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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, 2023

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

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, 2023, there were 979,527 thousand shares outstanding of the registrant’s $0.001 par value common stock.

PART I. Financial Information

Item 1. Consolidated Financial Statements

CytoDyn Inc.

Consolidated Balance Sheets

(Unaudited, in thousands, except par value)

November 30, 2023

    

May 31, 2023

Assets

 

Current assets:

 

 

  

Cash

$

147

$

2,541

Restricted cash

 

6,577

 

6,507

Prepaid expenses

 

1,578

 

1,167

Prepaid service fees

 

538

 

590

Total current assets

 

8,840

 

10,805

Other non-current assets

 

400

 

487

Total assets

$

9,240

$

11,292

Liabilities and Stockholders’ Deficit

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

62,328

$

62,725

Accrued liabilities and compensation

 

9,150

 

6,669

Accrued interest on convertible notes

 

12,936

 

10,598

Accrued dividends on convertible preferred stock

 

6,049

 

5,308

Convertible notes payable, net

 

32,914

 

34,417

Derivative liability - equity instruments

33

79

Total current liabilities

 

123,410

 

119,796

Notes payable, net

714

Operating leases

 

211

 

283

Total liabilities

 

123,621

 

120,793

Commitments and Contingencies (Note 8)

 

  

 

  

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 November 30, 2023 and May 31, 2023

 

 

Series C convertible preferred stock, $0.001 par value; 8 authorized; 6 issued and outstanding at November 30, 2023 and May 31, 2023

 

 

Series D convertible preferred stock, $0.001 par value; 12 authorized; 9 issued and outstanding at November 30, 2023 and May 31, 2023

 

 

Common stock, $0.001 par value; 1,750,000 shares authorized; 971,729 and 919,053 issued, and 971,286 and 918,610 outstanding at November 30, 2023 and May 31, 2023, respectively

 

971

 

919

Treasury stock, $0.001 par value; 443 shares at November 30, 2023 and May 31, 2023

Additional paid-in capital

 

747,472

 

731,270

Accumulated deficit

 

(862,824)

 

(841,690)

Total stockholders’ deficit

 

(114,381)

 

(109,501)

Total liabilities and stockholders' deficit

$

9,240

$

11,292

See accompanying notes to consolidated financial statements.

3

CytoDyn Inc.

Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

Three months ended November 30,

Six months ended November 30,

    

2023

    

2022

    

2023

    

2022

Operating expenses:

 

  

 

  

 

  

 

  

 

General and administrative

$

2,311

$

5,043

$

4,999

$

11,376

Research and development

 

1,079

 

137

 

2,993

 

713

Amortization and depreciation

 

8

 

54

 

18

 

153

Inventory charge

17,929

20,633

Total operating expenses

 

3,398

 

23,163

 

8,010

 

32,875

Operating loss

 

(3,398)

 

(23,163)

 

(8,010)

 

(32,875)

Interest and other expenses:

Interest on convertible notes

 

(1,164)

 

(1,159)

 

(2,361)

 

(2,305)

Amortization of discount on convertible notes

(142)

(580)

(542)

(1,156)

Amortization of debt issuance costs

 

(3)

 

(18)

 

(369)

 

(34)

Issuance costs for private placement of shares and warrants through placement agent (Note 5)

(906)

(906)

Loss on induced conversion

 

(636)

(638)

(2,640)

(638)

Finance charges

 

(891)

 

(937)

 

(1,803)

 

(1,877)

Loss on note extinguishment

 

(2,406)

 

 

(4,490)

 

Gain (loss) on derivatives

(17)

(13)

(8,601)

Total interest and other expenses

 

(6,165)

 

(3,332)

 

(13,124)

 

(14,611)

Loss before income taxes

 

(9,563)

 

(26,495)

 

(21,134)

 

(47,486)

Income tax benefit

 

 

 

 

Net loss

$

(9,563)

$

(26,495)

$

(21,134)

$

(47,486)

Basic and diluted:

Weighted average common shares outstanding

958,988

813,373

941,191

800,545

Loss per share

$

(0.01)

$

(0.03)

$

(0.02)

$

(0.07)

See accompanying notes to consolidated financial statements.

4

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ Deficit

(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, 2023

34

$

919,053

$

919

443

$

$

731,270

$

(841,690)

$

(109,501)

Issuance of stock for convertible note repayment

8,661

8

 

1,492

 

 

1,500

Loss on induced conversion

 

2,004

 

 

2,004

Warrants issued in note offering

 

170

 

 

170

Stock issued for compensation

686

1

 

154

 

 

155

Warrant exercises

3,000

3

 

297

 

 

300

Dividends accrued on Series C and D convertible preferred stock

 

(373)

 

 

(373)

Reclassification of warrants from liability to equity classified

79

79

Stock-based compensation

 

348

 

 

348

Net loss

 

 

(11,571)

 

(11,571)

Balance at August 31, 2023

34

931,400

931

443

735,441

(853,261)

(116,889)

Issuance of stock for convertible note repayment

3,535

4

496

 

500

Loss on induced conversion

636

636

Warrants issued in note offering

10

10

Note conversion

14,339

14

4,379

4,393

Stock issued for compensation

559

1

97

98

Stock issued for private offering

21,453

21

6,307

 

6,328

Dividends accrued on Series C and D convertible preferred stock

(368)

 

(368)

Stock-based compensation

474

 

474

Net loss

(9,563)

 

(9,563)

Balance at November 30, 2023

34

$

971,286

$

971

443

$

$

747,472

$

(862,824)

$

(114,381)

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 of prior period preferred stock dividends

(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)

Issuance of stock for convertible note repayment

 

1,822

 

2

 

 

498

 

 

500

Loss on induced conversion

638

638

Stock issued for compensation

 

765

 

 

 

310

 

 

310

Exercise of warrants, net of issuance costs

 

9,652

 

10

 

 

2,123

 

 

2,133

Make-whole shares related to private warrant exchange

 

23

 

 

 

 

 

Dividend paid in common stock upon conversion of Series C convertible preferred stock ($0.50 per share)

319

159

159

Dividends accrued on Series C and D convertible preferred stock

 

 

 

 

(369)

 

 

(369)

Stock-based compensation

 

 

 

 

1,467

 

 

1,467

Net loss

 

 

 

 

 

(26,495)

 

(26,495)

Balance at November 30, 2022

34

$

825,279

$

825

443

$

$

692,558

$

(809,352)

$

(115,969)

See accompanying notes to consolidated financial statements.

5

CytoDyn Inc.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

Six months ended November 30,

    

2023

    

2022

Cash flows from operating activities:

 

  

 

Net loss

$

(21,134)

$

(47,486)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Amortization and depreciation

 

18

 

153

Amortization of debt issuance costs

 

369

 

34

Issuance costs for private placement of shares and warrants through placement agent

906

Amortization of discount on convertible notes

 

542

 

1,156

Loss on derivatives

13

8,601

Loss on induced conversion

2,640

638

Loss on note extinguishment

 

4,490

 

Inventory charge

20,633

Stock-based compensation

 

1,075

 

3,118

Changes in operating assets and liabilities:

 

 

  

(Increase) decrease in prepaid expenses and other assets

(290)

(303)

(Decrease) increase in accounts payable and accrued expenses

 

4,374

 

(2,024)

Net cash used in operating activities

 

(6,997)

 

(15,480)

Cash flows from investing activities:

 

  

 

  

Net cash Provided by/used in investing activities

 

 

Cash flows from financing activities:

 

  

 

  

Proceeds from warrant transactions, net of offering costs

2,133

Proceeds from sale of common stock and warrants, net of issuance costs

 

3,016

 

11,255

Proceeds from warrant exercises

 

300

 

264

Proceeds held in trust

 

 

200

Proceeds from convertible note and warrant issuances, net of issuance costs

1,357

Net cash provided by financing activities

 

4,673

 

13,852

Net change in cash and restricted cash

 

(2,324)

 

(1,628)

Cash and restricted cash at beginning of period

 

9,048

 

4,231

Cash and restricted cash at end of period

$

6,724

$

2,603

Cash and restricted cash consisted of the following:

Cash

$

147

$

2,403

Restricted cash

6,577

200

Total cash and restricted cash

$

6,724

$

2,603

Supplemental disclosure:

Cash paid for interest

$

38

$

Non-cash investing and financing transactions:

 

  

 

  

Derivative liability associated with warrants

$

80

$

8,601

Issuance of common stock for principal of convertible notes

$

2,000

$

500

Accrued dividends on Series C and D convertible preferred stock

$

741

$

753

Warrants issued to placement agent

$

413

$

159

Deemed dividend on common stock issued due to down round provision, recorded in additional paid-in capital

$

$

5,294

Note conversion to common stock and warrants

$

2,295

$

See accompanying notes to consolidated financial statements.

6

CYTODYN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF NOVEMBER 30, 2023

(Unaudited)

Note 1. Organization

CytoDyn Inc. (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 clinical-stage biotechnology company focused on the clinical development of innovative treatments for multiple therapeutic indications based on its product candidate, leronlimab, a novel humanized monoclonal antibody targeting the C-C chemokine receptor type 5 (“CCR5”).

The Company has been investigating leronlimab as a viral entry inhibitor for treatment of human immunodeficiency virus (“HIV”), believed to competitively bind to the N-terminus and second extracellular loop of the CCR5 receptor. For immunology, the CCR5 receptor is believed to be implicated in immune-mediated illnesses such as Metabolic dysfunction-associated steatohepatitis (“MASH”), replacement for the term nonalcoholic steatohepatitis (“NASH”). Leronlimab is being or has been studied in MASH, MASH-HIV, solid tumors in oncology, and other HIV indications where CCR5 is believed to play an integral role.

Note 2. Summary of Significant Accounting Policies

Basis of presentation

The unaudited interim consolidated financial statements include the accounts of CytoDyn Inc. and its wholly owned subsidiary, CytoDyn Operations Inc. All intercompany transactions and balances are eliminated in consolidation. The consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”) have been omitted in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The interim financial information and notes thereto should be read in conjunction with the Company's latest Annual Report on Form 10-K for the fiscal year ended May 31, 2023 (the “2023 Form 10-K”). The results of operations for the periods presented are not necessarily indicative of results to be expected for the entire fiscal year or for any other future annual or interim period.

Reclassifications

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

Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and 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 $21.1 million for the six months ended November 30, 2023, and has an accumulated deficit of approximately $862.8 million as of November 30, 2023. These factors, among several others, including the various matters discussed in Note 8, Commitments and Contingencies, raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

7

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 seeking the lifting of the U.S Food and Drug Administration’s (the “FDA”) clinical hold with regard to the Company’s HIV program, performing additional pre-clinical and clinical studies in various indications, and seeking regulatory approval for 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.

Use of estimates

The preparation of the consolidated financial statements in accordance with accounting principles 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, 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 status of our analysis of the results of our clinical trials and/or discussions with the FDA which could have an impact on 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 capitalization and write-off of pre-launch inventories, charges for excess and obsolete inventories, research and development expenses, commitments and contingencies, stock-based compensation, and the assumptions used to value warrants and warrant modifications. Actual results could differ from these estimates.

Restricted cash

As of November 30, 2023, the Company had recorded approximately $6.6 million of restricted cash. The restricted cash is related to cash held as collateral in connection with a surety bond that was posted as required in the Amarex litigation and will remain as restricted cash until the litigation is resolved.

Recent Accounting Pronouncements

In July 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-03“Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock” (“ASU 2023-03”). This ASU amends various paragraphs in the accounting codification pursuant to the issuance of Commission Staff Bulletin ("SAB") number 120. ASU 2023-03 does not provide any new guidance and is immediately effective. ASU 2023-03 did not have a material impact on the consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements – Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments clarify or improve disclosure and presentation requirements on various disclosure areas, including the statement of cash flows, earnings per share, debt, equity, and derivatives. The amendments will align the requirements in the FASB ASC with the SEC’s regulations. The amendments in this ASU will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will not be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. The Company is currently evaluating the impact of the amendments on its financial statement disclosures.

8

On December 14, 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The ASU is effective for annual periods beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. The Company is currently evaluating the effect of this update on its consolidated financial statements and related disclosures.

Note 3. Accounts Payable and Accrued Liabilities and Compensation

As of November 30, 2023 and May 31, 2023, the accounts payable balance was approximately $62.3 million and $62.7 million, respectively, with two vendors accounting for 70% and 72% of the total balance of accounts payable at the respective dates.

The components of accrued liabilities and compensation are as follows (in thousands):

November 30, 2023

May 31, 2023

Compensation and related expense

$

228

$

335

Legal fees and settlement

81

168

Clinical expense

346

187

Accrued inventory charges and expenses

 

7,023

 

4,978

License fees

1,330

862

Lease payable

142

139

Total accrued liabilities

$

9,150

$

6,669

Note 4. 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.

November 30, 2023

May 31, 2023

(in thousands except conversion rate)

    

Series B

    

Series C

    

Series D

    

Series B

    

Series C

    

Series D

Shares of preferred stock outstanding

19

6

9

19

6

9

Common stock conversion rate

10:1

2,000:1

1,250:1

10:1

2,000:1

1,250:1

Total shares of common stock if converted

190

12,670

10,565

190

12,670

10,565

Undeclared dividends

$

17

$

-

$

-

$

15

$

-

$

-

Accrued dividends

$

-

$

2,818

$

3,231

$

-

$

2,500

$

2,808

Total shares of common stock if dividends converted

34

5,636

6,462

30

5,000

5,616

Under the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), dividends on its outstanding shares of Series B Convertible Preferred Stock (the “Series B preferred stock”) may be paid in cash or shares of the 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 (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.

Series B preferred stock provides for a liquidation preference over the common shares of $5.00 per share, plus any accrued and unpaid dividends. In the event of liquidation, holders of Series C and Series D preferred stock will be entitled to receive, on a pari passu basis, and in preference of any payment or distribution to holders of the Series B preferred stock and common stock, an amount per share equal to $1,000 per share plus any accrued and unpaid dividends.

9

Convertible notes and accrued interest

November 30, 2023

May 31, 2023

(in thousands)

    

April 2, 2021 Note

    

April 23, 2021 Note

    

Short-term Notes

Total

    

April 2, 2021 Note

    

April 23, 2021 Note

Placement Agent Notes

Total

Convertible notes payable outstanding principal

$

4,081

$

29,369

$

250

$

33,700

$

6,081

$

29,369

$

1,000

$

36,450

Less: Unamortized debt discount and issuance costs

(102)

(607)

(77)

(786)

(211)

(822)

(286)

(1,319)

Convertible notes payable, net

3,979

28,762

173

32,914

5,870

28,547

714

35,131

Accrued interest on convertible notes

4,261

8,675