~~development (“R&D”) expenses~~

~~R&D expenses include~~ the ~~costs~~ProstaGene noncompete intangible asset becoming fully amortized as of ~~clinical trials, non-clinical, Chemistry, Manufacturing and Controls (“CMC”), regulatory and license and patent fees. R&D expenses consisted of the following for the periods presented:~~

Three months ended November 30,

Change

Six months ended November 30,

Change

(in thousands)
2021

2020

$

%

2021

2020

$

%

Clinical
$
5,598

$
6,896

$
(1,298)

(19)
%

$
14,661

$
16,456

$
(1,795)

(11)
%

Non-Clinical

511

67

444

663

675

1,038

(363)

(35)

CMC

2,696

9,287

(6,591)

(71)

7,019

13,814

(6,795)

(49)

License and patent fees

235

196

39

20

469

430

39

9

Total research and development
$
9,040

$
16,446

$
(7,406)

(45)
%

$
22,824

$
31,738

$
(8,914)

(28)
%

~~For the six months ended~~ November 30, 2021, R&D expenditures were primarily devoted to: (1) COVID-19 clinical trials, (2) NASH clinical trial, (3) HIV extension studies which continue to provide leronlimab to patients who have successfully completed a trial, (4) clinical trials for oncology and other immunology indications, (5) HIV BLA resubmission, and (6) CMC activities related to clinical and commercialization inventories, including expenses associated with the write-offresulting in decreased amortization expense of ~~and reserving for the write-down of inventory.~~

For the three months ended November 30, 2021, R&D expenses decreased approximately $7.4 million, or 45%, compared to the same period from 2020. The decrease was primarily due to decreased CMC related activities and clinical trial expenses, offset by slight increases in non-clinical expenses and license and patent fees. The reduction in CMC expense was related to decreased manufacturing activity related to the commercialization of leronlimab. The reduction in clinical expenses was primarily attributable to decreased expenses associated with the various clinical trials related to HIV extension studies, COVID-19, and oncology, and the packaging and shipping of leronlimab, which were partially offset by increases related to conducting NASH trials and costs related to resubmission of our HIV BLA.

For the six months ended November 30, 2021, R&D expenses decreased approximately $8.9 million, or 28%, compared to the same period from 2020. The decrease was due to lower CMC, clinical trial and non-clinical expenses. The reduction in CMC expense was due to decreased manufacturing activity tied to the commercialization of leronlimab. The decrease in clinical expenses was primarily attributable to reduced expenses associated with the various clinical trials related to COVID-19, HIV extension studies, and oncology, and the packaging and shipping of leronlimab, which were partially offset by an increase in clinical trial costs related to NASH and costs related to resubmission of our HIV BLA. The reduction in non-clinical expenses was attributable to decreased activity associated with non-clinical studies.

We expect future R&D expenses to be dependent on the timing of our BLA resubmission and potential FDA approval, the timing of FDA clearance, if any, of our pivotal trial protocol for leronlimab as a monotherapy for HIV patients, clinical and regulatory activities related to COVID-19, and clinical activities related to NASH, oncology and immunology trials, along with the outcome of the studies for several other indications.

~~Amortization and depreciation expenses~~

Amortization and depreciation expense for the three and six months ended November 30, 2021 and November 30, 2020 was approximately $0.3 million and $0.5 million, and $0.5 million and $1.0 million, respectively. The decrease of approximately $0.3 million, or 50%, and $0.5 million, or 48%, for the three and six month periods, respectively, was attributable to an impairment charge related to an intangible asset recorded in the third quarter of fiscal year 2021, which reduced the amortization of intangibles.

~~Loss on extinguishment of convertible notes~~

For the three and six months ended November 30, 2021 and November 30, 2020, we recognized a non-cash loss on the extinguishment of convertible notes of approximately $3.3 million and $4.2 million, and $8.0 million and $4.2 million, respectively. The losses resulted from separate and independently negotiated note payment settlements in which certain debt was agreed to be settled in exchange for shares issued at a price less than the closing price for the date of the

~~Table of Contents~~

~~respective transactions. The original underlying convertible notes were entered into on November 10, 2020 and April 2, 2021.~~ ~~The November 10, 2020 note was fully retired during the six months ended November 30, 2021.~~

~~Legal Settlement~~

~~For the three and six months ended November 30, 2021, we incurred approximately zero and $1.9~~ million, respectively, in legal settlement expense. We did not recognize any legal settlement expense during the comparable periods of fiscal 2021. The legal settlement expense consisted of a $0.2 million cash payment and approximately $1.7 million of non-cash expense related to the issuance of warrants in connection with a negotiated settlement of a dispute with a placement agent.

~~Interest expense~~

Interest expense includes finance charges, non-cash amortization of the discount on convertible notes, non-cash amortization of debt issuance costs, non-cash inducement interest expense, and interest on convertible notes payable. Interest expense consisted of the following for the periods presented:

Three months ended November 30,

Change

Six months ended November 30,

Change

(in thousands)
2021

2020

$

%

2021

2020

$

%

(Revised) ⁽¹⁾

(Revised) ⁽¹⁾

Finance charges
$
1,024

$
231

$
793

343
%

$
1,059

$
137

$
922

673
%

Amortization of discount on convertible notes

793

1,243

(450)

(36)

1,745

2,582

(837)

(32)

Amortization of debt issuance costs

23

15

8

53

51

19

32

168

Inducement interest expense

4,704

4,217

487

12

5,232

7,562

(2,330)

(31)

Interest on convertible notes payable

1,426

1,047

379

36

3,112

1,613

1,499

93

Total interest expense
$
7,970

$
6,753

$
1,217

18
%

$
11,199

$
11,913

$
(714)

(6)
%

~~(1)~~

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

For the three months ended November 30, 2021, interest expense increased $1.2 million, or 18%, compared to the same period of fiscal year 2021. The increase was primarily driven by an increase in non-cash inducement interest expense related to private warrant exchanges that occurred during the three months ended November 30, 2021. Additionally, there were increases in finance charges associated with vendor trade payables and interest on convertible notes. These increases were offset in part by a decrease in non-cash amortization of discount on convertible notes.

For the six months ended November 30, 2021, interest expense decreased by $0.7 million, or 6%, compared to the same period of fiscal year 2021. The decrease was primarily driven by decreases in non-cash inducement interest expense related to a private warrant exchange and amortization of discount on convertible notes. These decreases were offset in part by increases in interest on convertible notes and finance charges associated with vendor trade payables.

~~Fluctuations in Operating Results~~

The Company’s operating results may fluctuate due to a number of factors, such as the timing of product manufacturing activities and inventory related shelf lives, patient enrollment or completion rates in various trials, potential amendments to clinical trial protocols, and legal proceedings and related outcomes. We periodically conduct offerings to raise capital, which can create various forms of non-cash interest expense or amortization of issuance costs. Further, we periodically negotiate the settlement of debt payment obligations in exchange for equity securities of the Company, which can create a non-cash loss or gain upon extinguishment of debt. In addition, in prior years, we had derivative liabilities tied to certain securities that included a contingent cash settlement provision that can vary substantially from period to period, creating a non-cash charge or benefit.

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Table of Contents

Interest and other expense

Interest and other expense consisted of the following:

Three months ended August 31,

Change

2022

2021

$

%
(in thousands)

(Restated) ⁽¹⁾

Interest on convertible notes payable
$
1,146

$
1,686

$
(540)

(32)
Amortization of discount on convertible notes

576

952

(376)

(39)
Amortization of debt issuance costs

16

28

(12)

(43)
Loss on induced conversion

—

18,530

(18,530)

(100)
Finance charges

940

35

905

2,586
Inducement interest expense

—

528

(528)

(100)
Legal settlement

—

1,941

(1,941)

(100)
Loss on derivatives

8,601

—

8,601

100
Total interest and other expense
$
11,279

$
23,700

$
(12,421)

(52)
See Note 2, Summary of Significant Accounting Policies.
For the three months ended August 31, 2022, interest and other expenses decreased approximately $12.4 million, or 52%, compared to the same period last year. The decrease was primarily due to a decrease in loss on induced conversion and legal settlement offset by an increase in loss on derivatives. The decrease in non-cash loss on induced conversions resulted from the Company not issuing any common stock to settle any outstanding convertible debt during the current period as compared to the same period last year (refer to Part II, Item 8, Note 14, Restatement in the 2022 Form 10-K). The decrease in legal settlement expense was the result of the Company having no legal settlements during the three months ended August 31, 2022. The increase in loss on derivatives was attributable to the change in the fair value of liability classified warrants related to the Surety Bond Backstop Agreement and placement agent warrants issued in connection with a recent offering. These warrants became equity classified upon the stockholders’ approval of an increase in authorized shares on August 31, 2022.

Liquidity and Capital Resources

As of August 31, 2022, we had a total of approximately $4.7 million in cash and approximately $122.3 million in short-term liabilities. We expect to continue to incur operating losses and require a significant amount of capital in the future as we continue to develop and seek approval to commercialize leronlimab. Despite the Company’s negative working capital position, vendor relations remain relatively accommodative, and we do not currently anticipate significant delays in our business initiatives schedule due to liquidity constraints. We cannot be certain, however, that future funding will be available to us when needed on terms that are acceptable to us, or at all. We sell securities and incur debt when the terms of such agreements are deemed favorable to both parties under then current circumstances and as necessary to fund our current and projected cash needs.

Cash

The Company’s cash position of approximately ~~$8.9~~$4.7 million as of ~~November 30, 2021 decreased~~August 31, 2022, increased by ~~$25.1~~approximately $0.5 million, when compared to the balance of ~~approximately $33.9~~$4.2 million atas of May 31, ~~2021.~~2022. This ~~decrease~~increase was primarily ~~caused by $60.6 million in cash used in operating activities, partially offset by $35.6~~the result of approximately $11.5 million in cash provided by financing ~~activities. See~~ ~~Going Concern~~ ~~below for discussion around the Company’s ability to continue to fund operations and satisfy its payment obligations and commitments.~~

Six months ended November 30,

Change

(in thousands)
2021

2020

$

Net cash (used in) provided by:

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

$
(61,119)

$
487

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

$
(77)

$
64

Net cash provided by financing activities
$
35,577

$
76,311

$
(40,734)

~~Cash used~~activities offset by approximately $11.1 million in ~~operating activities~~

~~Net~~ cash used in operating activities totaled approximately $60.6 million during the six months ended November 30, 2021, representing an improvement of approximately $0.5 million over the comparable period a year ago. The decrease in net cash used in operating activities was due primarily the change in our ~~net loss, working capital fluctuations, and changes in our non-cash expenses, all of which are highly variable.~~

~~Cash used in investing activities~~

~~Net cash used in investing activities was immaterial for the six months ended November 30, 2021, compared to the six months ended November 30, 2020.~~

~~Cash provided by financing activities~~

Net cash provided by financing activities totaled approximately $35.6 million during the six months ended November 30, 2021, a decrease of approximately $40.7 million from net cash provided by financingoperating activities during the ~~six~~three months ended ~~November 30, 2020. The decrease in net cash provided from financing activities was primarily attributable~~August 31, 2022. Refer to a decrease in proceeds received from convertible notes of $50.0 million, and stock option and warrant transactions and exercises of approximately $20.8 million. These decreases were partially offset by increased proceeds of approximately $27.8 million from the sale of common stock and warrants.

~~Inventory~~

The Company’s pre-launch inventories consist of raw materials purchased for commercial production and work-in-progress inventory related to the substantially completed commercial production of pre-launch inventories of leronlimab to support the Company’s expected approval of the product as a combination therapy for HIV patients in the United States. Work-in-progress consists of bulk drug substance, which is the manufactured drug stored in bulk storage, and drug product, which is the manufactured drug in unlabeled vials. SeeItem 1, Note 2, Summary of Significant Accounting Policies – ~~Inventory~~Going Concern, and ~~Note 3,~~the ~~Inventories~~Going Concern, discussion belowfor ~~further discussion~~information regardingthe Company’s ability to continue to fund its operations and satisfy its payment obligations and commitments. Summary of cash flows and changes between the ~~capitalization of pre-launch inventories.~~

~~The Company’s inventory position~~periods presented is as of November 30, 2021 was approximately $88.6 million, net of an approximate $2.5 million reserve, decreased approximately $4.9 million when compared to a balance of approximately $93.5 million as of May 31, 2021, net of an approximate $0.7 million reserve. During the six months ended November 30, 2021, the decrease in inventory was primarily related to $2.5 million of raw materials returned, approximately $1.8 million reserved for current and future estimated obsolescence of raw materials, and approximately $1.5 million related to the write-off of expired raw materials not previously reserved for and untested vialed drug product used for clinical purposes, offset by inventory purchases of approximately $1.3 million. As of November 30,follows:


	Three months ended August 31,				Change
(in thousands)	2022		2021		$
Net cash (used in) provided by:
Net cash used in operating activities	$	(11,074)	$	(31,741)	$	20,667
Net cash used in investing activities	$	—	$	(8)	$	8
Net cash provided by financing activities	$	11,519	$	4,348	$	7,171

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Table of Contents

~~2021~~Cash used in operating activities

Net cash used in operating activities totaled approximately $11.1 million during the three months ended August 31, 2022, representing an improvement of approximately $20.7 million compared to the three months ended August 31, 2021. The decrease in the net amount of cash used was due primarily to a decrease in our net loss, attributable to decreased G&A expense, R&D expense, and non-cash interest and other expense, and working capital fluctuations, all of which are highly variable. Refer to General and Administrative, Research and Development, and Interest and Other Expense sections for the discussion.

Cash used in investing activities

Net cash used in investing activities for the three months ended August 31, 2022 when compared to the same period in the prior year did not change significantly.

Cash provided by financing activities

Net cash provided by financing activities totaled approximately $11.5 million, an increase of approximately $7.2 million compared to the three months ended August 31, 2021. The increase in net amount of cash provided was the result of receiving approximately $11.3 million through the private placement of common stock and warrants through a placement agent and approximately $0.2 million through the exercise of warrants (Refer to Note 6, Equity Awards and Stock-Based Compensation).

Pre-launch inventories

During the fourth fiscal quarter of 2022, the Company concluded that a significant portion of inventories no longer qualify for capitalization as pre-launch inventories due to expiration of shelf-life prior to expected commercial sales and the ability to obtain additional commercial product stability data until after shelf-life expiration. This is due to delays experienced from the originally anticipated BLA approval date from the FDA. Although these inventories are no longer being capitalized as pre-launch inventories for US GAAP accounting purposes, the inventories written-off for accounting purposes continue to be physically maintained, can be used for clinical trials, and can be commercially sold if the shelf-lives are extended as the result of the performance of on-going continued stability testing of drug product. In the event the shelf-lives of these written-off inventories are extended, and the inventories are sold commercially, the Company will not recognize any costs of goods sold on the previously expensed inventories. The Company also concluded that, due to delays of future production, certain raw materials would expire prior to production and as such no longer qualify for capitalization. Specifically, the Company evaluated its raw materials, which consist of specialized raw materials, resins, and other, against the anticipated production date and determined that while the next production date is indeterminable as of May 31, 2022, specialized raw materials have remaining shelf-lives ranging from 2023 to 2026. Therefore, a reserve of $10.2 million for the entire remaining value of specialized and other raw materials was recorded as of May 31, 2022. The Company also concluded that approximately $29.1 million, composed of five batches of drug product, out of total of nine manufactured, is likely to expire prior to the anticipated date the product may be approved for commercialization. Additionally, the Company anticipates that approximately $34.2 million of the drug product comprising the remaining four manufactured batches, with shelf-lives lasting into 2026, may expire prior to receiving approval for commercialization. The Company wrote-off the entire remaining balance of the drug product, in the amount of $63.3 million, as of May 31, 2022.

During the first quarter of fiscal 2023, the Company reviewed purchase commitments made by its manufacturing partner, Samsung BioLogics Co., Ltd. (“Samsung”), under the master agreement between the Company and Samsung, and its vendors for specialized raw materials for which the Company made a prepayment in the amount of $2.7 million in the third quarter of fiscal 2022, which were recorded as other assets in the consolidated financial statements as of May 31, 2022. The Company and its manufacturing partner have been in discussions, among other things, about cancelling the commitments to the suppliers, which have been unsuccessful to date. These additional specialized raw materials are estimated to have shelf-lives ranging from 2023 to 2026. The entire amount was ~~approximately $22.5 million, net~~reserved for as of ~~an approximate $2.5 million reserve,~~August 31, 2022.

During the fourth fiscal quarter of 2022, the Company completed its validation of the resins’ properties based on the number of cycles they have been used for, and the ~~total work-in-progress was approximately $66.0 million. Work-in-progress consists~~remaining number of ~~bulk drug substance, which~~manufacturing cycles they may be used for; the

Table of Contents

Company did not identify any resins that failed suitability validation. As of August 31, 2022, the remaining life of resins remained unchanged, ranging between 37 and 62 cycles. The Company will continue to present its resins inventory based on the remaining shelf-lives until a new shelf-life is assigned based on the manufactured drug stored in bulk storage, and drug product, which is the manufactured drug in unlabeled vials. Bulk drug substance and drug product comprised approximately $12.6 million and $53.5 million, respectively,results of ~~work-in-progress inventory.~~usability testing.

Convertible debt

~~A summary of our convertible debt arrangements is included in Note 5,~~ ~~Convertible Instruments~~~~, of the Notes to the Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.~~

April 2, 2021 Convertible Note

On April 2, 2021, we issued a convertible note with a principal amount of $28.5 million resulting in net cash proceeds of $25.0 million, after $3.4 million of debt discount and $0.1 million of offering costs. The note accrues interest daily at a rate of 10% per annum, contains a stated conversion price of $10.00 per share, and matures in April 2023. The April 2, 2021 Note required monthly debt reduction payments of $7.5 million for the six months beginning in May 2021, which could also be satisfied by payments on other notes held by the noteholder or its affiliates. Beginning six months after the issuance date, the noteholder may request monthly redemptions of up to $3.5 million. ~~The~~As of August 31, 2022, the outstanding balance of the April 2, 2021 Note, including accrued interest, was approximately ~~$19.8 million as of November 30, 2021.~~$12.4 million.
April 23, 2021 Convertible Note
On April 23, 2021, we issued a convertible note with a principal amount of $28.5 million resulting in net cash proceeds of $25.0 million, after $3.4 million of debt discount and $0.1 million of offering costs. The note accrues interest daily at a rate of 10% per annum, contains a stated conversion price of $10.00 per share, and matures in April 2023. Beginning six months after the issuance date, the noteholder may request monthly redemptions of up to $7.0 million. ~~The~~As of August 31, 2022, the outstanding balance of the April 23, 2021 Note, including accrued interest, was approximately ~~$27.9 million as of November 30, 2021.~~$31.6 million.

Common stock
We have ~~1,000.0~~1,350.0 million authorized shares of common stock. The table below summarizes intended uses of common stock.

As of
(in millions)
August 31, 2022
Issuable upon:

Warrants exercise
176.2
Convertible preferred stock and undeclared dividends conversion
32.2
Outstanding stock options exercise or vesting of outstanding RSUs
17.4
Reserved for issuance pursuant to future stock-based awards under equity incentive plan
26.1
Reserved and issuable upon conversion of outstanding convertible notes
12.0
Total shares reserved for future uses
263.8
Common stock outstanding
812.3
As of ~~November 30, 2021,~~August 31, 2022, we had approximately 685.4 million shares of common stock outstanding, approximately 44.9 million shares of common stock issuable upon the exercise of warrants, approximately 3.0 million shares reserved for unissued warrants, approximately 34.1 million shares of common stock issuable upon conversion of convertible preferred stock and undeclared dividends, approximately 25.3 million shares of common stock issuable upon the exercise of outstanding stock options or the vesting of outstanding restricted stock units, approximately 18.8 million shares of common stock reserved for issuance pursuant to future stock-based awards under our equity incentive plan, and approximately 12.0 million shares of common stock reserved and issuable upon conversion of outstanding convertible notes. As a result, as of November 30, 2021, we had approximately 176.4273.9 million unreserved authorized shares of common stock available for issuance. Our ability to continue to fund our operations depends on our ability to raise capital. The funding necessary for our operations may not be available on acceptable terms, or at all. If we deplete our cash reserves, we may have to discontinue our operations and liquidate our assets, in extreme cases, we could be forced to file for bankruptcy protection, discontinue operations or liquidate assets.
~~Commitments and Contingencies~~Off-Balance Sheet Arrangements
~~Commitments with Samsung BioLogics Co., Ltd. (“Samsung”)~~
~~In April 2019, the Company entered into an agreement with Samsung, pursuant~~As of August 31, 2022, we did not have any off-balance sheet arrangements that have, or are reasonably likely to ~~which Samsung will perform technology transfer, process validation, manufacturing, and supply services for the commercial supply~~have, a material effect on our current or future financial condition, results of leronlimab effective through calendar year 2027. In 2020, the Company entered into an additional agreement, pursuant to which Samsung will perform technology transfer, process validation, vial filling and storage services for clinical, pre-approval inspection, and commercial supply of leronlimab. Samsung is obligated to procure necessary raw materials for the Company and manufacture a specified minimum number of batches, and the Company is required to provide a rolling three-year forecast of future estimated manufacturing requirements to Samsung that are binding. On January 6, 2022,operations, liquidity, capital expenditures or capital resources.

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~~Samsung provided written notice~~Contractual Obligations

Refer to ~~the Company of the Company’s material breach of the parties’ Master Services~~Note 4, Accounts Payable and Project Specific Agreements for failure to pay approximately $13.5 million due on December 31, 2021. An additional approximate $22.8 million is due under the agreements on January 31, 2022. These amounts areAccrued Liabilities, Note 5, Convertible Instruments and Accrued Interest, and Note 9, Commitments and Contingencies included in ~~accounts payable at November 30, 2021. Under~~Part I, Item 1 of this Form 10-Q, and in Item 7 in the agreements, the Company has 45 days to make commercially reasonable efforts to commence curing the breach. If such steps have not been taken during the cure period, Samsung may terminate the agreements upon 45 days’ notice. Management has communicated to Samsung its intent to commence curing the breach prior to the expiration of the cure period. The future commitments pursuant to these agreements are estimated as follows:2022 Form 10-K.

Fiscal Year (in thousands)

Amount
2022 (6 months remaining)

$
21,271
2023

113,790
2024

106,140
2025

14,400
Total

$
255,601
Legal Proceedings
~~Commitments with Contract Research Organization (“CRO”)~~
The Company has entered into project work orders, as amended, for each of 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 that would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range up to approximately $0.2 million. In the remote circumstance that the Company would terminate all clinical trials, the collective financial penalties may range from a low of approximately $20 thousand to an approximate high of approximately $0.6 million.
~~Legal Proceedings~~
The Company is a party to various legal ~~proceedings. As of November 30, 2021, we were not party to any material pending legal~~ proceedings ~~other than those~~ described in ~~Note 10,~~ ~~Commitments and Contingencies~~~~, to the Consolidated Financial Statements included in~~ Part I, Item 1, Note 9, Commitments and Contingencies – Legal Proceedings of this Form 10-Q. We are unable to predict 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. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a recognized accrual, if any, could be material to the Company’s consolidated financial statements. As of August 31, 2022, the Company did not record any legal accruals related to the outcomes of the matters discussed in this Form 10-Q.
Regulatory Matters
FDA Refusal to File Letter re HIV BLA Submission
In July 2020, the Company received a Refusal to File letter from the FDA regarding its BLA submission for leronlimab as a combination therapy with HAART for highly treatment-experienced HIV patients. The FDA informed the Company the BLA did not contain certain information and data needed to complete a substantive review and therefore, the FDA would not file the BLA. The deficiencies cited by FDA included administrative deficiencies, omissions, corrections to data presentation and related analyses, and clarifications regarding the manufacturing processes. In November 2021, the Company resubmitted the non-clinical and CMC sections of the BLA and is currently reevaluating the clinical section. As of March 2022, the FDA had commenced its review of the CMC section. Additionally, in March 2022 the FDA placed the HIV program on a partial clinical hold, which may affect our ability to resubmit the BLA. The Company is in dispute with its former contract research organization (“CRO”), as described in Note 9, Commitments and Contingencies – Legal Proceedings in this Form 10-Q. The Company previously obtained a court order requiring the CRO to release the Company’s clinical data related to the BLA and other clinical trials, which the CRO had been withholding. Further, the order granted the Company the right to perform an audit of the CRO’s services. The Company is in the process of evaluating the data, results of the audit, and implications of the partial clinical hold. The Company will update the feasibility of the resubmission of the clinical section of the BLA once it completes its evaluation.
FDA Warning Letter re COVID-19 Misbranding of Investigational Drug
In January 2022, the Company received a Warning Letter from the United States FDA alleging that its former CEO had made references in a video interview to COVID-19 and leronlimab in a promotional context to the effect that leronlimab, an investigational new drug, is safe and effective for the purpose for which it is being investigated or otherwise promoted the drug. The FDA warned the Company that leronlimab has not been approved or authorized by the FDA, its safety and effectiveness has not yet been established, and that the related clinical trial data was mischaracterized in the video. The FDA further alleged the video misbranded leronlimab under section 502(f)(1) of the FD&C Act and in violation of section 301(a) of the FD&C Act, as the claims in the video made representations in a promotional context regarding the safety and efficacy of an investigational new drug that has not been approved or authorized by the FDA. This matter was resolved with the FDA on September 26, 2022.

FDA HIV Partial Clinical Hold and COVID-19 Full Clinical Hold Letters
In March 2022, the United States FDA placed a partial clinical hold on the Company’s HIV program and a full clinical hold on its COVID-19 program in the United States. The Company was not enrolling any new patients in the trials placed on hold in the United States. Under the full clinical hold on the COVID-19 program, no new clinical studies may be initiated until the clinical hold is resolved. As discussed above, the Company has made a business decision not to

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currently pursue the use of leronlimab in COVID-19 patients and has no plans for further trials under the COVID-19 indication. CytoDyn is working closely with the FDA to resolve the partial clinical hold as soon as possible. As of the date of this filing, the Company has submitted the updated Investigator Brochure to the FDA in connection with the lifting of the clinical hold. The Company is in the process of completing additionally requested materials and will submit them as soon as possible.

Under the full clinical hold on the COVID-19 program, no new clinical studies may be initiated until the clinical hold is resolved. The Company is not currently conducting any COVID-19 trials in the United States, and the Company has made the business decision to discontinue its investigation of leronlimab for COVID-19.

Going Concern

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. As presented in the accompanying consolidated financial statements, the Company had losses for all periods presented. The Company incurred a net loss of approximately $21.0 million in the three months ended August 31, 2022 and has an accumulated deficit of approximately $782.9 million as of August 31, 2022. These factors, among several others, raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company has operated at a loss since inception. The Company’s continuation as a going concern is dependent upon its ability to obtain a significant amount of additional operating capital, to continue to fund operations and pay its liabilities and commitments, its research into multiple indications for and development of its product candidate, to obtain FDA approval of its product candidate for use in treating one or more indications, to outsource manufacturing of its product, and ultimately to attain profitability. We intend to seek additional funding through equity or debt offerings, licensing agreements, supply and distribution agreements, and strategic alliances to implement our business plan. There are no assurances, however, that we will be successful in these endeavors. If we are not able to raise capital on a timely basis on favorable terms, if at all, we may need to significantly change or scale back operations, including our efforts related to the BLA and other development and commercialization initiatives or to adequately fund legal proceedings, all of which individually or in combination could materially impede our ability to achieve profitability. The Company’s failure to raise additional capital could also affect our relationships with key vendors, including Samsung, disrupting our ability to timely execute our business plan. In extreme cases, the Company could be forced to file for bankruptcy protection, discontinue operations or liquidate assets.

Since inception, the Company has financed its activities principally from the public and private sale of equity securities as well as with proceeds from issuance of convertible notes 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. The sale of equity and convertible debt securities to raise additional capital is likely to result in dilution to stockholders and those securities may have rights senior to those of common shares. If the Company raises funds through the issuance of additional preferred stock, convertible debt securities or other debt or equity financing, the related transaction documents could contain covenants restricting its operations.

During fiscal 2021, the Company entered into long-term convertible notes that are secured by all of our assets (excluding our intellectual property), and include certain restrictive provisions, including limitations on incurring additional indebtedness and future dilutive issuances of securities, any of which could impair our ability to raise additional capital on acceptable terms. During fiscal 2022, in exchange for warrants, the Company entered into a backstop arrangement, as amended, with an accredited investor whereby the Company pledged its patents and the investor agreed to indemnify the issuer of the surety bond in the Amarex dispute with respect to the Company’s obligations under the surety bond. Future third-party funding arrangements may also require the Company to relinquish valuable rights. Additional capital, if available, may not be available on reasonable or non-dilutive terms.

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New Accounting Pronouncements

Refer to Part I, Note 2, Summary of Significant Accounting Policies – Recent Accounting Pronouncementsof this Form 10-Q for the discussion.

.Critical Accounting Policies and Estimates

Pre-launch inventories

We capitalize 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 we have determined that 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 3 clinical trial results for the underlying product candidate, results from meetings with the relevant regulatory authorities prior to the filing of regulatory applications, and the compilation of the regulatory application. We closely monitor the status of the product within the regulatory review and approval process, including all relevant communication with regulatory authorities. If we are aware of any specific material risks or contingencies other than the normal regulatory review and approval process or if there are any specific issues identified relating to safety, efficacy, manufacturing, marketing or labeling, the related inventory may no longer qualify for capitalization.

We value inventory at the lower of cost or net realizable value using the average cost method. Inventories currently consist of raw materials, bulk drug substance, and drug product in unlabeled vials to be used for commercialization of the Company’s biologic, leronlimab, which is in the regulatory approval process. 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 ~~recognizes~~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 pre-launch inventory, the Company relies on independent analysis provided by third parties knowledgeable of the range of likely commercial prices comparable to current comparable commercial product.

For inventories capitalized prior to FDA marketing approval in preparation of product launch, anticipated future sales, shelf-lives, and expected approval date are considered when evaluating realizability of pre-launch inventories. 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 stability data of all inventories. As inventories approach their shelf-life expiration, the Company may perform additional stability testing to determine if the inventory is still viable, which can result in an extension of its shelf-life. Further, in addition to performing additional stability testing, certain raw materials inventory may be sold in its then current condition prior to reaching expiration. We also consider potential delays associated with regulatory approval in determining whether preapproval inventory remains salable. In determining whether pre-approval inventory remains salable, the Company considers a number of factors ranging from potential delays associated with regulatory approval, whether the introduction of a competing product could negatively impact the demand for our product and affect the realizability of our inventories, whether physicians would be willing to prescribe leronlimab to their patients, or if the target patient population would be willing to try leronlimab as a new therapy.

Although the Company may conclude that certain inventories no longer qualify for capitalization as pre-launch inventories due to expiration of shelf-life prior to expected commercial sales and the ability to obtain additional commercial product stability data until after shelf-life expiration, and are therefore written-off for accounting purposes, we may continue to physically maintain them and may use them for clinical trials, or may sell them if the shelf-lives can be extended as a result of the performance of on-going continued stability testing of drug product. In the event the shelf-lives of these written-off inventories are extended, and the inventories are sold commercially, the Company will not recognize any costs of goods sold on the previously expensed inventories.

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Stock-based compensation

We use the Black-Scholes option pricing model to estimate the fair value of stock options on the date of grant utilizing certain assumptions that require judgments and estimates. These assumptions include estimates for stock price volatility, expected term and risk-free interest rates in determining the fair value of the stock options. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the equity award. The expected volatility is based on the historical volatility of the Company’s common stock at monthly intervals. The computation of the expected option term is based on the “simplified method,” as the options issued by the Company are considered “plain vanilla” options. In accordance with ASC 718, Compensation -Stock Compensation, the Company has elected to recognize the effect of forfeitures as they are incurred, and as such does not estimate future unvested forfeitures for all periods presented. Quarterly expense is reduced during the period when grants are forfeited, such that the full expense is recorded at the time of grant and only reduced when the grant is forfeited.

We at times issue restricted common stock and/or restricted stock units to executives or third parties as compensation for services rendered. Such awards are valued at fair market value on the effective date of the Company’s obligation. From time to time, we also issue stock options and warrants to consultants as compensation for services. Costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more readily measurable.

Contingent liabilities

We have significant license and contingent milestone and royalty liabilities. We estimate the likelihood of paying these contingent liabilities periodically based on the progress of our clinical trials, BLA approval status, and status of commercialization. We are also party to various legal proceedings. We recognize 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 it is disclosed and if the loss or range of loss can be estimated, the possible loss is also disclosed. It is not possible to determine the ultimate 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 has not been made,~~any, could be material to the Company’s consolidated financial statements. ~~As of November 30, 2021,~~We periodically reassess these matters when additional information becomes available and adjust our estimates and assumptions when facts and circumstances indicate the ~~Company had not recorded any accruals related to the outcome of the matters described in Note 10,~~ ~~Commitments and Contingencies—Legal Proceedings~~.

~~Distribution~~

In December 2019, the Company entered into a supply agreement with Vyera Pharmaceuticals, LLC (“Vyera”) for the sale of leronlimab for HIV in the United States in conjunction with a commercialization and license agreement entered into with Vyera. See “Licensing” below for further discussion of the agreement. On April 6, 2021, the Company entered into an exclusive supply and distribution agreement with Biomm S.A., a Brazilian pharmaceutical company, granting the exclusive right to distribute and sell leronlimab in Brazil upon Brazilian regulatory approval. On April 15, 2021, the Company entered into an exclusive supply and distribution agreement with Chiral Pharma Corporation, a Philippine pharmaceutical company, granting the exclusive right to distribute and sell up to 200,000 vials of leronlimab during the 12 months ending April 15, 2022, to treat critically ill COVID-19 patients in the Philippines under CSP or Emergency Use Authorization (“EUA”) from the Food and Drug Administration of the Philippines. On May 11, 2021, the Company entered into an exclusive supply and distribution agreement with Macleods Pharmaceuticals Ltd., an

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

~~Licensing~~

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

In December 2019, the Company entered into a Commercialization and License Agreement and a Supply Agreement with Vyera (together the “License Agreements”), under which the Company granted Vyera an exclusive royalty-bearing license to commercialize pharmaceutical preparations containing leronlimab for treatment of HIV in humans in the United States. The License Agreements gave Vyera the right to assign its rights and obligations under the agreements to an affiliate of Vyera. In October 2020, Vyera assigned the License agreements to SevenScore Pharmaceuticals, which in turn assigned them to Regnum Corp. in December 2021. Vyera, SevenScore and Regnum are each controlled by their parent Phoenixus AG.

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

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

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

~~Regulatory Matters~~

~~FDA Refusal to File Letter on HIV BLA Submission~~

In July 2020, the Company received a Refusal to File letter from the FDA regarding its BLA submission for leronlimab as a combination therapy with HAART for highly treatment experienced HIV patients. The FDA informed the Company the BLA did not contain certain information needed to complete a substantive review and therefore, the FDA would not file the BLA. In particular, the FDA informed the Company that the receptor occupancy analysis performed by its third-party laboratory was not properly performed, and would be required to 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. Subsequent to the Refusal to File letter, the Company received further clarification on the BLA’s deficiencies. The Company has engaged a leading global healthcare diagnostic company, along with an expanded team of subject matter expert consultants, to conduct the receptor occupancy analysis necessary in order to resubmit the BLA. The Company began to resubmit the BLA in July 2021. In November 2021 it resubmitted the non-clinical and manufacturing sections of the BLA, and currently expects to complete the resubmission process with the resubmission of the clinical section of the BLA in the first calendar quarter of 2022.

~~Going Concern~~

As reported in the accompanying financial statements, during the six months ended November 30, 2021 and November 30, 2020, the Company incurred net losses of approximately $68.1 million and $66.3 million, respectively. The Company has had limited to no activities that produced revenue in the periods presented and has sustained operating losses since inception.
We currently require and will continue to require a significant amount of additional capital to fund operations and pay our liabilities and commitments, and our ability to continue as a going concern is dependent on our ability to raise such additional capital, commercialize 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 and/or slow CMC-related activities, which could materially delay commercialization initiatives and 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 its business plan. In extreme cases, the Company could be forced to file for bankruptcy protection, discontinue operations or liquidate assets.
Since inception, the Company has financed its activities principally from the public and private sale of equity securities and proceeds from convertible notes payable and related party notes payable. The Company intends to finance its future operating activities and its working capital needs largely from the sale of equity and debt securities, combined with additional potential funding from other traditional and non-traditional financing sources. As of the date of this filing, the Company has approximately 176.4 million shares of common stock authorized and unreserved and available for issuance under its certificate of incorporation, as amended.
The sale of equity and convertible debt securities to raise additional capital may result in dilution to stockholders and those securities may have rights senior to those of common shares. If the Company raises funds through the issuance of additional preferred stock, convertible debt securities or other debt financing, the related transaction documents could contain covenants restricting its operations. On April 2 and April 23, 2021, the Company entered into long-term convertible notes that are secured by all of our assets (excluding our intellectual property), and include certain restrictive provisions, including limitations on incurring additional indebtedness and future dilutive issuances of securities, any of which could impair our ability to raise additional capital on acceptable terms and conditions. Any other third-party funding arrangements could require the Company to relinquish valuable rights. The Company 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 Item 1A in our 2021 Form 10-K and Item 1A. in Part II of this Form 10-Q.

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The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses for all periods presented and has a substantial accumulated deficit. As of November 30, 2021, these factors, among several others, raise substantial doubt about our ability to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain a significant amount of additional operating capital, to continue its research into multiple indications for and development of its product candidate, to obtain FDA approval of its product candidate for use in treating one or more indications, to outsource manufacturing of its product, and ultimately to attain profitability. The Company intends to seek additional funding through equity or debt offerings, licensing agreements, supply and distribution agreements, and strategic alliances to implement its business plan. There are no assurances, however, that it will be successful in these endeavors.
~~Off-Balance Sheet Arrangements~~
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.
~~Critical Accounting Estimates~~
Our critical accounting estimates are those estimates that require the most significant judgments and estimates in presenting the Company’s consolidated financial statements. The Company evaluates its estimates, judgments, and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Part II, Item 7, of our 2021 Form 10-K and Note 2 of the Notes to Consolidated Financial Statements included in Part I, Item 1, ~~of this Form 10-Q. The application of our critical accounting policies require management to make judgments~~Note 9, Commitments and estimates about the amounts reflected in the consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.
~~Recent Accounting Pronouncements~~
~~Please refer to Note 2,~~ ~~Summary of Significant Accounting Policies – Recent Accounting Pronouncements~~Contingencies~~, of the Notes to Consolidated Financial Statements included in Part I, Item 1~~ of this Form 10-Q for ~~a discussion of recent accounting pronouncements and their anticipated effect on our business.~~additional information.

Item 3. Quantitative and Qualitative Disclosures about Market ~~Risk.~~Risk
~~Interest Rate Risk~~
~~We are exposed to market risks in~~There have been no material changes from the ordinary course of business. These risks primarily include interest rate sensitivities. As of November 30, 2021, we had $8.9 million in cash and cash equivalents. We intend to hold our cash in interest-bearing money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash and the low risk profile of its investment, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash.
~~Common Stock Price Volatility~~

~~The Compensation Committee~~information previously reported under Part II, Item 7A of the Board of Directors has historically granted stock incentive awards to management and employees in the form of stock options. Stock-based compensation expense is recognized for stock options over the requisite service period using the fair value of these grants as estimated at the date of grant using the Black-Scholes pricing

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~~model and the market value of our publicly traded common stock on the date of grant. This expense is reflected in the “~~~~General and administrative~~” expense line item in our consolidated statements of operations. In addition to the market value of our common stock, one of the inputs into this model that significantly impacts the fair value of the options is the expected volatility of our common stock over the estimated life of the option. We estimate expected volatility by using the most recent historical experience.

~~Since November 2019, our common stock has experienced periods of elevated volatility in trading. Grants of stock options and compensatory warrants during~~ 2022 will continue to reflect increased expected volatility in the estimation of grant date fair value of stock options that would result in a higher value and related stock-based compensation expense for these awards when compared to prior years.

Additionally, we periodically negotiate the settlement of debt payment obligations in exchange for equity securities of the Company, which can create a non-cash loss or gain upon extinguishment of debt as the price of our common stock fluctuates. If we continue to enter into these settlements, the increased levels of volatility in our common stock trading price will result in increased dilution and extinguishment gains or losses.Form 10-K.

Item 4. Controls and ~~Procedures.~~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~~During the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of November 30, 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 Chief Executive Officer and Chief Financial Officer have concluded, based upon the evaluation described above, that, as of November 30, 2021, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting described below.
~~Material Weakness~~
In connection with the preparation of our financial statements for the three and six months ended November 30, 2021, we identified an error that resulted in revisions to additional paid-in capital and non-cash inducement interest expense beginning in fiscal year 2018 through the three monthsquarter ended August 31, 2021. The error relates to a pre-existing model used to calculate non-cash inducement interest expense designed to calculate inducement interest expense specific to modification of a warrant term (e.g., extension of the term or modification of exercise price) without settling the instrument. However, starting in fiscal year 2018 and to date, inducements have been primarily structured to be a settlement of the warrant, not a modification. We believe the failure to identify these errors on a timely basis resulted from a material weakness related to the evaluation of complex accounting issues due to staffing constraints and lack of technical expertise.
In connection with the identification of the material weakness in our internal control over financial reporting, we continue to evaluate, design and implement controls and procedures to address this weakness. In recent periods, we have entered into consulting arrangements for external resources and have hired additional personnel with accounting skills to strengthen internal control over financial reporting, specifically in the areas of technical accounting and financial reporting. To date, resources have been added in each of these specific areas, and we intend to continue these arrangements and to further supplement internal personnel. We also are enhancing risk assessment and monitoring controls to ensure that control activities are appropriately designed, implemented and operating effectively and have

~~Table of Contents~~

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

~~Changes in Internal Control Over Financial Reporting~~

~~Other than the changes to date described above,~~2022, 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. Our President and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of August 31, 2022 due to the unremediated material weakness in internal control over financial reporting described below.

We maintain controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended ("the Exchange Act"), is accurately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and that such information is accumulated and communicated to our management,

Table of Contents

including our President and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As previously disclosed in Item 9A of the 2022 Form 10-K, during the fiscal year ended May 31, 2022, the Company identified an error that resulted in revisions to additional paid-in capital and non-cash inducement interest expense beginning in fiscal year 2018 through the three months ended August 31, 2021. Additionally, the Company also identified a material error in how the Company accounted for common stock issued to settle certain convertible note obligations dating back to fiscal year 2021. The error resulted in an understatement of the previously reported non-cash loss on induced conversion and additional paid-in capital. Therefore, management reached the following conclusions as of May 31, 2022.

●

Management concluded that the failure to identify errors related to evaluation of complex accounting issues for which alternative accounting treatments exist constitutes a material weakness in the Company’s internal control over financial reporting. This material weakness is deemed to be caused by lack of review of equity transactions to allow for consideration of alternative accounting treatments, and an insufficient number of finance reporting and accounting personnel with the knowledge, experience, or training appropriate in light of the Company’s financial reporting requirements.

●

The Company failed to perform an adequate risk assessment, did not adequately design, and did not fully document information technology (IT) general controls in the areas of user access, program change management, operations over certain IT systems that support the Company’s financial reporting processes, including controls to respond to the Complementary User Entity Controls assumed in the design and implementation of third-party service organizations controls. We concluded that in the aggregate, these failures constitute a material weakness in the Company’s internal control over financial reporting.

A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statement will not be prevented or detected on a timely basis. Our independent registered public accounting firm, Macias Gini & O’Connell LLP, who audited the consolidated financial statements included in the 2022 Form 10-K, issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

In connection with the identification of the material weaknesses in our internal control over financial reporting, we continue to evaluate, design and implement controls and procedures to address this weakness. We have entered into consulting arrangements for external resources and have hired additional personnel with accounting skills to strengthen internal control over financial reporting, specifically in the areas of technical accounting and financial reporting. We also plan to perform a risk assessment of our internal controls related to information technology systems, and plan to design and place in operation controls tailored to address risks that we deem to be relevant to our Company. Further, we plan to document all of our control activities in this area, including controls to respond to the Complementary User Entity Controls assumed in the design and implementation of third-party service organizations. A material weakness in internal control over financial reporting is a matter that may require some period of time to correct.

4840

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PART II – Other Information

Item 1. Legal ~~Proceedings.~~Proceedings
~~For a description of pending~~There have been no material ~~legal proceedings, please see Note 10,~~ ~~Commitments and Contingencies~~~~, of~~changes from the ~~Notes to Consolidated Financial Statements included~~information previously reported in ~~Part I, Item 1 of this~~the 2022 Form ~~10-Q.~~10-K.

Item 1A. Risk ~~Factors.~~Factors
We are subject to various risks, including ~~those set forth below, and those~~ risk factors identified in our ~~Annual Report on~~2022 Form 10-K, for the year ended May 31, 2021, filed with the SEC on July 30, 2021, as amended by Amendment No. 1 filed with the SEC on September 28, 2021, and our subsequent filings with the SEC, that could have a negative effect on our financial condition and could cause results to differ materially from those expressed in forward-looking statements contained in this report or other reports filed with the SEC.10-K. You should carefully consider these risk factors in addition to the risk factor below and other information in this Form 10-Q.
Our cash reserves are extremely low, requiring that we raise substantial additional financing to satisfy our current payment obligations and to fund our ~~operations.~~operations, which continues to be difficult in light of the low trading price of our common stock.
We must continue to raise substantial additional funds in the near term to meet our payment obligations and fund our operations. ~~This~~Additional funding may not be available on acceptable terms or at all. In addition, as of September 30, 2022, despite the approval by our stockholders of an additional 350.0 million authorized shares of common stock on August 31, 2022, we had only approximately 273.9 million shares of common stock available for issuance in new financing transactions. We may also need to use some of the additional authorized shares (or funds raised through the sale of such shares) to satisfy our outstanding accounts payable and accrued liabilities. If we ~~fail~~are not able to raise additional funds on a timely basis, we may be forced to delay, reduce the scope of, or eliminate one or more of our planned operating activities, including seeking removal of clinical holds placed on us by the FDA, the potential resubmission of our BLA application, analysis of clinical trial data for purposes of responding to FDA requirements and preparing additional regulatory submissions, additional clinical trials for indications we plan to pursue, regulatory and compliance activities, and legal defense activities. Any such delay or ~~postpone~~inability to pursue our ~~regulatory submissions and commercialization initiatives, which would~~planned activities likely will adversely affect our business, financial condition, and stock price. The continued low trading price of our common stock (with a closing price of $0.40 per share on October 6, 2022) presents a significant challenge to our ability to raise additional funds. If we deplete our cash reserves, we may have ~~no choice but~~ to discontinue our operations and liquidate our assets.
~~We are required to post a $6.5 million bond in the dispute with our former contract research organization, which requires us to provide cash collateral to secure the full amount of the bond.~~
~~As discussed in Note 10,~~ ~~Commitments and Contingencies~~, of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, the court issued an injunction requiring Amarex to provide the Company with access to the databases and other information Amarex acquired in the course of providing services to the Company with regard to its clinical trials. As a condition to the injunction, the court ordered the Company to post a $6.5 million bond to cover a portion of disputed invoices for services in the related arbitration. To obtain the bond, the Company must tender $6.5 million in cash as collateral to the surety issuing the bond. If the Company is unable to provide the collateral in a timely fashion, its ability to review the databases and related information that Amarex holds may be delayed, potentially for several months or longer, resulting in additional delays in completion of the BLA resubmission process.
We have received notice of a material breach of our payment obligations to Samsung, which could result in termination of our agreements for manufacturing of our drug product and related services by Samsung.
On January 6, 2022, Samsung, one of our contract manufacturing organizations, sent written notice to the Company that it had materially breached its agreements with Samsung by failing to pay approximately $13.5 million due on December 31, 2021. An additional $22.8 million is due under the agreements on January 31, 2022. These amounts are included in accounts payable at November 30, 2021. Under the agreements, the Company has 45 days to make commercially reasonable efforts to commence curing the breach. If such steps have not been taken during the cure period, Samsung may terminate the agreements upon 45 days’ notice. Management intends to and has communicated to Samsung its intent to commence curing the breach prior to the expiration of the cure period. See Note 10, ~~Commitments and Contingencies~~~~, of the Notes to Consolidated Financial Statements included in Part I, Item 1 and~~ ~~“Commitments and Contingencies”~~ ~~in Part I, Item 2 of this Form 10-Q for additional information.~~
~~Additional delays in the completion of the resubmission of our BLA may substantially hinder our efforts to commercialize our drug product and decrease stockholder value.~~

~~Table of Contents~~

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

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

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

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

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

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

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

~~Table of Contents~~

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

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds
~~None.~~During September and October 2022, the Company issued a total of 80,816 shares of common stock in satisfaction of a total of $40,205 in severance payments due in September 2022 to our former CEO. The numbers of shares issued were based on the closing price of the common stock on the applicable dates. The Company relied on the exemption from registration afforded by Section 4(a)(2) of the Securities Act in connection with the issuance of the shares.

~~Item 3. Defaults Upon Senior Securities.~~
~~None.~~

~~Item 4. Mine Safety Disclosures.~~
~~Not Applicable.~~
~~Item 5. Other Information.~~
~~As described in Note 10,~~ ~~Commitments and Contingencies~~, of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, on January 7, 2022, the Delaware Court of Chancery entered an order that declared that a portion of Article VI, Section 5, of the Company’s certificate of incorporation was null and void and of no legal effect under Delaware law. The order was entered pursuant to a stipulation submitted by the Company and the plaintiffs in a putative class-action lawsuit filed on September 22, 2021, to resolve the matter. As a result of the court order, the language in brackets below was stricken:
“5. Removal. Subject to the rights, if any, of any series of Preferred Stock to elect Directors and to remove any Director whom the holders of any such stock have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office [(i) only with cause and (ii)] only by the affirmative vote of the holders of at least a majority in voting power of the shares then entitled to vote at an election of Directors.”.
The Company intends to file a certificate of amendment with the Secretary of State of the State of Delaware pursuant to the Delaware General Corporation Law to cause the amendment of Article VI, Section 5, to reflect removal of the bracketed language.

5141

Table of Contents

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

Incorporated by Reference
Exhibit
No
Description

Filed
Herewith

Form
Exhibit No.
Filing Date
3.1

Amended and Restated Certificate of Incorporation, as amended August 31, 2022.

X

31.1

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

X

31.2

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

X

32

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*

X

101.INS

Inline XBRL Instance Document.

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

X

104

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

X

Incorporated by Reference
Exhibit
No

Description

Filed
Herewith

Form
Exhibit No.
Filing Date
3.1

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

X

10.1

Form of Subscription Agreement.

8-K
10.1
11/23/2021

31.1

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

X

31.2

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

X

32.1

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

X

32.2

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

X

101.INS

Inline XBRL Instance Document.

X

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

X

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

X

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

X

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

X

104

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

X

*Furnished, not filed.

5242

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

Dated: ~~January 10,~~October 11, 2022
/s/ Cyrus Arman
Cyrus Arman
President
(Principal Executive Officer)

Dated: October 11, 2022

/s/ Antonio Migliarese

Antonio Migliarese

Chief Financial Officer

(Principal Financial and Accounting Officer)

5343


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


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


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


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


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


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


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


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


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


	As of
(in millions)	August 31, 2022
Issuable upon:
Warrants exercise	176.2
Convertible preferred stock and undeclared dividends conversion	32.2
Outstanding stock options exercise or vesting of outstanding RSUs	17.4
Reserved for issuance pursuant to future stock-based awards under equity incentive plan	26.1
Reserved and issuable upon conversion of outstanding convertible notes	12.0
Total shares reserved for future uses	263.8
Common stock outstanding	812.3


			Incorporated by Reference
Exhibit No	Description	Filed Herewith	Form	Exhibit No.	Filing Date
3.1	Amended and Restated Certificate of Incorporation, as amended August 31, 2022.	X

31.1	Rule 13a-14(a) Certification by President of Registrant.	X

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

32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*	X

101.INS	Inline XBRL Instance Document.	X

101.SCH	Inline XBRL Taxonomy Extension Schema Document.	X

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

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

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

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

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


	CYTODYN INC.
	(Registrant)

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

Dated: ~~January 10,~~October 11, 2022		/s/ Cyrus Arman
		Cyrus Arman
		President
		(Principal Executive Officer)



Dated: October 11, 2022			/s/ Antonio Migliarese
			Antonio Migliarese
			Chief Financial Officer
			(Principal Financial and Accounting Officer)