# CytoDyn Inc.: Form 10-Q for the period ended Feb 29, 2024

- Company: [CytoDyn Inc.](/companies/cydy.md) (CIK 1175680)
- Form: 10-Q
- Filed: 2024-04-15
- Accepted by EDGAR: Apr 15, 2024, 21:18 ET
- Period: 2024-02-29
- Accession: 0001558370-24-005134
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1175680/000155837024005134/cydy-20240229x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1175680/000155837024005134/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-02-29.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2023-12-01 to 2024-02-29 | $650.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-06-01 to 2024-02-29 | $3.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-12-01 to 2024-02-29 | −$3.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-06-01 to 2024-02-29 | −$11.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-12-01 to 2024-02-29 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-06-01 to 2024-02-29 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-12-01 to 2024-02-29 | −$11.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-06-01 to 2024-02-29 | −$33.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-12-01 to 2024-02-29 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-06-01 to 2024-02-29 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-12-01 to 2024-02-29 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-06-01 to 2024-02-29 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-12-01 to 2024-02-29 | 982,209,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-06-01 to 2024-02-29 | 954,814,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-06-01 to 2024-02-29 | −$9.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-02-29 | $1.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-02-29 | $9.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-02-29 | $10.3m | us-gaap:Assets |
| Current liabilities | at 2024-02-29 | $129.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-02-29 | $129.7m | us-gaap:Liabilities |
| Long-term debt | at 2024-02-29 | $44.2m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-02-29 | −$119.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,170 characters.

Certain information included in this quarterly report on Form 10-Q contains, or incorporates by reference, forward-looking statements within the meaning of Section 21E of the Exchange Act. Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words such as “believes,” “intends,” “estimates,” “expects,” “plans,” “anticipates” and variations thereof, or the use of future tense, 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. In evaluating all such statements, we urge you to specifically consider various risks identified in Part II, Item 1A and elsewhere in this quarterly report, and those set forth in Item 1A. *Risk Factors* in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 (the “2023 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, and information regarding future operations and clinical studies and trials, future operating and capital expenditures, and future availability of capital. You should not place undue reliance on our forward-looking statements, which are subject to risks and uncertainties relating to, among other things: the regulatory determinations of leronlimab’s safety and effectiveness by the FDA and various drug regulatory agencies in other countries; the Company’s ability to raise additional capital to fund its operations; the Company’s ability to meet its debt and other payment obligations; the Company’s ability to enter into or maintain partnership or licensing arrangements with third parties; the Company’s ability to recruit and 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 regulatory submissions or applications for approval of the Company’s drug product; the Company’s ability to achieve approval of a marketable product; the design, implementation and conduct of clinical trials; the results of any such clinical trials, including the possibility of unfavorable clinical trial results; the market for, and marketability of, any product that is approved; 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; regulatory initiatives, compliance with governmental regulations and the regulatory approval process; the Company’s ability to resolve its disputes with Amarex and Samsung; other legal proceedings, investigations or inquiries affecting the Company or its products; stockholder actions or proposals with regard to the Company, its management, or its Board of Directors; and various other matters, many of which are beyond the Company’s control. Should one or more of these risks or uncertainties develop, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated, or otherwise indicated by our forward-looking statements. Except as required by law, we do not undertake any responsibility to update these forward-looking statements to address events or circumstances that occur after the date of this 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 forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our 2023 Form 10-K, and the other sections of this Form 10-Q, including our 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

The Company is a clinical stage biotechnology company focused on the clinical development and potential commercialization of its product candidate, leronlimab, which is being studied for MASH, solid tumors in oncology, and HIV indications. The Company’s focus is on implementing a therapeutic development and commercialization pathway for leronlimab through an approach that is opportunistic and minimizes the amount of Company capital needed for the creation of value by identifying strategies that are time- and cost-effective and support the creation of non-dilutive financing opportunities, such as license agreements and co-development or strategic partnerships. Our current business strategy, following the February 2024 removal of the clinical hold imposed by the FDA in December 2023, as described in more detail below, is to proceed toward conducting a Phase II study evaluating the effects of leronlimab on chronic inflammation; evaluating opportunities in solid tumors in oncology; pursuing research and development of longer-acting molecules; evaluating whether to conduct a combination pre-clinical study or monotherapy Phase 2b/3 clinical trial in MASH; publishing data from previously conducted studies; and resolving legal, regulatory, and financial matters.

#### Third Quarter Overview

#### Removal of Clinical Hold on HIV program

In March 2022, the FDA notified the Company that it had placed a partial clinical hold on the Company’s HIV program. The FDA’s hold letter requested that the Company provide the agency with an aggregate analysis of cardiovascular events across all leronlimab clinical programs, a Safety Surveillance Plan, an aggregate safety data analysis, an updated Investigator’s Brochure, annual reports, a benefit-risk assessment, and a general investigational plan. In November 2023, the Company submitted a response to the FDA’s clinical hold letter addressing comments received through previous incomplete response communications and an informal meeting with the agency primarily related to the benefit-risk assessment for the intended HIV population and a proposed new HIV clinical trial protocol.

The Company received a letter from the FDA in December 2023 notifying the Company that: (i) the “partial hold” implemented by the FDA in March 2022 had been lifted; and (ii) a new “full hold” had been applied as it relates to the newly proposed clinical trial protocol submitted in November 2023 alongside the Company’s complete response to the partial clinical hold. The Company submitted its revised protocol to the FDA in January 2024.

On February 27, 2024, the Company received confirmation from the FDA that its clinical hold on leronlimab has been lifted. The Company now intends to pursue its plan for the further development of leronlimab as a therapy that provides clinical benefit by modulating chronic inflammation. The Company believes its proposed inflammation study will allow the Company to further establish leronlimab’s mechanism of action in a cost-effective manner.

#### Long-acting CCR5 antagonist developments

In March 2023, the Company entered into a joint development agreement with a third-party generative artificial intelligence (“AI”) drug discovery and development company to develop one or more longer-acting molecules. The Company believes working with a partner with AI capabilities will result in the expedited development of a modified, longer-acting therapeutic, and could lead to greater acceptance by patients due to the requirement for less frequent injections. The services provided by the third party may yield extended intellectual property protection, thereby increasing the value of the Company’s patent portfolio. In December 2023, the Company received various iterations of potential long-acting therapeutics, on which the Company will be performing assays to determine the suitability and feasibility of the long-acting therapeutic candidates for further development.

#### Cancer program developments

In December 2023, the Company entered into a partnership with Albert Einstein College of Medicine and Montefiore Medical Center, located in New York. The Company is providing leronlimab to support a pre-clinical study evaluating the efficacy of leronlimab independently and in combination with temozolomide in treating glioblastoma multiforme, also known as grade IV astrocytoma (“GBM”), in infected humanized mice. The study will involve three groups of humanized mice: one control group, one group that will receive only leronlimab, and another group that will receive a combination of leronlimab and temozolomide. The primary objective of this study is to evaluate the effect of leronlimab on the primary tumor growth and occurrence of metastases on CCR5+ and CCR5- cells in humanized mice. Upon completion of the study, the academic institutions will provide the Company with a research report outlining the study results, and they will have the right to publish and present the study results. GBM is the most common type of primary malignant brain tumor and is aggressive and fast-growing. This study is expected to take place in the 2024 calendar year.

The Company continues to identify additional next steps in the clinical development of leronlimab and is exploring potential business opportunities to continue the investigation of leronlimab for solid tumors in oncology based on data generated to date by the Company.

#### MASH program developments

The Company continues to evaluate whether to perform a pre-clinical study in MASH that would be significantly less capital-intensive than a human clinical trial and could generate potentially valuable data leading to partnerships or other potential non-dilutive financing opportunities.

#### Corporate developments

As of late February 2024, leronlimab is no longer on FDA hold. On February 27, 2024, the Company received confirmation from the FDA that its clinical hold on leronlimab has been lifted. For additional information on the history and removal of the clinical hold, please see *Removal of Clinical Hold on HIV program* above.

During the quarter ended February 29, 2024, the Company concluded a sale of unsecured promissory notes resulting in net proceeds of approximately $0.9 million, including approximately $0.7 million during the quarter, and commenced a private offering through a placement agent, resulting in aggregate net proceeds of approximately $2.7 million.

On April 3, 2024, the Company and Samsung executed a side letter agreement (the “Side Letter”), wherein the parties reached agreement for an orderly process for winding down services and a restructuring of the amount payable by the Company to Samsung (the “Total Balance”). The Total Balance due to Samsung, as restructured under the Side Letter, is now approximately $43.8 million. Except for a single $250,000 payment due on or before December 31, 2024, the entirety of the Total Balance is contingent, and will only be due and payable, upon the Company achieving a qualifying “Revenue” event, as that term is defined in the Side Letter. Under the Side Letter, the Company has agreed to pay 20% of its qualifying Revenue generated in each calendar year, if any, with such payments to be applied to reduce the Total Balance until it is repaid in full. Interest will not accrue on the Total Balance throughout the prospective repayment period.

### Results of Operations

#### Fluctuations in operating results

The Company’s operating results may fluctuate significantly depending on the outcomes, number and timing of pre-clinical and clinical studies, patient enrollment and/or completion rates in the studies, and their related effect on research and development expenses, regulatory and compliance activities, activities related to seeking removal of the clinical hold and FDA approval of our drug product, general and administrative expenses, professional fees, and legal and regulatory proceedings and related consequences. We require a significant amount of capital to continue to operate; therefore, we regularly conduct financing offerings to raise capital, which may result in various forms of non-cash interest expense or other expenses. Additionally, we periodically seek to negotiate settlement of debt payment obligations in exchange for equity securities of the Company and enter into warrant exchanges or modifications that may result in non-cash charges. Our ability to continue to fund operations will depend on our ability to raise additional funds. See the *Liquidity and Capital Resources* and *Going Concern* sections in this Item 2 of Part I and Part II, Item 1A Risk Factors included in this quarterly report and Item 1A. *Risk Factors* in our 2023 Form 10-K.

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

*(in thousands, except for per share data)*

| ​ ​ Operating expenses: | ​ ​ ​ | ​ ​ Three months ended February 29, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ | ​ ​ Change $% ​ ​ | ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Nine months ended February 29, 2024 ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ | ​ ​ Change $% ​ ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | ---: | --- | ---: | --- | ---: | --- | ---: |
| General and administrative | ​ | $2,757 |  | $2,971 | ​ | $(214) | ​ | (7)% | $7,756 |  | $14,347 | ​ | $(6,591) | ​ | (46)% |
| Research and development | ​ | 650 |  | 938 | ​ | (288) | ​ | (31) ​ | 3,643 |  | 1,651 | ​ | 1,992 | ​ | 121 ​ |
| Amortization and depreciation | ​ | 7 |  | 12 | ​ | (5) | ​ | (42) ​ | 25 |  | 165 | ​ | (140) | ​ | (85) ​ |
| Inventory charge | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | — ​ | ​ — | ​ | ​ 20,633 | ​ | ​ (20,633) | ​ | (100) ​ |
| Total operating expenses | ​ | 3,414 |  | 3,921 | ​ | (507) | ​ | (13) ​ | 11,424 |  | 36,796 | ​ | (25,372) | ​ | (69) ​ |
| Operating loss | ​ | (3,414) |  | (3,921) | ​ | 507 | ​ | 13 ​ | (11,424) |  | (36,796) | ​ | 25,372 | ​ | 69 ​ |
| Interest and other expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest on convertible notes | ​ | (1,151) | ​ | ​ (1,142) | ​ | ​ (9) | ​ | (1) ​ | ​ (3,512) | ​ | ​ (3,447) | ​ | ​ (65) | ​ | (2) ​ |
| Amortization of discount on convertible notes | ​ | (409) |  | (565) | ​ | 156 | ​ | 28 ​ | (951) |  | (1,721) | ​ | 770 | ​ | 45 ​ |
| Amortization of debt issuance costs | ​ | ​ (203) | ​ | ​ (17) | ​ | ​ (186) | ​ | (1,094) ​ | ​ (572) | ​ | ​ (51) | ​ | ​ (521) | ​ | (1,022) ​ |
| Issuance costs for private placement of shares and warrants through placement agent | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | — ​ | ​ (906) | ​ | ​ — | ​ | ​ (906) | ​ | (100) ​ |
| Loss on induced conversion | ​ | ​ (3,353) | ​ | ​ (2,018) | ​ | ​ (1,335) | ​ | (66) ​ | ​ (5,993) | ​ | ​ (2,656) | ​ | ​ (3,337) | ​ | (126) ​ |
| Finance charges | ​ | (882) |  | (5,884) | ​ | 5,002 | ​ | 85 ​ | (2,685) |  | (7,761) | ​ | 5,076 | ​ | 65 ​ |
| Loss on note extinguishment | ​ | (1,550) |  | — | ​ | (1,550) | ​ | (100) ​ | (6,040) |  | — | ​ | (6,040) | ​ | (100) ​ |
| Loss on derivatives | ​ | ​ (958) | ​ | ​ (155) | ​ | ​ (803) | ​ | (518) ​ | ​ (971) | ​ | ​ (8,756) | ​ | ​ 7,785 | ​ | 89 ​ |
| Total interest and other expenses | ​ | (8,506) |  | (9,781) | ​ | 1,275 | ​ | 13 ​ | (21,630) |  | (24,392) | ​ | 2,762 | ​ | 11 ​ |
| Loss before income taxes | ​ | (11,920) |  | (13,702) | ​ | 1,782 | ​ | 13 ​ | (33,054) |  | (61,188) | ​ | 28,134 | ​ | 46 ​ |
| Income tax benefit | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | — ​ | — |  | — | ​ | — | ​ | — ​ |
| Net loss | ​ | $(11,920) |  | $(13,702) | ​ | $1,782 | ​ | 13% | $(33,054) | ​ | $(61,188) | ​ | $28,134 | ​ | 46% |
| Basic and diluted: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Weighted average common shares outstanding | ​ | ​ 982,209 | ​ | ​ 832,215 | ​ | ​ 149,994 | ​ | 18 ​ | ​ 954,814 | ​ | ​ 810,986 | ​ | ​ 143,828 | ​ | 18 ​ |
| Loss per share | ​ | $(0.01) | ​ | $(0.02) | ​ | $0.01 | ​ | 50% | $(0.04) |  | $(0.08) | ​ | $0.04 | ​ | 50% |

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

G&A expenses consisted of the following:

*(in thousands)*

| ​ ​ | ​ ​ Three months ended February 29, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ ​ | ​ ​ Nine months ended February 29, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ |
| --- | ---: | --- | ---: | --- | --- | --- | ---: | ---: | --- | ---: | --- | --- | --- | ---: |
| Salaries, benefits, and other compensation | $725 | ​ | $918 | ​ | $(193) | ​ | (21)% | $1,828 | ​ | $3,175 | ​ | $(1,347) | ​ | (42)% |
| Stock-based compensation | 869 | ​ | 419 | ​ | ​ 450 | ​ | 107 ​ | 1,944 | ​ | 3,537 | ​ | ​ (1,593) | ​ | (45) ​ |
| Legal fees | ​ 326 | ​ | ​ 255 | ​ | ​ 71 | ​ | 28 ​ | ​ 1,119 | ​ | ​ 2,752 | ​ | ​ (1,633) | ​ | (59) ​ |
| Insurance | ​ 456 | ​ | ​ 646 | ​ | ​ (190) | ​ | (29) ​ | ​ 1,393 | ​ | ​ 2,017 | ​ | ​ (624) | ​ | (31) ​ |
| Other | 381 | ​ | 733 | ​ | ​ (352) | ​ | (48) ​ | 1,472 | ​ | 2,866 | ​ | ​ (1,394) | ​ | (49) ​ |
| Total general and administrative | $2,757 | ​ | $2,971 | ​ | $(214) | ​ | (7)% | $7,756 | ​ | $14,347 | ​ | $(6,591) | ​ | (46)% |

The decrease in G&A expenses for the three-month period ended February 29, 2024, compared to the same period in the prior year, was primarily due to a reduction in other, and salaries, benefits, and other compensation offset by an increase in stock-based compensation. The decrease in other was primarily due to a reduction in audit-related fees. The decrease in salaries, benefits, and other compensation was primarily related to headcount reductions. The increase in stock-based compensation was due to stock options granted during the current period.

The decrease in G&A expenses for the nine-month period ended February 29, 2024, compared to the same period in the prior year, was primarily due to a reduction in legal fees, other, stock-based compensation, and salaries, benefits, and other compensation. The decrease in legal fees was primarily due to decreased fees related to the SEC and DOJ investigations, offset by less fees covered by the Company’s insurance carrier(s) and increased fees related to the Amarex litigation. The decrease in other expenses was primarily the result of a reduction in audit-related fees. The decreases in stock-based compensation and salaries, benefits, and other compensation were primarily related to headcount reductions in an effort by the Company to preserve cash and align resources with corporate priorities.

#### Research and development (“R&D”) expenses

R&D expenses consisted of the following:

*(in thousands)*

| ​ ​ | ​ ​ Three months ended February 29, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ ​ | ​ ​ Nine months ended February 29, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ |
| --- | ---: | --- | ---: | --- | --- | --- | ---: | ---: | --- | ---: | --- | --- | --- | ---: |
| Clinical | $116 | ​ | $486 | ​ | $(370) | ​ | (76)% | $1,643 | ​ | $(145) | ​ | $1,788 | ​ | (1,233)% |
| Non-clinical | 4 | ​ | 4 | ​ | ​ — | ​ | - ​ | 491 | ​ | 31 | ​ | ​ 460 | ​ | 1,484 ​ |
| CMC | 286 | ​ | 203 | ​ | ​ 83 | ​ | 41 ​ | 774 | ​ | 1,122 | ​ | ​ (348) | ​ | (31) |
| License and patent fees | 244 | ​ | 245 | ​ | ​ (1) | ​ | (0) ​ | 735 | ​ | 643 | ​ | ​ 92 | ​ | 14 |
| Total research and development | $650 | ​ | $938 | ​ | $(288) | ​ | (31)% | $3,643 | ​ | $1,651 | ​ | $1,992 | ​ | 121% |

The decrease in R&D expense in the three-month period ended February 29, 2024, compared to the same period in the prior year, was primarily due to a reduction in clinical expenses related to fees for clinical hold consulting.

The increase in R&D expense in the nine-month period ended February 29, 2024, compared to the same period in the prior year, was primarily related to an increase in clinical and non-clinical expenses, partially offset by a decrease in CMC. The increase in clinical expenses was primarily related to a credit balance in the prior year due to a reduction in CRO costs for the Brazilian COVID-19 trials, resulting in vendor credits, and Brazilian COVID-19 CRO close-out costs incurred in the current period, offset by decreases in costs related to the HIV program partial clinical hold and studies completed, paused, or closed in the prior year. The increase in non-clinical expenses was primarily driven by activities related to the discovery and development of a long-acting modified therapeutic. The decrease in CMC expenses was primarily driven by the reduction in necessary stability testing of previously manufactured leronlimab.

The future trend of our R&D expenses is dependent on the costs of any future clinical trials, our decision-making and timing of which indications on which to focus our future efforts toward the development and study of leronlimab, which may include pre-clinical and clinical studies for oncology, MASH and HIV related indications, as well as efforts to develop a long-acting new or modified therapeutic, the timing and outcomes of such efforts, and the timing of the final close-out of closed studies.

#### Inventory charge

The decrease in the inventory charge for the nine-month period ended February 29, 2024, compared to the same period in the prior year was attributable to the full inventory write-off in the prior year because the pre-launch inventories no longer qualified for inventory capitalization following the withdrawal of the Company’s BLA submission to the FDA. See Note 3, *Inventories, net*, in the 2023 Form 10-K for additional information.

#### Interest and other expense

Interest and other expense consisted of the following:

*(in thousands)*

| ​ ​ | ​ ​ Three months ended February 29, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ ​ | ​ ​ Nine months ended February 29, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ |
| --- | ---: | --- | ---: | --- | --- | --- | ---: | ---: | --- | ---: | --- | --- | --- | ---: |
| Interest on convertible notes payable | $(1,151) | ​ | $(1,142) | ​ | $(9) | ​ | (1)% | $(3,512) | ​ | $(3,447) | ​ | $(65) | ​ | 2% |
| Amortization of discount on convertible notes | (409) | ​ | (565) | ​ | ​ 156 | ​ | 28 ​ | (951) | ​ | (1,721) | ​ | ​ 770 | ​ | (45) ​ |
| Amortization of debt issuance costs | ​ (203) | ​ | ​ (17) | ​ | ​ (186) | ​ | (1,094) ​ | ​ (572) | ​ | ​ (51) | ​ | ​ (521) | ​ | 1,022 ​ |
| Issuance costs for private placement of shares and warrants through placement agent | ​ — | ​ | ​ — | ​ | ​ — | ​ | - ​ | ​ (906) | ​ | ​ — | ​ | ​ (906) | ​ | (100) ​ |
| Loss on induced conversion | (3,353) | ​ | (2,018) | ​ | ​ (1,335) | ​ | (66) ​ | (5,993) | ​ | (2,656) | ​ | ​ (3,337) | ​ | 126 |
| Finance charges | (882) | ​ | (5,884) | ​ | ​ 5,002 | ​ | 85 ​ | (2,685) | ​ | (7,761) | ​ | ​ 5,076 | ​ | (65) |
| Loss on note extinguishment | ​ (1,550) | ​ | ​ — | ​ | ​ (1,550) | ​ | (100) ​ | ​ (6,040) | ​ | ​ — | ​ | ​ (6,040) | ​ | (100) ​ |
| Loss on derivatives | ​ (958) | ​ | ​ (155) | ​ | ​ (803) | ​ | (518) ​ | ​ (971) | ​ | ​ (8,756) | ​ | ​ 7,785 | ​ | (89) ​ |
| Total interest and other expenses | $(8,506) | ​ | $(9,781) | ​ | $1,275 | ​ | (13)% | $(21,630) | ​ | $(24,392) | ​ | $2,762 | ​ | (11)% |

The decrease in interest and other expenses for the three-month period ended February 29, 2024, compared with the same period in the prior year, was primarily due to the decrease in finance charges due to financing the Surety Bond backstop agreement through the issuance of warrants in the prior period. The decrease in interest and other expenses was offset by increases in loss on induced conversions and note extinguishments resulted from additional note payments made in shares of common stock and warrants during the current period.

The decrease in interest and other expenses for the nine-month period ended February 29, 2024, compared to the same period in the prior year, was primarily due to a decrease in non-cash loss on derivatives and finance charges, partially offset by increases in loss on induced conversion and loss on note extinguishment. The decrease in loss on derivatives in the current nine-month period compared to the same period in the prior year is due to the issuance of fewer liability-classified warrants in the current period. The increase in loss on note extinguishment resulted from the Company retiring outstanding convertible debt by converting notes outstanding to common stock and warrants, and due to the final closing price of the related private placement being lower than the initial closing price. The increase in loss on induced conversion for the current nine-month period compared to the prior period resulted from the Company settling a larger balance of the outstanding convertible debt with common stock in the current period.

### Liquidity and Capital Resources

As of February 29, 2024, we had a total of approximately $1.4 million in cash and $6.6 million in restricted cash and approximately $129.5 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. There can be no assurance 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 arrangements are deemed acceptable to both parties under then current circumstances and as necessary to fund our current and projected cash needs. As of March 31, 2024, we have approximately 298.7 million shares of common stock available for issuance in new financing transactions.

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 may contain covenants restricting its operations.

During the 2021 fiscal year, 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.

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.

#### Cash

The Company’s cash and restricted cash position of approximately $1.4 million and $6.6 million, respectively, as of February 29, 2024, decreased by approximately $1.1 million and increased by approximately $0.1 million, respectively, when compared to the balance of $2.5 million and $6.5 million, respectively, as of May 31, 2023. This decrease was primarily the result of approximately $9.3 million in cash used in our operating activities, offset by approximately $8.3 million in cash provided by financing activities during the nine months ended February 29, 2024. Refer to Item 1, Note 2, *Summary of Significant Accounting Policies – Going Concern*, and the *Going Concern* discussion below for information regarding concerns about the Company’s ability to continue to fund its operations and satisfy its payment obligations and commitments. A summary of cash flows and changes between the periods presented is as follows:

*(in thousands)*

| ​ ​ Net cash (used in) provided by: | ​ ​ Nine months ended February 29, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ | ​ ​ Change $​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ |
| --- | ---: | --- | ---: | --- | ---: | --- | --- |
| Net cash used in operating activities | $(9,332) | ​ | $(21,698) | ​ | $12,366 | ​ | ​ |
| Net cash provided by/ used in investing activities | $— | ​ | $— | ​ | $— | ​ | ​ |
| Net cash provided by financing activities | $8,307 | ​ | $28,577 | ​ | $(20,270) | ​ | ​ |

#### Cash used in operating activities

Net cash used in operating activities totaled approximately $9.3 million during the nine months ended February 29, 2024, representing an improvement of approximately $12.4 million compared to the nine months ended February 28, 2023. The decrease in the net amount of cash used was due primarily to a decrease in our net loss, primarily attributable to decreased G&A expense, and working capital fluctuations, all of which are highly variable. Refer to *General and Administrative Expenses* section for further discussion.

#### Cash provided by financing activities

Net cash provided by financing activities totaled approximately $8.3 million during the nine months ended February 29, 2024, a decrease of approximately $20.3 million compared to the nine months ended February 28, 2023. The decrease in net cash provided was primarily the result of raising less funds from private placements of common stock and warrants, partially offset by an increase in funds from the issuance of convertible notes.

#### Pre-launch inventories

The Company previously capitalized pre-launch inventories which were subsequently charged-off in October 2022 for GAAP accounting purposes due to no longer qualifying for pre-launch inventory capitalization. Work-in-progress and finished drug product inventories continue to be physically maintained, can be used for clinical trials, and can be sold commercially upon regulatory approval if the shelf-lives can be extended as a result of the performance of on-going stability tests. For additional information, refer to Note 3, *Inventories, net*, in the 2023 Form 10-K.

#### Convertible debt

#### 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 2025. 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. As of February 29, 2024, the outstanding balance of the April 2, 2021 Note, including accrued interest, was approximately $7.3 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 2025. Beginning six months after the issuance date, the noteholder may request monthly redemptions of up to $7.0 million. As of February 29, 2024, the outstanding balance of the April 23, 2021 Note, including accrued interest, was approximately $37.5 million.

#### Common stock

We have 1,750.0 million authorized shares of common stock. The table below summarizes intended uses of common stock.

*(in millions)*

| ​ ​ Issuable upon: | ​ As of February 29, 2024 ​ |
| --- | ---: |
| Warrant exercises | 292.9 |
| Convertible preferred stock and undeclared dividends conversion | 36.3 |
| Outstanding stock option exercises | 22.9 |
| Reserved for issuance pursuant to future stock-based awards under equity incentive plan | 16.4 |
| Reserved and issuable upon conversion of outstanding convertible notes | 12.0 |
| Reserved for private placement of common stock and warrants through a placement agent | 43.3 |
| Reserved for issuance of common stock and warrants related to note conversion | 14.4 |
| Total shares reserved for future uses | 438.2 |
| Common stock outstanding | 989.9 |

As of February 29, 2024, we had approximately 321.9 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 be forced to file for bankruptcy protection, discontinue operations, or liquidate our assets.

### Off-Balance Sheet Arrangements

As of February 29, 2024, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current or future financial condition, results of operations, liquidity, capital expenditures or capital resources.

### Contractual Obligations

Refer to Note 3, *Accounts Payable and Accrued Liabilities and Compensation*, Note 4, *Convertible Instruments and Accrued Interest*, and Note 8*, Commitments and Contingencies* included in Part I, Item 1 of this Form 10-Q, and Notes 6 and 10 in Part II, Item 8 in the 2023 Form 10-K.

### Legal Proceedings

The Company is a party to various legal proceedings described in Part I, Item 1, Note 8, *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 February 29, 2024, the Company had not recorded any accruals related to the outcomes of the legal matters discussed in this Form 10-Q.

### 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 $33.1 million in the nine months ended February 29, 2024, and has an accumulated deficit of approximately $874.7 million as of February 29, 2024. These factors, among several others, including the various matters discussed in Note 8, *Commitments and Contingencies*, 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 continuance 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 revenues and attain profitability. The Company plans to continue to engage in research and development activities related to leronlimab and a new or modified longer-acting therapeutic for multiple indications and expects to incur significant research and development expenses in the future, primarily related to its regulatory compliance, including performing additional clinical trials and seeking regulatory approval of its product candidate for commercialization. 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 primarily from the sale of equity and debt securities, combined with additional funding from other sources. However, there can be no assurance that the Company will be successful in these endeavors. See also *Liquidity and Capital Resources* above.

### New Accounting Pronouncements

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

### Critical Accounting Policies and Estimates

This discussion and analysis of the Company’s financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements and related disclosures 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 the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company’s critical accounting policies are described under the heading *Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates* in our 2023 Form 10-K.

## Controls and procedures

As filed, 1,670 characters.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in 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 Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of February 29, 2024 (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 Interim Chief Financial Officer concluded, based upon the evaluation described above, that as of February 29, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.

During the quarter ended February 29, 2024, 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.

## Risk factors

As filed, 5,140 characters.

We are subject to various risks, including risk factors identified in our 2023 Form 10-K. You should carefully consider those risk factors in addition to the risk factors set forth below and other information in this Form 10-Q.

***Our cash balances are extremely low, requiring that we obtain substantial additional financing to satisfy our current payment obligations and to fund our operations, which continues to be difficult in light of the low trading price of our common stock.***

As of March 31, 2024, we had an unrestricted cash balance of approximately $3.0 million and a reserved cash balance of approximately $6.6 million. We must continue to raise substantial additional funds in the near term to meet our payment obligations and fund our operations. Additional funding may not be available on acceptable terms or at all. In addition, as of March 31, 2024, we had approximately 298.7 million shares of common stock unreserved for other purposes and available for issuance in new financing transactions. We will need to use some of the additional authorized shares (or funds raised through the sale of such shares) to satisfy a portion of our outstanding accounts payable and accrued liabilities, which totaled approximately $72.6 million on February 29, 2024. If we 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: conducting a Phase II study evaluating the effects of leronlimab on chronic immune activation and inflammation; pursuing research and development of longer-acting molecules, including for the treatment and/or prevention of HIV; evaluating whether to conduct a combination pre-clinical study or monotherapy Phase 2b/3 clinical trial in MASH; and evaluating opportunities for pre-clinical and clinical studies in solid tumors in oncology and publishing data from previously conducted studies. Any delay or inability to pursue our 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 $0.16 per share on April 12, 2024) presents a significant challenge to our ability to raise additional funds. If we deplete our cash reserves, we may have to discontinue our operations and liquidate our assets.

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

The securities class action lawsuits filed against the Company in March 2021 have exhausted certain coverage allowances under the Company’s D&O insurance applicable to the relevant time period. This litigation, whether or not successful, may require us to incur substantial costs, which could harm our business and financial condition. During the course of litigation, negative public announcements regarding the results of hearings, motions, or other interim proceedings or developments may occur, which could have a further negative effect on the market price of our common stock. Refer to Note 8, *Commitments and Contingencies – Securities Class Action Lawsuits* for further information.

***Our Chief Financial Officer is currently serving in an interim role. The loss, temporary loss, or transition of members of our senior management team or any other key employees may adversely affect our business.***

During the past 24 months, we have experienced significant turnover among our senior executives, and currently have only three executive officers. Mitchell Cohen, the Company’s current Interim Chief Financial Officer, was appointed effective February 1, 2024. The Company’s Board of Directors intends to initiate a search for a long-term Chief Financial Officer at some point in the coming months, in collaboration with Mr. Cohen. If we are successful in recruiting one or more individuals to executive positions, the complexity inherent in integrating a new key member of the senior management team with existing senior management may limit the effectiveness of any such successor or otherwise adversely affect our business. Leadership transitions and any disruptions that result are inherently difficult to manage and may cause uncertainty or a disruption to our business or increase the likelihood of turnover of other key officers and employees. Further, we may incur significant expenses related to any executive transition costs. Finding suitable replacements for senior management and other key employees can be difficult, and there is no assurance we will be successful in attracting or retaining qualified personnel.

Our success depends significantly on the individual and collective contributions of our senior management team and key employees. The individual and collective efforts of these employees are important as we continue our efforts to develop leronlimab. The loss of the services of a member of our senior management team or the inability to hire and retain key management personnel likely would have a material adverse effect on our business and operations.

Filed Apr 15, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-005134. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.