# CytoDyn Inc.: Form 10-Q for the period ended Aug 31, 2024

- Company: [CytoDyn Inc.](/companies/cydy.md) (CIK 1175680)
- Form: 10-Q
- Filed: 2024-10-15
- Accepted by EDGAR: Oct 15, 2024, 21:16 ET
- Period: 2024-08-31
- Accession: 0001558370-24-013320
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1175680/000155837024013320/cydy-20240831x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1175680/000155837024013320/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-08-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2024-06-01 to 2024-08-31 | $22.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-06-01 to 2024-08-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-06-01 to 2024-08-31 | $19.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-06-01 to 2024-08-31 | $0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-06-01 to 2024-08-31 | $0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-06-01 to 2024-08-31 | 1,198,287,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-06-01 to 2024-08-31 | $5.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-08-31 | $24.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-08-31 | $27.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-08-31 | $28.0m | us-gaap:Assets |
| Current liabilities | at 2024-08-31 | $69.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-08-31 | $113.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-08-31 | $45.3m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-08-31 | −$85.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,491 characters.

Certain information included in this quarterly report on Form 10Q contains, or incorporates by reference, forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words such as “believes,” “intends,” “estimates,” “expects,” “projects,” “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 the 2024 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 Company’s ability to implement a successful operating strategy for the development of leronlimab and thereby create shareholder value, the ability to obtain regulatory approval of the Company’s drug products for commercials sales, and the strength of the Company’s leadership team. The Company’s forward-looking statements are not guarantees of performance, and actual results could vary materially from those contained in or expressed by such statements due to risks and uncertainties, including: (i) the regulatory determinations of leronlimab’s safety and effectiveness to treat the disease and conditions for which we are studying the product by the FDA and, potentially, 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 recruit and retain key employees; (vi) the timely and sufficient development, through internal resources or third-party consultants, of analyses of the data generated from the Company’s clinical trials required by the FDA or other regulatory agencies in connection with applications for approval of the Company’s drug product; (vii) the Company’s ability to achieve approval of a marketable product; (viii) the design, implementation and conduct of clinical trials; (ix) the results of any such 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) stockholder actions or proposals with regard to the Company, its management, or its Board of Directors; (xv) general economic and business conditions; (xvi) changes in foreign, political, and social conditions; (xvii) and various other matters, many of which are beyond the Company’s control.

We intend that all forward-looking statements made in this quarterly report will be subject to the safe harbor protection of the federal securities laws pursuant to Section 27A of the Securities Act and Section 21E of the Exchange Act, to the extent applicable. 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 2024 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 oncology and inflammation, as well as other potential indications, including HIV and MASH.

Our current business strategy is the clinical development of leronlimab, which may include the following:

1\. Conducting a Phase II study of leronlimab in patients with relapsed/refractory microsatellite stable colorectal cancer;

2\. Conducting a Phase II study exploring leronlimab and its effects on inflammation; and

3\. Continuing our work researching and developing a new or modified long-acting version of leronlimab.

Other programs that may be pursued include steatosis and liver fibrosis associated with MASH, either alone or as a combination therapy; and for metastatic triple-negative breast cancer with current standard of care, and/or exploring other trials with current standard of care and other cancer and immunologic indications.

We will need significant additional funding to execute the business strategy described above, including conducting additional pre-clinical studies and clinical trials, in furtherance of our efforts to obtain FDA approval to commercialize leronlimab. In addition to traditional fundraising the Company will pursue non-dilutive financing opportunities, such as license agreements and co-development or strategic partnerships, to help implement its strategy.

#### Corporate developments

During the quarter ended August 31, 2024, the Company completed a tender offer resulting in net proceeds of approximately $10.4 million.

On July 2, 2024, the Company and Amarex, the Company’s former CRO, entered into an agreement settling a lawsuit filed by the Company in October 2021 (the “Settlement Agreement”).The terms of the Settlement Agreement include: (i) the payment by Amarex of $12,000,000 to the Company, of which $10,000,000 was paid on execution of the Settlement Agreement and the balance will be paid on or before July 2, 2025; (ii) the release of the Company’s surety bond posted in the lawsuit and the return of the Company’s cash collateral in the amount of $6,500,000 provided as security to the surety; (iii) the crediting of all amounts claimed by Amarex as due and payable for its CRO services, totaling approximately $14,000,000, against the Company’s outstanding balance, reducing the balance to zero, with no funds required to be paid by the Company; and (iv) a mutual release of claims, resolving all legal claims between the parties.

### 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 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 2024 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 August 31, 2024 ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ | ​ ​ Change $% ​ ​ | ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| General and administrative | ​ | $1,604 |  | $2,688 | ​ | $(1,084) | ​ | (40)% |
| Research and development | ​ | (24,046) |  | 1,914 | ​ | (25,960) | ​ | (1,356) ​ |
| Depreciation | ​ | 5 |  | 10 | ​ | (5) | ​ | (50) ​ |
| Total operating expenses | ​ | (22,437) |  | 4,612 | ​ | (27,049) | ​ | (586) ​ |
| Operating gain (loss) | ​ | 22,437 |  | (4,612) | ​ | 27,049 | ​ | 586 ​ |
| Interest and other income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Interest income | ​ | ​ 126 | ​ | ​ — | ​ | ​ 126 | ​ | 100 ​ |
| Interest on convertible notes | ​ | ​ (1,165) | ​ | ​ (1,197) | ​ | ​ 32 | ​ | 3 ​ |
| Amortization of discount on convertible notes | ​ | (125) |  | (400) | ​ | 275 | ​ | 69 ​ |
| Amortization of debt issuance costs | ​ | ​ — | ​ | ​ (366) | ​ | ​ 366 | ​ | 100 ​ |
| Loss on induced conversion | ​ | ​ (1,180) | ​ | ​ (2,004) | ​ | ​ 824 | ​ | 41 ​ |
| Finance charges | ​ | (14) |  | (912) | ​ | 898 | ​ | 98 ​ |
| Loss on note extinguishment | ​ | — |  | (2,084) | ​ | 2,084 | ​ | 100 ​ |
| (Loss) gain on derivatives | ​ | ​ (852) | ​ | ​ 4 | ​ | ​ (856) | ​ | (21,400) ​ |
| Total interest and other expenses | ​ | (3,210) |  | (6,959) | ​ | 3,749 | ​ | 54 ​ |
| Gain (loss) before income taxes | ​ | 19,227 |  | (11,571) | ​ | 30,798 | ​ | 266 ​ |
| Income tax benefit | ​ | — |  | — | ​ | — | ​ | — ​ |
| Net income (loss) | ​ | $19,227 | ​ | $(11,571) | ​ | $30,798 | ​ | 266% |
| Income (Loss) per share: | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Basic | ​ | $0.02 | ​ | $(0.01) | ​ | $0.03 | ​ | 300 ​ |
| Diluted | ​ | $0.02 |  | $(0.01) | ​ | $0.03 | ​ | 300% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Weighted average common shares used in calculation of income (loss) per share: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Basic | ​ | ​ 1,135,043 | ​ | ​ 923,587 | ​ | ​ 211,456 | ​ | 23 ​ |
| Diluted | ​ | ​ 1,198,287 | ​ | ​ 923,587 | ​ | ​ 274,700 | ​ | 30% |

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

G&A expenses consisted of the following:

*(in thousands)*

| ​ ​ | ​ ​ Three months ended August 31, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ |
| --- | ---: | --- | ---: | --- | --- | --- | ---: |
| Salaries, benefits, and other compensation | $425 | ​ | $642 | ​ | $(217) | ​ | (34)% |
| Stock-based compensation | 136 | ​ | 503 | ​ | ​ (367) | ​ | (73) ​ |
| Legal fees | ​ 376 | ​ | ​ 317 | ​ | ​ 59 | ​ | 19 ​ |
| Insurance | ​ 323 | ​ | ​ 416 | ​ | ​ (93) | ​ | (22) ​ |
| Other | 344 | ​ | 810 | ​ | ​ (466) | ​ | (58) ​ |
| Total general and administrative | $1,604 | ​ | $2,688 | ​ | $(1,084) | ​ | (40)% |

The decrease in G&A expenses for the three-month period ended August 31, 2024, compared to the same period in the prior year, was primarily due to a reduction in Stock-based compensation and Salaries, benefits and other compensation based upon a classification of clinical employees’ compensation split between expense categories.

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

R&D expenses consisted of the following:

*(in thousands)*

| ​ ​ | ​ ​ Three months ended August 31, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ |
| --- | ---: | --- | ---: | --- | --- | --- | ---: |
| Clinical | $737 | ​ | $1,250 | ​ | $(513) | ​ | (41)% |
| Non-clinical | (14) | ​ | 250 | ​ | ​ (264) | ​ | (106) ​ |
| CMC | (30) | ​ | 169 | ​ | ​ (199) | ​ | (118) |
| License and patent fees | 246 | ​ | 245 | ​ | ​ 1 | ​ | 0 |
| Return of clinical expenses | ​ (24,985) | ​ | ​ — | ​ | ​ (24,985) | ​ | 100 ​ |
| Total research and development | $(24,046) | ​ | $1,914 | ​ | $(25,960) | ​ | (1,356)% |

The decrease in R&D expense in the three-month period ended August 31, 2024, compared to the same period in the prior year, was primarily due to a return of clinical expenses related to the settlement of the Company’s litigation with Amarex in July 2024.

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.

#### Interest and other income (expense)

Interest and other income (expense) consisted of the following:

*(in thousands)*

| ​ ​ | ​ ​ Three months ended August 31, 2024 | ​ | ​ ​ 2023 | ​ ​ | ​ ​ Change $% | ​ | ​ ​ |
| --- | ---: | --- | ---: | --- | --- | --- | ---: |
| Interest income | $126 | ​ | **​** — | ​ | $126 | ​ | 100% |
| Interest on convertible notes payable | ​ (1,165) | ​ | $(1,197) | ​ | ​ 32 | ​ | (3) ​ |
| Amortization of discount on convertible notes | (125) | ​ | (400) | ​ | ​ 275 | ​ | (69) ​ |
| Amortization of debt issuance costs | ​ — | ​ | ​ (366) | ​ | ​ 366 | ​ | (100) ​ |
| Loss on induced conversion | (1,180) | ​ | (2,004) | ​ | ​ 824 | ​ | (41) |
| Finance charges | (14) | ​ | (912) | ​ | ​ 898 | ​ | (98) |
| Loss on note extinguishment | ​ — | ​ | ​ (2,084) | ​ | ​ 2,084 | ​ | 100 ​ |
| (Loss) gain on derivatives | ​ (852) | ​ | ​ 4 | ​ | ​ (856) | ​ | (21,400) ​ |
| Total interest and other expenses | $(3,210) | ​ | $(6,959) | ​ | $3,749 | ​ | (54)% |

The decrease in interest and other expenses for the three-month period ended August 31, 2024, compared with the same period in the prior year, was primarily due to the decrease in loss on note extinguishment and finance charges. The decrease in loss on note extinguishment is due to note extinguishments occurring in the prior period. The decrease in finance charges is due to restructuring the balance due to Samsung, which removed any future interest. The decrease in interest and other expenses was offset by an increase in loss on derivatives due to the value of the interest in the Amarex settlement received by investors in the Placement Agent Notes.

### Liquidity and Capital Resources

As of August 31, 2024, we had a total of approximately $24.9 million in cash and approximately $69.6 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 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 September 30, 2024, we have approximately 199.3 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 position of approximately $24.9 million and no restricted cash, as of August 31, 2024, increased by approximately $21.8 million and decreased by approximately $6.7 million, respectively, when compared to the balance of $3.1 million and $6.7 million, respectively, as of May 31, 2024. This increase was primarily the result of approximately $10.0 million cash received for a legal settlement, the release of the $6.7 million surety bond, and approximately $9.7 million in cash provided by financing activities during the three months ended August 31, 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 provided by (used in): | ​ ​ Three months ended August 31, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ | ​ ​ Change $​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ |
| --- | ---: | --- | ---: | --- | ---: | --- | --- |
| Net cash provided by (used in) operating activities | $5,440 | ​ | $(4,495) | ​ | $9,935 | ​ | ​ |
| Net cash provided by/ used in investing activities | $— | ​ | $— | ​ | $— | ​ | ​ |
| Net cash provided by financing activities | $9,667 | ​ | $4,019 | ​ | $5,648 | ​ | ​ |

#### Cash provided by operating activities

Net cash provided by operating activities totaled approximately $5.4 million during the three months ended August 31, 2024, representing an improvement of approximately $9.9 million compared to the three months ended August 31, 2023. The increase in the net amount of cash provided by operating activities was due primarily to a legal settlement of approximately $10.0 million. Refer to Note 9, *Commitments and Contingencies – Legal Proceedings – Settlement of Amarex Dispute* for further discussion.

#### Cash provided by financing activities

Net cash provided by financing activities totaled approximately $9.7 million during the three months ended August 31, 2024, an increase of approximately $5.6 million compared to the three months ended August 31, 2023. The increase in net cash provided was primarily the result of raising funds through a warrant exchange tender offer during the current period compared a lower amount raised through private placements of common stock and warrants in the prior period.

#### 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 resulting from the withdrawal of the Company’s biologic license application submission. 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. Raw materials continue to be maintained to that they can be used in the future if needed.

#### 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 August 31, 2024, the outstanding balance of the April 2, 2021 Note, including accrued interest, was approximately $7.7 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 August 31, 2024, the outstanding balance of the April 23, 2021 Note, including accrued interest, was approximately $37.9 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 August 31, 2024 ​ |
| --- | ---: |
| Warrant exercises | 232.2 |
| Convertible preferred stock and undeclared dividends conversion | 37.8 |
| Outstanding stock option exercises | 25.8 |
| Reserved for issuance pursuant to future stock-based awards under equity incentive plan | 23.1 |
| Reserved and issuable upon conversion of outstanding convertible notes | 12.0 |
| Total shares reserved for future uses | 330.9 |
| Common stock outstanding | 1,219.8 |

As of August 31, 2024, we had approximately 199.3 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.

### Off-Balance Sheet Arrangements

As of August 31, 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, *Accrued Liabilities and Compensation*, Note 4, *Convertible Instruments and Accrued Interest*, and Note 9*, Commitments and Contingencies* included in Part I, Item 1 of this Form 10-Q, and Notes 5 and 10 in Part II, Item 8 in the 2024 Form 10-K.

### Legal Proceedings

The Company is a party to various legal proceedings described in Part I, Item 1, Note 9, *Commitments and Contingencies – Legal Proceedings* of this Form 10-Q. The Company recognizes accruals for such proceedings to the extent a loss is determined to be both probable and reasonably estimable. The best estimate of a loss within a possible range is accrued; however, if no estimate in the range is more probable than another, then the minimum amount in the range is accrued. If it is determined that a material loss is not probable but reasonably possible and the loss or range of loss can be estimated, the possible loss is disclosed.

It is not possible to 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, 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, if any, could be material to the Company’s consolidated financial statements. As of August 31, 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, except for the current quarter. Net income of $19.2 million in the current quarter resulted from the recovery of approximately $25.0 million in clinical expenses due to the settlement of the Company’s litigation with Amarex, which is a non-recurring event. The Company has an accumulated deficit of approximately $872.3 million as of August 31, 2024. 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 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, Item 1, Note 2, *Summary of Significant Accounting Policies – Recent Accounting Pronouncements* in this Form 10-Q for the discussion.

### Critical Accounting 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 estimates are described under the heading *Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates* in our 2024 Form 10-K.

## Controls and procedures

As filed, 1,643 characters.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the 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 August 31, 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 August 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.

During the quarter ended August 31, 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, 298 characters.

There have been no material changes in the risk factors that were included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, which was filed with the SEC on August 15, 2024. You should carefully consider those risk factors in addition to other information in this Form 10-Q.

Filed Oct 15, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-013320. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.