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Table of Contents

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 February 28, 2021

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)

(360980-8524

(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 March 31, 2021, there were 612,875,224 shares outstanding of the registrant’s $0.001 par value common stock.

Table of Contents

TABLE OF CONTENTS

PAGE

PART I

3

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

3

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

34

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

49

ITEM 4. CONTROLS AND PROCEDURES

50

PART II

51

ITEM 1. LEGAL PROCEEDINGS

51

ITEM 1A. RISK FACTORS

51

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

53

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

53

ITEM 4. MINE SAFETY DISCLOSURES

54

ITEM 5. OTHER INFORMATION

54

ITEM 6. EXHIBITS

55

2

Table of Contents

PART I. Financial Information

Item 1. Consolidated Financial Statements

CytoDyn Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share data)

    

February 28, 2021

    

May 31, 2020

(unaudited)

(audited)

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash

$

14,291

$

14,282

Restricted cash

 

 

10

Inventories

 

93,537

 

19,147

Prepaid expenses

 

1,208

 

498

Prepaid service fees

 

1,819

 

2,890

Total current assets

 

110,855

 

36,827

Operating leases right-of-use asset

 

760

 

176

Property and equipment, net

 

124

 

55

Intangibles, net

 

1,915

 

13,456

Total assets

$

113,654

$

50,514

Liabilities and Stockholders’ (Deficit) Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

72,509

$

29,479

Accrued liabilities and compensation

 

13,575

 

6,879

Accrued interest on convertible notes

 

2,391

 

292

Accrued dividends on convertible preferred stock

 

2,227

 

981

Operating leases payable

 

183

 

115

Convertible notes payable, net

 

37,976

 

6,745

Warrant exercise proceeds held in trust

 

 

10

Total current liabilities

 

128,861

 

44,501

Long-term liabilities:

 

  

 

  

Convertible notes payable, net

 

 

8,431

Operating leases liability

 

588

 

63

Total long-term liabilities

 

588

 

8,494

Total liabilities

 

129,449

 

52,995

Commitments and Contingencies (Note 10)

 

  

 

  

Stockholders’ (Deficit) Equity

 

  

 

  

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

 

  

 

  

Series D convertible preferred stock, $0.001 par value; 12 authorized; 9 issued and outstanding at February 28, 2021 and May 31, 2020, respectively

 

 

Series C convertible preferred stock, $0.001 par value; 8 authorized; 8 issued and outstanding at February 28, 2021 and May 31, 2020, respectively

 

 

Series B convertible preferred stock, $0.001 par value; 400 shares authorized, 79 and 92 shares issued and outstanding at February 28, 2021 and May 31, 2020, respectively

 

 

Common stock, $0.001 par value; 800,000 shares authorized, 609,420 and 519,261 issued and 608,978 and 518,975 outstanding at February 28, 2021 and May 31, 2020, respectively

 

609

 

519

Additional paid-in capital

 

449,579

 

351,711

Accumulated (deficit)

 

(465,983)

 

(354,711)

Less: Treasury stock, $0.001 par value (442 and 286 shares at February 28, 2021 and May 31, 2020, respectively)

 

 

Total stockholders’ (deficit) equity

 

(15,795)

 

(2,481)

Total liabilities and stockholders' (deficit) equity

$

113,654

$

50,514

See accompanying notes to consolidated financial statements.

3

Table of Contents

CytoDyn Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

    

Three Months Ended

Nine Months Ended

February 28,

February 29,

February 28,

February 29,

    

2021

    

2020

    

2021

    

2020

    

Operating expenses:

 

  

 

  

 

  

 

  

 

General and administrative

$

7,902

$

6,465

$

25,328

$

12,605

Research and development

 

12,323

 

15,109

 

44,061

 

32,691

Amortization and depreciation

 

511

 

501

 

1,522

 

1,532

Intangible asset impairment charge

10,049

 

 

10,049

 

Total operating expenses

 

30,785

 

22,075

 

80,960

 

46,828

Operating loss

 

(30,785)

 

(22,075)

 

(80,960)

 

(46,828)

Other income

 

500

500

Interest income

 

1

3

2

5

Change in fair value of derivative liabilities

 

 

(2,934)

 

 

(2,105)

Loss on extinguishment of convertible notes

 

(7,625)

(11,794)

Interest expense:

 

  

 

  

 

  

 

  

Finance charges

 

(2)

 

(61)

 

(140)

 

(1,619)

Amortization of discount on convertible notes

 

(157)

 

 

(2,739)

 

(1,470)

Amortization of debt issuance costs

 

(21)

 

 

(40)

 

(404)

Inducement interest expense

 

(4,139)

 

(5,163)

 

(11,242)

 

(7,876)

Interest on convertible notes payable

 

(1,257)

 

(6,038)

 

(2,870)

 

(6,995)

Total interest expense

 

(5,576)

 

(11,262)

 

(17,031)

 

(18,364)

Loss before income taxes

 

(43,985)

 

(35,768)

 

(109,783)

 

(66,792)

Income tax benefit

 

 

 

 

Net loss

$

(43,985)

$

(35,768)

$

(109,783)

$

(66,792)

Basic and diluted loss per share

$

(0.08)

$

(0.08)

$

(0.18)

$

(0.17)

Basic and diluted weighted average common shares outstanding

 

577,854

 

432,112

 

595,226

 

396,641

See accompanying notes to consolidated financial statements.

4

Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit) Equity

(Unaudited)

(In thousands, expect per share data)

Preferred Stock

Common Stock

Treasury Stock

    

Additional

    

Accumulated

    

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

Paid-In Capital 

Deficit

Total

Balance May 31, 2019

95

$

329,554

$

330

159

$

$

220,120

$

(229,364)

$

(8,914)

First Quarter Fiscal Year Ended May 31, 2020

Issuance of stock for convertible note repayment

 

3,014

 

3

 

 

1,002

 

 

1,005

Proceeds from registered direct offering ($0.50 per share)

 

5,640

 

6

 

 

2,250

 

 

2,256

Offering costs related to registered direct offering

 

 

 

 

(260)

 

 

(260)

Proceeds from public warrant tender offers

 

45,376

 

45

 

 

11,855

 

 

11,900

Offering costs related to public warrant tender offers

 

 

 

 

(1,058)

 

 

(1,058)

Inducement interest expense - tender offers and debt conversions

 

 

 

 

2,430

 

 

2,430

Proceeds from Series C preferred stock offering

2

 

 

 

 

1,754

 

 

1,754

Offering costs related to Series C preferred stock offering

 

 

 

 

(198)

 

 

(198)

Dividends on Series C preferred stock

 

 

 

 

 

(110)

 

(110)

Legal fees in connection with equity offerings

 

 

 

 

(16)

 

 

(16)

Stock-based compensation

 

 

 

 

581

 

 

581

Net Loss August 31, 2019

 

 

 

 

 

(16,164)

 

(16,164)

Balance August 31, 2019

97

$

383,584

$

384

159

$

$

238,460

$

(245,638)

$

(6,794)

Second Quarter Fiscal Year Ended May 31, 2020

Issuance of stock for convertible note repayment

 

2,270

 

2

 

 

738

 

 

740

Note conversion and extension fees

 

 

 

 

(217)

 

 

(217)

Proceeds from registered direct offering ($0.50 per share)

 

13,461

 

13

 

 

4,396

 

 

4,409

Offering costs related to registered direct offering

 

 

 

 

(74)

 

 

(74)

Inducement interest expense - debt conversion

 

 

 

 

283

 

 

283

Proceeds from Series C preferred stock offering

3

 

 

 

 

2,788

 

 

2,788

Offering costs related to Series C preferred stock offering

 

 

 

 

(182)

 

 

(182)

Exercise of option to repurchase common stock

 

 

 

 

(8)

 

 

(8)

Dividends on Series C preferred stock

 

 

 

 

 

(151)

 

(151)

Stock-based compensation

 

 

 

 

434

 

 

434

Net Loss November 30, 2019

 

 

 

 

 

(14,860)

 

(14,860)

Balance November 30, 2019

100

$

399,315

$

399

159

$

$

246,618

$

(260,649)

$

(13,632)

Third Quarter Fiscal Year Ended May 31, 2020

Issuance of stock for convertible note repayment

 

17,683

 

18

 

 

9,059

 

 

9,077

Proceeds from registered direct offering ($0.50 per share)

 

19,756

 

20

 

 

5,981

 

 

6,001

Offering costs related to registered direct offering

 

 

 

 

(44)

 

 

(44)

Proceeds from warrant exercises

10,716

11

5,417

5,428

Relative fair market value associated with warrants exercised

2,404

2,404

Proceeds from private warrant exchange

20,441

20

5,965

5,985

Offering costs related to private warrant exchange

(197)

(197)

Inducement interest expense - private warrant exchange

5,163

5,163

Proceeds from Series C preferred stock offering

 

 

 

 

415

 

 

415

Offering costs related to Series C preferred stock offering

 

 

 

 

(53)

 

 

(53)

Dividends on Series C preferred stock

 

 

 

 

 

(204)

 

(204)

Proceeds from Series D Preferred offering

8

 

7,570

 

 

7,570

Offering costs related to Series D Preferred offering

(5)

(5)

Dividends on Series D Preferred shares

(62)

(62)

Stock issued for services

2,620

3

(3)

Stock issued for bonuses and tendered for income tax

380

127

154

154

Exercise of stock options

181

54

54

Stock-based compensation

 

 

 

3,331

3,331

Net Loss February 29, 2020

 

 

 

 

 

(35,768)

 

(35,768)

Balance February 29, 2020

108

$

471,092

$

471

286

$

$

291,829

$

(296,683)

$

(4,383)

See accompanying notes to consolidated financial statements.

5

Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit) Equity

(Unaudited)

(In thousands, except per share data)

Preferred Stock

Common Stock

Treasury Stock

    

Additional

    

Accumulated

    

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

Paid-In Capital 

Deficit

Total

Balance May 31, 2020

109

$

519,261

$

519

286

$

$

351,711

$

(354,711)

$

(2,481)

First Quarter Fiscal Year Ended May 31, 2021

Issuance of stock for convertible note repayment

2,119

2

 

9,535

 

 

9,537

Issuance of legal settlement shares

4,000

4

 

(4)

 

 

Exercise of stock options

100

 

39

 

 

39

Stock issued for incentive compensation and tendered for income tax

323

156

 

828

 

 

828

Conversion of Series B preferred stock to common stock

(5)

50

 

 

 

Private warrant exchange

16,544

17

 

7,787

 

 

7,804

Exercise of warrants

27,928

28

 

13,441

 

 

13,469

Inducement interest expense related to private warrant exchange

 

3,345

 

 

3,345

Offering costs related to private warrant exchange

 

(364)

 

 

(364)

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

 

 

(243)

 

(243)

Dividends accrued on preferred stock

 

 

(420)

 

(420)

Stock-based compensation

 

2,086

 

 

2,086

Net Loss August 31, 2020

 

 

(30,832)

 

(30,832)

Balance August 31, 2020

104

$

570,325

$

570

442

$

$

388,404

$

(386,206)

$

2,768

Second Quarter Fiscal Year Ended May 31, 2021

Issuance of stock for convertible note repayment

4,293

4

 

11,549

 

 

11,553

Exercise of stock options

10

 

10

 

 

10

Stock issued for private offering ($1.50 per share)

667

1

 

999

 

 

1,000

Private warrant exchange

12,480

13