10-Q

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 August 31, 2018

☐ 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	75-3056237
(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)

(Registrant’s telephone number, including area code) (360) 980-8524

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

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 September 28, 2018, there were 255,762,949 shares outstanding of the registrant’s $0.001 par value common stock.

TABLE OF CONTENTS

	PAGE
PART I		3
ITEM  1. FINANCIAL STATEMENTS		3
ITEM  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		19
ITEM  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		25
ITEM  4. CONTROLS AND PROCEDURES		25
PART II		26
ITEM 1. LEGAL PROCEEDINGS		26
ITEM  1A. RISK FACTORS		26
ITEM  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		26
ITEM  3. DEFAULTS UPON SENIOR SECURITIES		26
ITEM  4. MINE SAFETY DISCLOSURES		26
ITEM 5. OTHER INFORMATION		26
ITEM 6. EXHIBITS		27

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PART I

Item 1. Financial Statements.

CytoDyn Inc.

Consolidated Balance Sheets

	August 31, 2018			May 31, 2018
	(unaudited)
Assets
Current assets:
Cash	$	4,749,413		$	1,231,445
Prepaid expenses		338,384			227,173
Prepaid service fees		2,451,983			1,862,009
Total current assets		7,539,780			3,320,627
Furniture and equipment, net		12,038			11,228
Intangibles, net		1,479,624			1,567,143
Total assets	$	9,031,442		$	4,898,998
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	20,711,613		$	15,841,859
Accrued liabilities and compensation		633,746			757,778
Accrued license fees		233,800			133,600
Accrued interest payable		104,630			—
Convertible note payable, net		2,455,386			—
Total current liabilities		24,139,175			16,733,237
Long-term liabilities:
Convertible note payable, net		2,618,372			—
Derivative liability		2,071,199			1,323,732
Total long-term liabilities		4,689,571			1,323,732
Total liabilities		28,828,746			18,056,969
Commitments and Contingencies		—			—
Stockholders’ (Deficit) equity
Series B convertible preferred stock, $0.001 par value; 400,000 shares authorized, 92,100 shares issued and outstanding at August 31, 2018 and May 31, 2018, respectively		92			92
Common stock, $0.001 par value; 450,000,000 and 375,000,000 shares authorized, 233,880,390 and 216,881,790 issued and 233,721,379 and 216,722,779 outstanding at August 31, 2018 and May 31, 2018, respectively		233,880			216,881
Additional paid-in capital		167,521,847			159,764,611
Accumulated (deficit)		(187,552,964	)		(173,139,396	)
Less: treasury stock, at par (159,011 shares at $0.001)		(159	)		(159	)
Total stockholders’ (deficit)		(19,797,304	)		(13,157,971	)
Total liabilities and stockholders’ (deficit) equity	$	9,031,442		$	4,898,998

See accompanying notes to consolidated financial statements.

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CytoDyn Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended August 31,
	2018			2017
Operating expenses:
General and administrative	$	1,996,428		$	1,569,680
Research and development		11,403,294			8,148,175
Amortization and depreciation		88,971			89,146
Total operating expenses		13,488,693			9,807,001
Operating loss		(13,488,693	)		(9,807,001	)
Interest income		979			787
Change in fair value of derivative liability		(747,467	)		(362,666	)
Interest expense:
Amortization of discount on convertible notes		(64,580	)		(444,152	)
Amortization of debt issuance costs		(9,178	)		(113,700	)
Inducement interest related to warrant exercise		—			(826,252	)
Interest on convertible notes payable		(104,630	)		(75,289	)
Total interest expense		(178,388	)		(1,459,393	)
Loss before income taxes		(14,413,569	)		(11,628,273	)
Provision for taxes on income		—			—
Net loss	$	(14,413,569	)	$	(11,628,273	)
Basic and diluted loss per share	$	(0.07	)	$	(0.08	)
Basic and diluted weighted average common shares outstanding		218,594,628			151,738,244

See accompanying notes to consolidated financial statements.

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CytoDyn Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended August 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(14,413,569	)	$	(11,628,273	)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization and depreciation		88,971			89,146
Amortization of debt issuance costs		9,178			113,700
Amortization of discount on convertible notes		64,580			444,152
Inducement interest related to warrant exercise		—			826,252
Change in fair value of derivative liability		747,467			362,666
Stock-based compensation		283,346			254,953
Changes in current assets and liabilities:
(Increase) decrease in prepaid expenses		(701,185	)		1,009,448
Increase in accounts payable and accrued expenses		4,950,552			1,527,847
Net cash used in operating activities		(8,970,660	)		(7,000,109	)
Cash flows from investing activities:
Furniture and equipment purchases		(2,262	)		—
Net cash used in investing activities		(2,262	)		—
Cash flows from financing activities:
Proceeds from sale of common stock and warrants		8,499,300			—
Proceeds from warrant exercises		—			1,647,500
Proceeds from convertible notes payable		5,000,000			4,888,500
Payment of offering costs		(1,008,410	)		(365,227	)
Net cash provided by financing activities		12,490,890			6,170,773
Net change in cash		3,517,968			(829,336	)
Cash, beginning of period		1,231,445			1,775,583
Cash, end of period	$	4,749,413		$	946,247
Non-cash investing and financing transactions:
Financing costs associated with placement agent warrants	$	—		$	70,383
Debt discount and issuance costs associated with convertible notes payable	$	700,000		$	1,574,628

See accompanying notes to consolidated financial statements.

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CYTODYN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AUGUST 31, 2018

(UNAUDITED)

Note 1 – Organization

CytoDyn Inc. (the “Company”, “we” or “us”) was originally incorporated under the laws of Colorado on May 2, 2002 under the name RexRay Corporation (its previous name) and, effective August 27, 2015, reincorporated under the laws of Delaware. We are a clinical-stage biotechnology company focused on the clinical development and potential commercialization of humanized monoclonal antibodies to treat Human Immunodeficiency Virus (“HIV”) infection. Our lead product candidate, PRO 140, belongs to a class of HIV therapies known as entry inhibitors. These therapies block HIV from entering into and infecting certain cells.

The Company is developing a class of therapeutic monoclonal antibodies to address unmet medical needs in the areas of HIV and Graft-versus-Host Disease (“GvHD”). In addition, we are expanding the clinical focus of PRO 140 to include the evaluation in certain cancer and immunological indications where CCR antagonism has shown initial promise.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the financial results for these periods. The consolidated financial statements and notes thereto are presented as prescribed by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements for the fiscal years ended May 31, 2018 and 2017 and notes thereto in the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended May 31, 2018, filed with the Securities and Exchange Commission on July 27, 2018 and September 28, 2018, respectively. Operating results for the three months ended August 31, 2018 are not necessarily indicative of the results that may be expected for the entire year. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three months ended August 31, 2018 and August 31, 2017, (b) the financial position at August 31, 2018 and (c) cash flows for the three months ended August 31, 2018 and August 31, 2017.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Advanced Genetic Technologies, Inc. (“AGTI”) and CytoDyn Veterinary Medicine LLC (“CVM”), both of which are dormant entities. All intercompany transactions and balances are eliminated in consolidation.

Reclassifications

Certain prior year amounts shown in the accompanying consolidated financial statements have been reclassified to conform to the 2018 presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total stockholders’ (deficit) equity, net loss or loss per share.

Going Concern

The consolidated accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company had losses for all periods presented. The Company incurred a net loss of $14,413,569 for the three months ended August 31, 2018 and has an accumulated deficit of $187,552,964 as of August 31, 2018. These factors, among others, 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. The Company’s continuation as a going concern is dependent upon its ability to obtain additional operating capital, complete development of its product candidates, obtain U.S. Food & Drug Administration (“FDA”) approval, outsource manufacturing of the product candidates, and ultimately achieve initial revenues and attain profitability. The Company is currently engaging in significant research and development activities related to these product candidates, and expects to incur significant research and development expenses in the future primarily related to its clinical trials. These research and development activities are subject to significant risks and uncertainties. The Company intends to finance its future development activities and its working capital needs largely from the sale of equity and debt securities, combined with additional funding from other traditional sources. There can be no assurance, however, that the Company will be successful in these endeavors.

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Use of Estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash

Cash is maintained at federally insured financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. Balances in excess of federally insured limits at August 31, 2018 and May 31, 2018 approximated $4.7 million and $1.1 million, respectively.

Identified Intangible Assets

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 350 Intangibles-Goodwill and Other, which establishes accounting standards for the impairment of long-lived assets such as intangible assets subject to amortization. The Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying value, the asset is considered impaired. Impairment losses are measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset. There were no impairment charges for the three months ended August 31, 2018 and 2017. The value of the Company’s patents would be significantly impaired by any adverse developments as they relate to the clinical trials pursuant to the patents acquired as discussed in Notes 7 and 9.

Research and Development

Research and development costs are expensed as incurred. Clinical trial costs incurred through third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development collaboration arrangements or other contractual agreements, the milestone payment obligations are expensed when the milestone conditions are probable and the amount of payment is reasonably estimable.

Pre-launch Inventory

The Company may scale-up and make commercial quantities of its product candidate prior to the date it anticipates that such product will receive final FDA approval. The scale-up and commercial production of pre-launch inventories involves the risk that such products may not be approved for marketing by the FDA on a timely basis, or ever. This risk notwithstanding, the Company may scale-up and build pre-launch inventories of product that have not yet received final governmental approval when the Company believes that such action is appropriate in relation to the commercial value of the product launch opportunity. The determination to capitalize is made once the Company (or its third party development partners) has filed a Biologics License Application (“BLA”) that has been acknowledged by the FDA as containing sufficient information to allow the FDA to conduct its review in an efficient and timely manner and management is reasonably certain that all regulatory and legal requirements will be satisfied. This determination is based on the particular facts and circumstances relating to the expected FDA approval of the drug product being considered. As of August 31, 2018 and May 31, 2018, the Company did not have pre-launch inventory that qualified for capitalization pursuant to U.S. GAAP ASC 330 “Inventory.”

Fair Value of Financial Instruments

At August 31, 2018 and May 31, 2018, the carrying value of the Company’s cash, accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of the instruments. The Company carries derivative financial instruments at fair value as required by U.S. GAAP.

Derivative financial instruments consist of financial instruments that contain a notional amount and one or more underlying variables (e.g., interest rate, security price, variable conversion rate or other variables), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. The Company follows the provisions of FASB ASC 815 “Derivatives and Hedging” (“ASC 815”), as their instruments are recorded as a derivative liability, at fair value, and FASB ASC 480 “Distinguishing Liabilities from Equity” (ASC 480), as it relates to warrant liability, with changes in fair value reflected in income.

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Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.

Level 3. Unobservable inputs to the valuation methodology are significant to the measurement of the fair value of assets or liabilities. These Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that the Company was unable to corroborate with observable market data.

Liability measured at fair value on a recurring basis by level within the fair value hierarchy as of August 31, 2018 and May 31, 2018 is as follows:

	Fair Value Measurement at				Fair Value Measurement at
	August 31, 2018 (1)				May 31, 2018 (1)
	Using				Using
	Level 3		Total		Level 3		Total
Liability:
Derivative liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732
Total liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732

(1) The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of August 31, 2018 and May 31, 2018.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurements. These instruments are not quoted on an active market, so the Company uses a Binomial Lattice Model to estimate the value of the derivative liability. A Binomial Lattice Model was used because management believes it reflects all the assumptions that market participants would likely consider in negotiating the transfer of the warrant. The Company’s derivative liability is classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation model. The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended August 31, 2018 and the year ended May 31, 2018:

Investor warrants issued with registered direct equity offering	$	4,360,000
Placement agent warrants issued with registered direct equity offering		819,200
Fair value adjustments		(3,855,468	)
Balance at May 31, 2018		1,323,732
Fair value adjustments		747,467
Balance at August 31, 2018	$	2,071,199

Stock-Based Compensation

U.S. GAAP requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award (requisite service period) or when designated milestones have been achieved.

The Company accounts for stock-based awards established by the fair market value of the instrument using the Black-Scholes option pricing model utilizing certain weighted average assumptions including stock price volatility, expected term and risk-free interest rates, as of the grant date. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the stock-based award. The expected volatility is based on the historical volatility of the Company’s common stock on monthly intervals. The computation of the expected option term is based on the “simplified method,” as the Company issuances are considered “plain vanilla” options. For stock-based awards with defined vesting, the Company recognizes compensation expense over the

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requisite service period or when designated milestones have been achieved. The Company estimates forfeitures at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Based on limited historical experience of forfeitures, the Company estimated future unvested forfeitures at 0% for all periods presented.

Common Stock

On August 24, 2017, at the 2017 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 350,000,000 to 375,000,000. On June 7, 2018, at a special meeting of stockholders, a proposal was approved to increase the total number of authorized shares of common stock of the Company from 375,000,000 to 450,000,000. Subsequent to each stockholders’ meeting, an amendment to the Company’s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to each authorized share increase.

On November 1, 2017, the Company held a special meeting of stockholders, at which the stockholders approved a proposal to effect a reverse stock split at a ratio of any whole number between one-for-two and one-for-fifteen, as determined by the board of directors, and a simultaneous reduction in the total number of authorized shares of common stock to 200,000,000 at any time before August 24, 2018, if and as determined by the board of directors. The Company did not effect a reverse stock split prior to the August 24, 2018 expiration date, therefore the board of directors no longer has the authorization or ability to effect a reverse stock split.

Preferred Stock

The Company’s Board of Directors is authorized to issue up to 5,000,000 shares of preferred stock without stockholder approval. As of August 31, 2018, the Company has authorized the issuance of 400,000 shares of Series B Convertible Preferred Stock, of which 92,100 shares were outstanding. The remaining preferred shares authorized have no specified rights.

Treasury Stock

Treasury stock purchases are accounted for under the par value method, whereby the cost of the acquired stock is recorded at par value. During the year ended May 31, 2018, the Company purchased 159,011 shares of $0.001 par value treasury stock for shares tendered in satisfaction of income tax withholding, in connection with incentive compensation paid to certain officers in the form of common stock.

Debt Discount

During the three months ended August 31, 2018 and the year ended May 31, 2018, the Company incurred approximately $0.6 million and $1.5 million of debt discount related to the issuance of convertible notes, as described in Note 4. The discount is amortized over the life of the convertible promissory notes. During the three months ended August 31, 2018, and August 31, 2017 the Company recorded approximately $65,000 and $444,000, respectively, of related amortization.

Debt Issuance Cost

During the three months ended August 31, 2018 and the year ended May 31, 2018, the Company incurred direct costs associated with the issuance of a convertible notes, as described in Note 4, and recorded approximately $0.1 million and $0.4 million, respectively of debt issuance costs. In connection with the debt issuance costs, the Company recognized approximately $9,000 and $114,000 of related amortization for the three months ended August 31, 2018 and August 31, 2017, respectively.

Offering Costs

The Company incurred direct incremental costs associated with the sale of equity securities, as described in Notes 10 and 11. The costs were approximately $3.5 million for the year ended May 31, 2018, and approximately $1.0 million and $-0- for the three months ended August 31, 2018 and August 31, 2017, respectively. The offering costs were recorded as a component of equity upon receipt of proceeds.

Stock for Services

The Company periodically issues warrants to consultants for various services. The Black-Scholes option pricing model, as described more fully above, is utilized to measure the fair value of the equity instruments on the date of issuance. The Company recognizes the compensation expense associated with the equity instruments over the requisite service or vesting period.

Loss per Common Share

Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share would include the weighted average number of shares of common stock outstanding and potentially dilutive common stock equivalents. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share. For this reason, common stock options and warrants to purchase 145,856,851 and 80,582,715 shares of common stock were not included in the computation of basic and diluted weighted average number of shares of common stock outstanding for the three months ended August 31, 2018 and August 31, 2017, respectively. Additionally, as of August 31, 2018, shares of Series B convertible preferred stock in the aggregate of 92,100 shares can potentially convert into 921,000 shares of common stock.

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Income Taxes

Deferred taxes are provided on the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Future tax benefits for net operating loss carry forwards are recognized to the extent that realization of these benefits is considered more likely than not. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (“ASC 740-10”). A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits for all periods presented. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefit in interest expense and penalties in operating expenses.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% effective as of January 1, 2018. In accordance with Section 15 of the Internal Revenue Code, we utilized a blended rate of 28.62% for our fiscal 2018 tax year, by applying a prorated percentage of the number of days prior to and subsequent to the January 1, 2018 effective date. For the fiscal year ended May 31, 2018, we recorded provisional charges for the re-measurement of the deferred tax assets and reduced our deferred taxes before the valuation allowance by $17,497,051 to our income tax expense. The net tax expense for the year ended May 31, 2018, is zero, due to the reduction in the deferred tax valuation allowance. The Company has a full valuation allowance as of August 31, 2018 and May 31, 2018, as management does not consider it more than likely than not that the benefits from the deferred taxes will be realized.

Note 3 – Recent Accounting Pronouncements

Recent accounting pronouncements, other than below, issued by the FASB (including its EITF), the AICPA and the SEC did not or are not believed by management to have a material effect on the Company’s present or future financial statements.

In March 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-05, Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendments in this Update add various Securities and Exchange Commission (“SEC) paragraphs pursuant to the issuance of SEC Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“Act”) (“SAB 118). The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. The Company has provided a reasonable estimate in the notes to the consolidated financial statements.

In July 2017, FASB issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Management is currently assessing the impact the adoption of ASU 2017-11 will have on the Company’s Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. Management is currently assessing the impact the adoption of ASU 2017-09 will have on the Company’s Consolidated Financial Statements.

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Note 4 – Convertible Instruments

Series B Convertible Preferred Stock

During fiscal 2010, the Company issued 400,000 shares of Series B, $0.001 par value Convertible Preferred Stock (“Series B”) at $5.00 per share for cash proceeds totaling $2,009,000, of which 92,100 shares remain outstanding at August 31, 2018. Each share of the Series B is convertible into ten shares of the Company’s $0.001 par value common stock, including any accrued dividends, with an effective fixed conversion price of $0.50 per share. The holders of the Series B can only convert their shares to common shares provided the Company has sufficient authorized common shares at the time of conversion. Accordingly, the conversion option was contingent upon the Company increasing its authorized common shares, which occurred in April 2010, when the Company’s stockholders approved an increase in the authorized shares of common stock to 100,000,000. At the commitment date, which occurred upon such stockholder approval, the conversion option related to the Series B was beneficial. The intrinsic value of the conversion option at the commitment date resulted in a constructive dividend to the Series B holders of approximately $6,000,000. The constructive dividend increased and decreased additional paid-in capital by identical amounts. The Series B has liquidation preferences over the common shares at $5.00 per share plus any accrued dividends. Dividends are payable to the Series B holders when declared by the board of directors at the rate of $0.25 per share per annum. Such dividends are cumulative and accrue whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally available. The Series B holders have no voting rights. As of August 31, 2018 and May 31, 2018, the undeclared, accrued dividends were approximately $199,200 and $199,000, respectively, or 398,400 and 387,000 shares of common stock, respectively.

Short-term Convertible Notes

During the year ended May 31, 2018, the Company issued approximately $4.89 million in aggregate principal of short-term Convertible Notes, with a maturity date of January 31, 2018, and related warrants to investors for cash. The principal amount of the short-term Convertible Notes, including any accrued but unpaid interest thereon, was convertible at the election of the holder at any time into shares of common shares at any time prior to maturity at a conversion price of $0.75 per share. The short-term Convertible Notes bore simple interest at the annual rate of 7%. Principal and accrued interest, to the extent not previously paid or converted, is due and payable on the maturity date. At the commitment date, the Company determined that the conversion feature related to these short-term Convertible Notes to be beneficial to the investors. As a result, the Company determined the intrinsic value of the beneficial conversion feature utilizing the fair value of the underlying common stock on the commitment dates and the effective conversion price after discounting the short-term Convertible Notes for the fair value of the related warrants.

In connection with the sale of the short-term Convertible Notes, detachable common stock warrants to purchase a total of 4,025,656 common shares, with an exercise price of $1.00 per share and a five-year term were issued to the investors. The Company determined the fair value of the warrants at issuance using the Black-Scholes option pricing model utilizing certain weighted average assumptions, such as expected stock price volatility, expected term of the warrants, risk-free interest rates and expected dividend yield at the grant date.

	2018
Expected dividend yield	0%
Stock price volatility	69.80%
Expected term	5 year
Risk-free interest rate	1.77 - 1.93%
Grant-date fair value	$0.30 - $0.39

The fair value of the warrants, coupled with the beneficial conversion features, were recorded as a debt discount to the short-term Convertible Notes and a corresponding increase to additional paid-in capital was amortized over the term of the short-term Convertible Notes. The Company incurred debt discount of approximately $1.5 million related to the beneficial conversion feature and detachable warrants issued with the short-term Convertible Notes during the year ended May 31, 2018. Accordingly, the Company recognized approximately $-0- and $0.4 million of non-cash debt discount during the three months ended August 31, 2018 and August 31, 2017. In connection with the short-term Convertible Notes, the Company incurred direct issuance costs of approximately $0.4 million during the year ended May 31, 2018. The issuance costs were amortized over the term of the short-term Convertible Notes and accordingly, the Company recognized approximately $-0- and $114,000 of debt issuance costs during the three months ended August 31, 2018 and August 31, 2017, respectively.

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On January 31, 2018, in connection with a registered direct equity offering, as fully described in Note 11, the short-term Convertible Notes in an aggregate principal amount of $5,788,500, plus accrued unpaid interest of approximately $243,000 were sold for 12,062,728 shares of common stock. The short-term Convertible Note investors also received warrants to purchase 7,718,010 shares of common stock. The securities were sold at a combined purchase price of $0.50 per share of common stock and related warrants, for aggregate gross proceeds to the Company of approximately $6.0 million. The Company repaid one short-term Convertible Note, including accrued interest in the aggregate of approximately $259,000. During the three months ended August 31, 2018 and August 31, 2017, the Company recognized approximately $-0- and $75,000, of interest expense related to the short-term Convertible Notes.

Activity related to the short-term Convertible Notes was as follows:

	August 31, 2018		May 31, 2018
Face amount of short-term Convertible Notes	$	—	$	6,038,500
Unamortized discount		—		—
Registered direct equity offering		—		(5,788,500	)
Note repayment		—		(250,000	)
Carrying value of short-term Convertible Notes	$	—	$	—

Long-term Convertible Note

On June 26, 2018, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note (the “Note”) with a two-year term to an institutional accredited investor in the initial principal amount of $5.7 million. The investor gave consideration of $5.0 million to the Company. The Note bears interest of 10% and is convertible into common stock, at $0.55 per share. The Note is convertible in total, or in part, of the outstanding balance, at any time after six months from the issue date upon five trading days’ notice, subject to certain adjustments and ownership limitations specified in the Note. The Investor may redeem any portion of the Note, at any time after six months from the issue date upon five trading days’ notice, subject to a maximum monthly redemption amount of $350,000. The securities purchase agreement requires the Company to reserve shares for future conversions or redemptions by dividing the outstanding principal balance plus accrued interest by the conversion price of $0.55 per share times 1.5.

In connection with the Note, the Company recorded debt discount of $0.6 million and debt issuance costs of $0.1 million. The discount and issuance costs will be amortized over the life of the Note, and accordingly, the Company recognized approximately $10,000 and $-0- amortization of debt issuance costs for the three months ended August 31, 2018 and August 31, 2017, respectively and approximately $65,000 and $-0- of amortization of debt discount for the three months ended August 31, 2018 and August 31, 2017, respectively. During the three months ended August 31, 2018 and August 31, 2017, the Company recognized approximately $104,000 and $-0-, of interest expense related to the Note.

Activity related to the Note was as follows:

	August 31, 2018
	Short term			Long term			Total			May 31, 2018
Face amount of Note	$	2,100,000		$	3,600,000		$	5,700,000		$	—
Monthly redemption		700,000			(700,000	)		—
Unamortized discount		(344,614	)		(281,628	)		(626,242	)		—
Carrying value of Note	$	2,455,386		$	2,618,372		$	5,073,758		$	—

Note 5 – Derivative Liability

The investor warrants issued with the September 2016 registered direct equity offering, and the placement agent warrants issued in conjunction with the offering, as fully described in Note 11, contain a provision for net cash settlement in the event that there is a fundamental transaction (contractually defined as a merger, sale of substantially all assets, tender offer or share exchange). If a fundamental transaction occurs in which the consideration issued consists principally of cash or stock in a successor entity, then the warrantholder has the option to receive cash equal to the fair value of the remaining unexercised portion of the warrant. Due to this contingent cash settlement provision, the investor and placement agent warrants require liability classification as derivatives in accordance with ASC 480 and ASC 815 and are recorded at fair value.

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The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date September 15, 2016, May 31, 2018 and August 31, 2018:

	Shares Indexed		Derivative Liability
Inception date September 15, 2016		7,733,334	$	5,179,200
Balance May 31, 2018		7,733,334		1,323,732
Balance August 31, 2018		7,733,334	$	2,071,199

The Company recognized approximately $747,000 and $363,000 of non-cash loss, due to the changes in the fair value of the liability associated with such classified warrants during the three months ended August 31, 2018 and August 31, 2017, respectively.

ASC 820 provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition. Fair values for the warrants were determined using a Binomial Lattice (“Lattice”) valuation model.

The Company estimated the fair value of the warrant derivative liability as of inception date September 15, 2016, May 31, 2018 and August 31, 2018, using the following assumptions:

	September 15, 2016		May 31, 2018		August 31, 2018
Fair value of underlying stock	$	0.78	$	0.49	$	0.69
Risk free rate		1.20%		2.63%		2.72%
Expected term (in years)		5		3.3		3.04
Stock price volatility		106%		64%		64%
Expected dividend yield		—		—		—
Probability of Fundamental Transaction		50%		50%		50%
Probability of holder requesting cash payment		50%		50%		50%

Due to the fundamental transaction provision contained in the warrants, which could provide for early redemption of the warrants, the model also considered subjective assumptions related to the fundamental transaction provision. The fair value of the warrants will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes in interest and management’s assumptions related to the fundamental transaction provisions.

Note 6 – Stock Options and Warrants

The Company has one active stock-based equity plan at August 31, 2018, the CytoDyn Inc. 2012 Equity Incentive Plan, as amended (the “2012 Plan”) and one stock-based equity plan that is no longer active, but under which certain prior awards remain outstanding, the CytoDyn Inc. 2004 Stock Incentive Plan (the “2004 Plan” and, together with the 2012 Plan, the “Incentive Plans”). The 2012 Plan was approved by stockholders at the Company’s 2012 annual meeting to replace the 2004 Plan. The 2012 Plan was amended by stockholder approval in February 2015 to increase the number of shares available for issuance from 3,000,000 to 5,000,000 shares of common stock and in March 2016 to increase the number of shares available for issuance from 5,000,000 to 7,000,000 shares of common stock. At the annual meeting of stockholders held on August 24, 2017, the stockholders approved an amendment to the 2012 Plan to increase the number of shares available for issuance from 7,000,000 to 15,000,000 shares of common stock. As of August 31, 2018, the Company had 2,403,048 shares available for future stock-based grants under the 2012 Plan.

Stock Options

During the three months ended August 31, 2018, the Company granted annual stock option awards to directors to purchase a total of 680,822 shares of common stock. The exercise price of the stock option awards is $0.49 per share, except for one stock option award covering 80,822 shares of common stock, which has an exercise price of $0.47 per share. These stock option awards vest quarterly over one year and have a ten-year term. The grant date fair value related to these stock options was $0.31 per share, except the stock option award covering 80,822 shares of common stock, which was $0.30 per share. These awards reflect an increase in the annual non-employee director stock option award from 75,000 to 100,000 shares per year, effective for fiscal year 2019.

During the three months ended August 31, 2018, the Company granted a stock option award covering 950,000 shares of common stock with an exercise price of $0.49 per share, to its Executive Chairman. This stock option award vests ratably over 24 months, has a ten-year term and a grant date fair value of $0.41 per share.

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During the three months ended August 31, 2018, the Company granted stock options, covering an aggregate of 875,000 shares of common stock, to executive management and employees with exercise prices of $0.49 per share. The stock option awards vest annually over three years, with a ten-year term and grant date fair values of $0.31 per share.

Warrants

On June 15, 2018, in connection with a registered direct equity offering, as fully described in Note 11, the Company issued warrants covering 1,970,000 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.75 per share. In connection with the registered direct offering, the Company also issued warrants covering 133,600 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.55 per share.

During the three months ended August 31, 2018, in connection with a private equity offering, as fully described in Note 10, the Company issued common stock warrants covering a total of 7,514,300 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.75 per share. In connection with this offering, the Company also issued common stock warrants covering 1,422,860 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.50 per share.

During the year ended May 31, 2018, the Company determined to extend the expiration dates of certain warrants from May 31, 2017 to June 30, 2017 covering 3,295,000 shares of common stock. The warrants were originally issued in connection with 2012 convertible promissory notes and had an amended exercise price of $1.00 per share. The extension to June 30, 2017 was contingent upon immediate exercise of the warrants at a reduced exercise price of $0.50 per share. The Company received proceeds of approximately $1.6 million and, pursuant to U.S. GAAP, the Company recognized non-cash inducement interest expense of approximately $0.8 million, which represented the incremental increase in the fair value of the extended warrants.

Compensation expense related to stock options and compensatory warrants for the three months ended August 31, 2018 and August 31, 2017 was approximately $283,000 and $255,000, respectively. The grant date fair value of options and compensatory warrants vested during the three month periods ended August 31, 2018 and August 31, 2017 was approximately $692,000 and $447,000, respectively. As of August 31, 2018, there was approximately $1.1million of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 1.6 years.

The following table represents stock option and warrant activity as of and for the three months ended August 31, 2018:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Options and warrants outstanding—May 31, 2018		132,385,269		$	0.80		3.78	$	3,673
Granted		13,546,582			0.67		—		—
Exercised		—			—		—		—
Forfeited/expired/cancelled		(75,000	)		0.65		—		—
Options and warrants outstanding—August 31, 2018		145,856,851			0.79		3.74		1,710,190
Outstanding exercisable—August 31, 2018		141,382,362		$	0.79		3.58	$	1,200,567

Note 7 – Acquisition of Patents

As discussed in Note 9 below, the Company consummated an asset purchase on October 16, 2012, and paid $3,500,000 for certain assets, including intellectual property, certain related licenses and sublicenses, FDA filings and various forms of the PRO 140 drug substance. The Company followed the guidance in Financial Accounting Standards Topic 805 to determine if the Company acquired a business. Based on the prescribed accounting, the Company acquired assets and not a business. As of August 31, 2018, the Company has recorded and is amortizing $3,500,000 of intangible assets in the form of patents. The Company estimates the acquired patents have an estimated life of ten years. Subsequent to the acquisition date, the Company has continued to expand, amend and file new patents central to its current clinical trial strategies, which, in turn, have extended the protection period for certain methods of using PRO 140 and formulations comprising PRO 140 out through at least 2031 and 2038, respectively, in various countries.

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The following presents intangible assets activity:

	August 31, 2018			May 31, 2018
Gross carrying amounts	$	3,500,000		$	3,500,000
Accumulated amortization		(2,056,365	)		(1,968,846	)
Total amortizable intangible assets, net		1,443,635			1,531,154
Patents currently not amortized		35,989			35,989
Carrying value of intangibles, net	$	1,479,624		$	1,567,143

Amortization expense related to acquired patents was approximately $87,500 for the three months ended August 31, 2018 and 2017, respectively. The estimated aggregate future amortization expense related to the Company’s intangible assets with finite lives is estimated at approximately $350,000 per year for approximately the next four years.

Note 8 – License Agreements

The Company has a license agreement with a third-party licensor covering the licensor’s “system know-how” technology with respect to the Company’s use of proprietary cell lines to manufacture new PRO 140 material. The Company accrues an annual license fee of £300,000 (approximately US$400,000 utilizing current exchange rates), which is payable annually in December, except for the December 2017 payment, which was extended to March 15, 2018. Future annual license fees and royalty rate will vary depending on whether the Company manufactures PRO 140, utilizes the third-party licensor as a contract manufacturer, or utilizes an independent party as a contract manufacturer. The licensor does not charge an annual license fee when it serves as the manufacturer. In addition, the Company will incur royalties of up to 0.75% to 2% of net sales, depending upon who serves as the manufacturer, when the Company commences their first commercial sale, which will continue as long as the license agreement is maintained.

Note 9 – Commitments and Contingencies

Under the Progenics Purchase Agreement, the Company acquired rights to the HIV viral-entry inhibitor drug candidate PRO 140, a humanized anti-CCR5 monoclonal antibody, as well as certain other related assets, including the existing inventory of bulk PRO 140 drug product, intellectual property, certain related licenses and sublicenses, and FDA regulatory filings. In connection with purchase, the Company has two remaining milestone payments, (i) $0.5 million upon filing a BLA with the FDA or non-U.S. equivalent regulatory body and (ii) $5.0 million, which will become due at the time of the first U.S. new drug application approval by the FDA or other non-U.S. approval for the sale of PRO 140. In addition, the Company will incur royalty payments of up to 5% on net sales during the period beginning on the date of the first commercial sale of PRO 140 until the later of (a) the expiration of the last to expire patent included in the acquired assets, and (b) 10 years, in each case determined on a country-by country basis. During the year ended May 31, 2016 the Company paid a milestone obligation of $1.5 million owed to Progenics as a result of the first dosing in a U.S. Phase 3 trial. To the extent that the remaining milestone payment and royalties are not timely made, under the terms of the Progenics Purchase Agreement, Progenics has certain repurchase rights relating to the assets sold to the Company thereunder. As of the date of this filing, it is management’s conclusion that the probability of achieving the subsequent future scientific research milestone is not reasonably determinable, thus the future milestone payments payable to Progenics and its sub-licensors are deemed contingent consideration and, therefore, are not currently accruable.

Payments to the third-party licensor and to Progenics are in addition to payments due under a Development and License Agreement, dated April 30, 1999 (the “PDL License”), between Protein Design Labs (now AbbVie Inc.) (“PDL”) and Progenics, which was assigned to the Company in the Progenics Purchase Agreement, pursuant to which the Company has an exclusive worldwide license to develop, make, have made, import, use, sell, offer to sell or have sold products that incorporate the humanized form of the PRO 140 antibody developed by PDL under the agreement the Company has paid various milestone obligations, with one remaining milestone payment of $0.5 million, which will become due upon FDA approval or approval by another non-U.S. equivalent regulatory body. In addition, the Company will incur royalties of up to 3.5% of net sales for the longer of 10 years and the date of expiration of the last to expire licensed patent. Additionally, the PDL License provides for an annual maintenance fee of $150,000 or until annual royalties paid exceed that amount. To the extent the remaining milestone payment and royalties are not timely made, under the terms of the PDL License, AbbVie Inc. has certain termination rights relating to the Company’s license of PRO 140 thereunder. As of the date of this filing, it is management’s conclusion that the probability of achieving the subsequent future scientific research milestones is not reasonably determinable, thus the future milestone payments payable to PDL, Progenics and its sub-licensors are deemed contingent consideration and, therefore, are not currently accruable. The Company has entered into project work orders, as amended, for each of its clinical research organization (“CRO”) and related laboratory vendors. Under the terms of these agreements, the Company incurs execution fees for direct services costs, which are recorded as a current asset. In the event the Company were to terminate any trial, it may incur certain financial penalties which would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range from an approximate low of $0.1 million to an approximate high of $1.4 million. In the remote circumstance that the Company would terminate all clinical trials, the collective financial penalties may range from an approximate low of $0.5 million to an approximate high of $2.3 million. During the year ended May 31, 2017, the Company entered into agreements with contract

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manufacturing companies. Under the terms of the agreements, the Company incurred approximately $2.1 million of execution fees for process validation and manufacturing activities, of which the remaining $0.7 million is reflected as a current asset, as of August 31, 2018. In the event the Company were to terminate any of the agreements, it may incur certain financial penalties which would become payable to the manufacturers. Conditioned on the timing of termination, the financial penalties may range up to an approximate high of $1.7 million. From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company’s financial position.

Note 10 – Private Securities Offerings

During the three months ended August 31, 2018, the Company conducted a private equity offering, in which accredited investors purchased unregistered common stock at $0.50 per share with warrant coverage rate of 50%. Pursuant to the offering, the Company sold a total of 15,028,600 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $7.5 million and issued to the investors five-year warrants covering 7,514,300 shares of common stock with an exercise price of $0.75 per share. The Company received net proceeds from the offering of approximately $6.6 million. In addition, the placement agent received warrants covering 1,422,860 shares of common stock (or 10% of total shares sold to investors) with a per share exercise price of $0.50, a five-year term. The placement agent warrants include a cashless exercise provision.

Note 11 – Registered Direct Equity Offerings

In September 2016, the Company entered into securities purchase agreements with certain institutional investors for the sale of 13,333,334 shares of common stock at a purchase price of $0.75 per share in a registered direct equity offering (the “Registered Offering”), pursuant to a registration statement on Form S-3. The investors in this Registered Offering also received warrants to purchase 6,666,667 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the Registered Offering of approximately $9.0 million after placement fees of 8% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 1,066,667 shares (or 8% of total shares sold to investors) with a per share exercise price of $0.825 and a five-year term.

A summary of the cash proceeds of the Registered Offering is shown below:

Gross proceeds from sale of common stock	$	10,000,000
Placement agent fees and expenses		1,010,000
Total net proceeds	$	8,990,000

As fully described in Note 5 above, the investor warrants and the placement agent warrants issued in conjunction with the Registered Offering are required to be accounted for in accordance with ASC 480 and ASC 815.

A summary of the ASC 480 allocation of the proceeds of the Registered Offering is as follows:

Allocated to common stock and additional paid in capital	$	6,334,417
Allocated to warrant liabilities		2,655,583
Total net proceeds	$	8,990,000

Closing costs included 1,066,667 warrants valued at $819,200 for placement agent fees. Based upon the estimated fair value of the stock and warrants in the units, the Company allocated $241,986 to financing expense and $577,214 as stock issuance costs.

On January 31, 2018, the Company entered into subscription agreements with certain investors who owned convertible promissory notes of the Company (the “Notes”) for the sale by the Company of 12,062,728 shares of common stock in a registered direct offering (the “January 31 Offering”). The investors in the January 31 Offering also received warrants to purchase 7,718,010 shares of common stock. The securities were sold at a combined purchase price of $0.50 per share of common stock and related warrants, for aggregate gross proceeds to the Company of approximately $6.0 million. The Notes matured on January 31, 2018, upon which date the Company became obligated to pay the principal amount of approximately $6.0 million on the Notes, plus accrued but unpaid interest of approximately $0.3 million, for aggregate payment obligations at maturity of approximately $6.3 million. The common stock and warrants were issued in full satisfaction of approximately $6.0 million of such payment obligations, with one holder of an aggregate principal amount and accrued unpaid interest of approximately $0.3 million electing to be repaid in cash instead of participating in the January 31, 2018 Offering. As a result, all of the proceeds from the January 31 Offering were used to satisfy the Company’s payment obligations pursuant to the Notes. The warrants will be exercisable for a period of five years commencing on their issuance date, at an exercise price of $0.75 per share of common stock, subject to certain ownership limitations and adjustments as provided under the terms of the warrants. The number of shares of common stock underlying the warrant issued to each investor was calculated as the difference between (x) the number of shares of common stock issued to each investor in the January 31, 2018 Offering in respect of the payment obligations relating solely to principal amounts on the Notes and (y) the number of shares of common stock underlying certain

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warrants originally issued to such investor in the original Notes offering. The effect was to bring each investor from 50% warrant coverage in the original offering of Notes, assuming conversion of the principal amount thereof at an original conversion price of $0.75 per share, to 100% warrant coverage after the January 31 Offering, assuming reinvestment of the principal amount on the Notes at $0.50 per share. The warrants in the January 31 Offering, had an original exercise price of $1.00 per share, therefore, due to the reduction of exercise price to $0.75 per share, the Company recognized a non-cash inducement interest expense of approximately $2.4 million due to the modification. In connection with this January 31 Offering, the Company paid a commission of $164,425 to the placement agent.

On June 15, 2018, the Company entered into subscription agreements with certain investors for the sale of 1,970,000 shares of common stock at a purchase price of $0.50 per shares in a registered direct offering, pursuant to a registration statement on Form S-3. The investors in the offering also received warrants to purchase 1,970,000 shares of common stock with an exercise price of $0.75 per share and a five-year term. The Company received net proceeds from the offering of approximately $0.9 million. In addition, the placement agent received warrants covering 133,600 shares of common stock (or 8% of total shares sold to investors) with a per share exercise price of $0.55, a five-year term and include a cashless exercise provision.

Note 12 – Employee Benefit Plan

The Company has an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code (the “Code”), covering all of its employees. The Company makes a qualified non-elective contribution of 3%, which consequently vests immediately. In addition, participants in the Plan may contribute a percentage of their compensation, but not in excess of the maximum allowed under the Code. During the three months ended August 31, 2018 and 2017, the Company incurred an expense of approximately $15,800 and $10,800, respectively, for qualified non-elective contributions.

Note 13 – Related Party Transactions

On July 26, 2017, Jordan G. Naydenov, a director with the Company, participated in the private placement of convertible promissory notes, as fully described in Note 4. Mr. Naydenov purchased a convertible promissory note, bearing interest of 7%, for $100,000 in aggregate principal and received a warrant covering 66,666 shares of common stock at an exercise price of $1.00. The terms and conditions of Mr. Naydenov’s investment were identical to those offered to all other investors in the offering and his investment was approved by the Audit Committee of the Board of Directors.

On July 28, 2017, Alpha Venture Capital Partners, LP (“AVCP”), participated in the private placement of convertible promissory notes, as fully described in Note 4. Carl C. Dockery, the principal of AVCP, is a director of the Company. AVCP purchased a convertible promissory note, bearing interest of 7%, for $50,000 in aggregate principal and received a warrant covering 33,333 shares of common stock at an exercise price of $1.00. The terms and conditions of the AVCP investment were identical to those offered to all other investors in the offering and his investment was approved by the Audit Committee of the Board of Directors.

On November 8, 2017, in connection with a private equity offering, a limited liability company in which Anthony D. Caracciolo, Executive Chairman of the Company, holds a partial ownership interest purchased $100,000 of common stock and warrants on terms identical to those applicable to the other investors in the private equity offering.

On January 31, 2018 each of Mr. Caracciolo, Mr. Naydenov and AVCP participated with other investors in the offering of common stock and warrants in satisfaction of the payment obligations relating to the convertible promissory notes, as fully described in Note 11 above.

The Audit Committee of the Board of Directors, comprised of independent directors, reviews and approves all related party transactions. The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.

On July 12, 2018, the Company announced certain leadership changes in connection with the strategic expansion and entry into certain cancer and immunologic indications. In connection with such leadership changes and effective July 11, 2018 Denis R. Burger, Ph.D. and A. Bruce Montgomery, M.D. resigned as members of the Company’s board of directors and Dr. Burger has also resigned as Chief Science Officer of the Company, which is not an executive officer position. In connection with the resignations of Dr. Burger and Dr. Montgomery, on July 10, 2018, the Company’s board of directors determined to accelerate all outstanding unvested stock options held by Dr. Burger and Dr. Montgomery, to vest immediately upon the effectiveness of their resignations and to retain the stock options’ exercise period through their respective expiration date. Stock options covering 500,000 shares held by Dr. Burger and stock options covering 100,000 shares held by Dr. Montgomery were subject to acceleration. The terms of the stock options remained otherwise unchanged.

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Note 14 – Subsequent Events

Between September 4, 2018 and October 4, 2018, the Company conducted a private equity offering, in which accredited investors purchased common stock at $0.50 per share with warrant coverage ratio of 50%. Pursuant to the offering, the Company sold a total of 22,661,570 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $11.3 million and issued to the investors five-year warrants covering 11,330,785 shares of common stock with an exercise price of $0.75 per share. In connection with the equity offering, the Company paid an aggregate cash fee of approximately $1.3 million to the placement agent and issued warrants covering an aggregate of 2,174,157 shares of common stock to the placement agent as additional compensation. The placement agent warrants have a five-year term and an exercise price of $0.50 per share. The Company also paid a one-time non-accountable expense fee of $25,000 to the placement agent for its services in connection with the offering.

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

This filing, contains forward-looking statements. The words “anticipate,” “believe,” “expect,” “intend,” “predict,” “plan,” “seek,” “estimate,” “project,” “continue,” “could,” “may,” and similar terms and expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures and future net cash flows. Such statements reflect current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, regulatory initiatives and compliance with governmental regulations, the sufficiency of the Company’s cash position and the ability to raise additional capital, the results of clinical trials for the Company’s drug candidates, and various other matters, many of which are beyond the Company’s control. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated, or otherwise indicated. Consequently, all of the forward-looking statements made in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the other sections of this Quarterly Report, including the Company’s financial statements and related notes appearing elsewhere herein. To the extent not otherwise defined herein, capitalized terms shall have the same meanings as in such financial statements and related notes. This discussion and analysis contains forward-looking statements including information about possible or assumed results of the Company’s financial condition, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated and set forth in such forward-looking statements.

Results of Operations

Clinical Trials Update

Phase 2b Extension Study for HIV, as Monotherapy

Currently, there are a total of six patients in this ongoing extension study and each has surpassed almost four years of suppressed viral load with PRO 140 as a single agent therapy. These patients are continuing in extension studies of this monotherapy trial by self-administering, subcutaneous weekly injection of PRO 140.

Phase 2b/3 Pivotal Trial for HIV, as Combination Therapy

This is a pivotal 25-week trial for PRO 140 as a combination therapy to a highly active antiretroviral therapy (“HAART”) drug regimens. This trial was a double blind, placebo controlled trial. In late February 2018, the Company reported that it had enrolled 52 patients and the trial’s primary endpoint was achieved with a p-value of 0.0032. The primary endpoint for efficacy was defined as 0.5log reduction in viral load after one week of therapy with PRO 140 in combination with the patient’s failing HAART regimen. Following the achievement of primary endpoint, the trial is continuing to enroll under an open label for safety analysis. Nearly all patients have successfully completed this trial and most of the patients have transitioned into a FDA-cleared rollover study, in order to provide continued access to PRO 140 therapy, at the request of their treating physician. Management projects that the total costs of this trial, including the open label portion, may range from $12 million to $13 million. The successful results of this trial serves as the basis for our BLA filing, which is expected to be completed in the first half of 2019.

Rollover Study for HIV, as Combination Therapy

This study is designed for patients who successfully complete the Phase 2b/3 Combination Therapy trial and for whom the treating physicians request a continuation of PRO 140 therapy in order to maintain suppressed viral load. If this study enrolls 50 patients from the Phase 2b/3 trial and all patients remain in the rollover study for one year, management estimates the cost of this study to be approximately $4 million to $5 million.

Phase 2b/3 Investigative Trial for HIV, as Long-term Monotherapy

This is a trial of over 300 patients that assesses using PRO 140 subcutaneously as a long-acting single-agent maintenance therapy for 48 weeks in patients with suppressed viral load with CCR5-tropic HIV-1 infection. The primary endpoint is the proportion of participants with a suppressed viral load to those who experienced virologic failure. The secondary endpoint is length of time to virologic failure. Enrollment of the first several patients was announced in December 2016. We are currently evaluating two higher-dose arms, one with 525 mg dose (a 50% increase from the original dosage of 350 mg), as well as a 700 mg dose. We believe that a higher dose will result in a higher response rate, which is supported by preliminary data. We expect to increase the number of sites in order to accelerate enrollment upon the availability of additional capital. The estimates for the total cost of this trial currently range

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from $22 million to $25 million, but such estimates will be updated upon the determination of the increased number of sites, the rate of patient enrollment and the overall duration of the trial, all of which could cause the total trial costs to vary. We expect enrollment to be completed in 2018, subject to the foregoing variables. Patients who are completing this trial are transitioning to a FDA-cleared rollover study, as requested by the treating physicians to enable the patients to have continued access to PRO 140 as a single-agent maintenance therapy.

Phase 2 Trial for Graft-versus-Host Disease

This Phase 2 multi-center100-day study with 60 patients is designed to evaluate the feasibility of the use of PRO 140 as an add-on therapy to standard GvHD prophylaxis treatment for prevention of acute GvHD in adult patients with acute myeloid leukemia (“AML”) or myelodysplastic syndrome (“MDS”) undergoing allogeneic hematopoietic stem cell transplantation (“HST”). Enrollment of the first patient was announced in May of 2017. On October 5, 2017, the Company announced that the FDA had granted orphan drug designation to PRO 140 for the prevention of GvHD. In March 2018, we announced that the Independent Data Monitoring Committee (“IDMC”) for PRO 140 Phase 2 trial in GvHD had completed a planned interim analysis of trial data on the first 10 patients enrolled. Following this review of data from the first 10 patients in the Phase 2 trial, the Company filed amendments to the protocol with the FDA. The amendments included switching the pre-treatment conditioning regimen from aggressive myeloablative (“MA”) conditioning to a reduced intensity conditioning (“RIC”), and switching from a blinded one-for-one randomized placebo-controlled design to an open-label design under which all enrollees receive PRO 140. The amendments also provide for a 100% increase in the dose of PRO 140 (to 700 mg) to more closely mimic preclinical dosing. The next review of data by the IDMC will occur following enrollment of 10 patients under the amended protocol after each patient has been dosed for 30 days. Management estimates the cost of this trial to be approximately $3.5 to $4 million.

Cancer and Immunological Applications for PRO 140

We are continuing to explore opportunities for clinical applications for PRO 140 involving the CCR5 receptor, other than HIV-related treatments, such as inflammatory conditions, autoimmune diseases and cancer.

The target of PRO 140 is the important immunologic receptor CCR5. The CCR5 receptor is more than the pathway to HIV replication; it is also a crucial component in inflammatory responses. This opens the potential for multiple pipeline opportunities for PRO 140.

The CCR5 receptor is a protein located on the surface of white blood cells that serves as a receptor for chemical attractants called chemokines. Chemokines are the key orchestrators of leukocyte trafficking by attracting immune cells to the sites of inflammation.

At the site of an inflammatory reaction, chemokines are released. These chemokines are specific for CCR5 and cause the migration of T-cells to these sites promoting further inflammation. The mechanism of action of PRO 140 has the potential to block the movement of T-cells to inflammatory sites, which could be instrumental in diminishing or eliminating inflammatory responses. CCR5 is also expressed on certain cancers. Some disease processes that could benefit from CCR5 blockade include many types of common cancers, graft-vs-host disease (a reaction occurring in some patients after bone marrow transplantation), autoimmunity and chronic inflammation, such as rheumatoid arthritis and psoriasis. Also recent published data by Dr. Richard Pestell, the Company’s Interim Chief Medical Officer, has shown that the cancer cells within the tumor consist of two types of cells one, with CCR5 and others without them. The data published clearly indicated that the only cancer cells that can metastasize⁽¹⁾ are the cells with CCR5. Metastasis is the cause of death in the vast majority of cancer patients. Moreover, Dr. Pestell’s prior publication indicates that CCR5 antagonists can turn off the calcium signal, which in turn stops the migration of CCR5 positive cancer cells⁽²⁾. Turning off this calcium signal appears to block the guided migration a stop the metastasis⁽²⁾. PRO 140 has demonstrated (in an in-vitro study) that it also turns off this calcium signal, thereby stopping metastasis of these cells. Furthermore, these published studies showed current chemotherapies induced CCR5, and CCR5 antagonists enhance the effectiveness of current chemotherapies, potentially allowing a reduction in chemotherapy, which may provide an improved quality of life for patients⁽¹⁾.

Due to its mechanism of action, we believe PRO 140 has significant advantages in terms of safety and reduced side effects over other CCR5 antagonists. Prior studies have demonstrated that PRO 140 does not cause direct activation of T-cells. We have already reported encouraging human safety data for our clinical trials with PRO 140 in HIV-infected patients.

We have initiated our first clinical trial with PRO 140 in an immunological indication – a Phase 2 clinical trial with PRO 140 for GvHD in patients with AML or MDS who are undergoing bone marrow stem cell transplantation. GvHD represents an unmet medical need, with patients who contract GvHD during stem cell transplant having a significantly decreased 1-year survival rate with relapsed GvHD as the leading cause of death. Our pre-clinical study in GvHD has been published in the peer-reviewed journal Biology of Blood and Marrow Transplantation.

We are also expanding the clinical focus with PRO 140 to include the evaluation in certain cancer and immunological indications where CCR5 antagonism has shown initial promise. We expect to file an investigational new drug application (“IND”) with the FDA to begin a clinical trial with PRO 140 for metastatic triple-negative breast cancer before the end of 2018.

The Company will require a significant amount of additional capital to complete the foregoing clinical trials for HIV and make its BLA submission. See “Liquidity and Capital Resources” below.

ProstaGene Transaction

On August 27, 2018, the Company entered into a Transaction Agreement (the “Acquisition Agreement”) with ProstaGene, LLC, a Delaware limited liability company (“ProstaGene”), and Dr. Richard G. Pestell, M.D., Ph.D (“Dr. Pestell”), pursuant to which the Company

⁽¹⁾  Jiao X, Velasco-Velázquez MA, Wang M, Li Z, Rui H, Peck AR, Korkola JE, Chen X, Xu S, DuHadaway JB, Guerrero-Rodriguez S, Addya S, Sicoli D, Mu Z, Zhang G, Stucky A, Zhang X, Cristofanilli M, Fatatis A, Gray JW, Zhong JF, Prendergast GC, Pestell RG, CCR5 Governs DNA Damage Repair and Breast Cancer Stem Cell Expansion. Cancer Res. 2018 Apr 1;78(7):1657-1671. doi: 10.1158/0008-5472.CAN-17-0915. Epub 2018 Jan 22.PMID: 29358169

⁽²⁾  Velasco-Velázquez M¹, Jiao X, De La Fuente M, Pestell TG, Ertel A, Lisanti MP, Pestell RG. CCR5 antagonist blocks metastasis of basal breast cancer cells. Cancer Res. 2012 Aug 1;72(15):3839-50. doi: 10.1158/0008-5472.CAN-11-3917. Epub 2012 May 25.

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agreed, on the terms and subject to the conditions stated therein, to purchase from ProstaGene substantially all of the assets and rights, and to assume certain obligations and liabilities, associated with ProstaGene’s business (the “ProstaGene Assets,” and such transaction, the “ProstaGene Transaction”).

The Company, Point NewCo, Inc., a wholly owned subsidiary of the Company (“NewCo”), Point Merger Sub, Inc., a wholly owned subsidiary of NewCo (“MergerCo”), ProstaGene, and Dr. Pestell are parties to the Acquisition Agreement. Pursuant to the Acquisition Agreement, in order to achieve certain tax efficiencies relating to the ProstaGene Transaction, the Company will reorganize into a holding company by merging MergerCo into the Company (the “Merger”), with the Company surviving as a wholly owned subsidiary of NewCo (the “Surviving Corporation”). In the Merger, pursuant to Section 251(g) of the Delaware General Corporation Law, all of the outstanding capital stock of the Company (including any convertible debt, warrants, options, or other rights to acquire the same) will be converted automatically, on a share-for-share basis, into equivalent capital stock of NewCo (and rights to acquire the same). NewCo will become the successor to the Company for all purposes, including under applicable securities laws. Stockholder approval of the Merger is not required.

As consideration for the ProstaGene Assets, NewCo will issue to Sellers either (collectively, the “Stock Payment Shares”) (i) an aggregate of 27,000,000 shares of NewCo common stock, par value $0.001 per share (the “NewCo Common Stock”) or (ii) an aggregate of 270,000 shares of NewCo Series C preferred stock, par value $0.001 per share (“NewCo Series C Preferred Stock”), which will automatically convert into an aggregate of 27,000,000 shares of NewCo Common Stock (the “Conversion Shares”) upon the stockholder approval described below. Whether NewCo Common Stock or NewCo Series C Preferred Stock is issued upon closing depends on whether the stockholders of the Company have previously approved an amendment to the Company’s Certificate of Incorporation to increase sufficiently the number of authorized shares of common stock, as specified in the Acquisition Agreement. If no such increase is obtained, the Company will issue to Sellers shares of NewCo Series C Preferred Stock, which will be redeemable after June 30, 2019 for cash, at a price per share equal to the closing price of the Company’s common stock one trading day before the closing date of the ProstaGene Transaction.

In connection with the ProstaGene Transaction, Dr. Pestell has agreed to enter into an employment agreement upon the closing date of the ProstaGene Transaction (the “Employment Agreement”) appointing Dr. Pestell as Chief Medical Officer. The Employment Agreement provides for a three year term of employment, unless terminated by either party pursuant to the terms of the Employment Agreement. The Employment Agreement also provides for, among other things, (i) an annual base salary of $400,000, (ii) a target annual bonus equal to 50% of Dr. Pestell’s base salary, (iii) an annual supplemental bonus in an amount to be determined at the sole discretion of the board of directors of the Company, and (iv) other customary benefits described in the form of employment agreement. The Company will also issue Dr. Pestell a stock option award under its equity incentive plan, covering 350,000 shares of Company Common Stock or NewCo Common Stock, as the case may be, vesting in three equal annual installments over a three-year period from the grant date.

The Sellers have agreed to a noncompetition covenant commencing on the closing date of the ProstaGene Transaction and ending on the later of (i) five (5) years from the closing date, and (ii) one (1) year following the termination of Dr. Pestell’s employment for any reason. Further, Dr. Pestell has agreed to certain procedures providing the Company a “right of first look” to license or acquire any intellectual property created by Dr. Pestell as a principal investigator for certain outside academic institutions, as well as certain procedures for managing potential conflicts of interest in respect of any such outside research activities.

The Acquisition Agreement includes certain indemnification rights for NewCo and the Surviving Corporation (and certain of their related parties and affiliates) by the Sellers and for ProstaGene (and certain of its related parties and affiliates) by NewCo and the Surviving Corporation. Upon the closing date of the ProstaGene Transaction, Stock Payment Shares equivalent to an aggregate of 5,400,000 shares of NewCo Common Stock (the “Indemnification Shares”) will be withheld from the Sellers and will serve as the source of recovery for the Company against any indemnification claims against the Sellers. To the extent not necessary to satisfy any indemnification claims, Indemnification Shares will be released to the Sellers in three equal six-month installments over an eighteen-month period commencing on the closing date of the ProstaGene Transaction.

Pursuant to the Acquisition Agreement, Stock Payment Shares equivalent to 8,342,000 shares of NewCo Common Stock being paid to Dr. Pestell (the “Restricted Shares”), will be subject to a Stock Restriction Agreement (the “Stock Restriction Agreement”) restricting transfer of such Restricted Shares for a three-year period from the closing date of the ProstaGene Transaction. In the event Dr. Pestell’s employment with the Company is terminated other than by the Company without Cause (as defined in the Employment Agreement) or by Dr. Pestell for Good Reason (as defined in the Employment Agreement), the Company will have an option, to repurchase such Restricted Shares from Dr. Pestell at a purchase price of $0.001 per share. The Restricted Shares will vest and be released from the Stock Restriction Agreement in three equal annual installments commencing one year after the closing date of the ProstaGene Transaction.

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The Acquisition Agreement may be terminated (i) by mutual written consent of the Company and the Sellers, (ii) by either the Company or the Sellers if the other party is in breach of the Acquisition Agreement, or (iii) in any event, on December 31, 2018 if the Acquisition Agreement has not been consummated, unless such date is extended by mutual written consent of the Company and the Sellers. Pursuant to the Acquisition Agreement, Sellers are not obligated to close the ProstaGene Transaction if a material adverse change (as defined in the Acquisition Agreement) in the business of the Company has occurred prior to the closing date of the ProstaGene Transaction.

Upon the signing of the Acquisition Agreement, the board of directors of the Company appointed Dr. Pestell as Interim Chief Medical Officer, pursuant to a consulting arrangement under which Dr. Pestell will receive a prorated salary of $400,000 through his appointment as Chief Medical Officer upon the closing of the ProstaGene Transaction.

Results of Operations for the three months ended August 31, 2018 and 2017 are as follows:

For the three months ended August 31, 2018 and August 31, 2017, the Company had no activities that produced revenues from operations.

For the three months ended August 31, 2018, the Company incurred a net loss of approximately $14.4 million, as compared to a net loss of approximately $11.6 million for the similar period in 2017. The increase in net loss of approximately $2.8 million related primarily to increases in research and development expenses of approximately $3.3 million, increases in general and administrative expenses of approximately $0.4 million, and non-cash expense from change in derivative liability of approximately $0.4 million, offset by a reduction in interest expenses of approximately $1.3 million. The loss per share for the quarter ended August 31, 2018 was $(0.07) compared to $(0.08) in the same period a year ago.

For the three months ended August 31, 2018 and August 31, 2017, operating expenses totaled approximately $13.5 million and $9.8 million, respectively, consisting of research and development, general and administrative expenses, and amortization and depreciation. The increase in operating expenses of approximately $3.7 million, or 38%, was attributable to increases in research and development expenses of approximately $3.3 million and an increase in general and administrative expenses of approximately $0.4 million.

General and administrative expenses, which totaled approximately $2.0 million for the three months ended August 31, 2018, were comprised of salaries and benefits, non-cash stock-based compensation expense, professional fees, insurance and various other expenses. The increase in general and administrative expenses of approximately $0.4 million, or 27%, for the three months ended August 31, 2018 over the comparable period a year ago was due to increased consulting and professional services and insurance.

Research and development (“R&D”) expenses, which totaled approximately $11.4 million for the three months ended August 31, 2018, increased approximately $3.3 million, or 40%, over the comparable 2017 quarter principally due to higher clinical trial and manufacturing-related expenses. For the quarter ended August 31, 2018, R&D expenditures continue to be primarily devoted to: (1) one pivotal Phase 2b/3 combination therapy trial and its roll-over trial, one investigative Phase 2b/3 monotherapy trial and its roll-over trial, one Phase 2 GvHD trial, (2) increased CMC (chemistry, manufacturing and controls) activities to address regulatory compliance requirements of a future BLA filing and to advance the preparations for manufacturing new PRO 140 and (3) preparation of the non-clinical section necessary to complete the BLA filing with the FDA.

We expect R&D expense to continue to increase in future periods, as the activity within the Company’s clinical trials expands and the biologics manufacturing processes and related regulatory compliance activities increase, all of which support the Company’s objectives to advance the preparation for an anticipated BLA filing in the first quarter of 2019.

For the three months ended August 31, 2018, the Company recognized a non-cash charge associated with the increase in fair value of a derivative liability of approximately $0.7 million, as compared to a non-cash charge of approximately $0.4 in the similar 2017 quarter. The warrants that contain a provision which gives rise to a derivative liability originated in September 2016. For each reporting period, we determine the fair value of the derivative liability and record a corresponding non-cash benefit or non-cash charge, as a consequence of a decrease or increase, respectively, in the calculated derivative liability.

For the three months ended August 31, 2018, the Company incurred approximately $0.2 million in interest expense, as compared to the approximate $1.5 million for the same quarter in 2017. The components of interest expense included amortization of discount on convertible notes, amortization of debt issuance costs and interest related to convertible promissory notes.

The future trends in all expenses will be driven, in large part, by the future outcomes of clinical trials and the correlative effect on research and development expenses, as well as general and administrative expenses, in addition to manufacturing of new commercial PRO 140, along with the necessary regulatory processes to confirm its qualification for future sale, if approved. The

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Company requires a significant amount of additional capital and its ability to continue to fund operations will continue to depend on its ability to raise such capital. See in particular, “Liquidity and Capital Resources” below and Item 1A Risk Factors in the Annual Report on Form 10-K for the year ended May 31, 2018.

Liquidity and Capital Resources

The Company’s cash position at August 31, 2018 increased approximately $3.5 million to approximately $4.7 million, as compared to a balance of approximately $1.2 million as of May 31, 2018. The net increase in cash for the three months ended August 31, 2018 was attributable to net cash provided by financing activities of approximately $12.5 million, offset in part by cash used in operating activities of approximately $9.0 million.

As of August 31, 2018, the Company had negative working capital of approximately $16.6 million compared to negative working capital of approximately $13.4 million at May 31, 2018, an increase in negative working capital of approximately $3.2 million attributable primarily to cash used in operations.

Cash Flows

Net cash used in operating activities totaled approximately $9.0 million during the three months ended August 31, 2018, which reflects an increase of approximately $2.0 million of net cash used in operating activities over the three months ended August 31, 2017. The increase in net cash used in operating activities was due to an increase in net loss of approximately $2.8 million, which was mitigated in part by the effect of a comparative net change in working capital components totaling approximately $1.7 million, offset by a decrease in non-cash expense items of approximately $0.9 million for the three months ended August 31, 2018 as compared to the similar period in 2017.

Net cash used in investing activities was immaterial during the three months ended August 31, 2018, and there was no activity during the three months ended August 31, 2017.

Net cash provided by financing activities of approximately $12.5 million during the three months ended August 31, 2018, increased approximately $6.3 million over the $6.2 million of net cash provided by financing activities during the three months ended August 31, 2017. The increase in net cash provided from financing activities was attributable to net proceeds from the sale of common stock and warrants of approximately $7.5 million, an increase of approximately $0.5 million in net proceeds from the sale of convertible notes, offset by a reduction of approximately $1.7 million in proceeds from the exercise of warrants during the three months ended August 31, 2018.

Capital Requirements

We have not generated revenue to date, and will not generate product revenue in the foreseeable future. We expect that we will continue to incur significant operating losses as expenses continue to increase as we proceed with clinical trials with respect to PRO 140 and continues to advance PRO 140 through the product development and regulatory process. The future trends of all expenses will be driven, in large part, by the future outcomes of the clinical trials and their correlative effect on general and administrative expenses, in addition to the manufacturing of new commercial PRO 140, along with the increasing activities to prepare and file a BLA for PRO 140 as a combination therapy. We will require a significant amount of additional capital in the future for our clinical trials and to advance our manufacturing activities of PRO 140 necessary for completion of our BLA filing.

In connection with this undertaking, we have entered into an arrangement with a third party contract manufacturing organization (the “CMO”) to provide process transfer, validation and manufacturing services for PRO 140. Management believes the CMO will best serve our strategic objectives for the anticipated BLA filing and, if approved, the long-term commercial manufacturing capabilities for PRO 140. Management will continue to assess manufacturing capacity requirements as new market information becomes available. In the event that we terminate the agreement with our CMO, we may incur certain financial penalties which would become payable to the CMO. Conditioned on the timing of termination, the financial penalties may range up to an approximate high of $1.7 million. These CMO undertakings are anticipated to require approximately $12 million of additional capital over the next several fiscal quarters, including the estimated costs to fill, label, and package product into the final commercial package for commercial sale.

We have entered into project work orders for each of our clinical trials with our CRO and related laboratory vendors. Under the terms of these agreements, we have prepaid certain execution fees for direct services costs. In connection with our clinical trials, we have entered into separate project work orders for each trial with our CRO. In the event that we terminate any trial, we may incur certain financial penalties which would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range from an approximate low of $0.1 million to an approximate high of $1.4 million. In the remote circumstance that we terminate all clinical trials, the collective financial penalties may range from an approximate low of $0.5 million to an approximate high of $2.3 million.

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Under the Progenics Purchase Agreement, we are required to pay Progenics the following ongoing milestone payments and royalties: (i) $5.0 million at the time of the first U.S. new drug application approval by the FDA or other non-U.S. approval for the sale of PRO 140; and (ii) royalty payments of up to five percent (5%) on net sales during the period beginning on the date of the first commercial sale of PRO 140 until the later of (a) the expiration of the last to expire patent included in the acquired assets, and (b) 10 years, in each case determined on a country-by country basis. In addition, under a Development and License Agreement, dated April 30, 1999 (the “PDL License”), between Protein Design Labs (now AbbVie Inc.) and Progenics, which was previously assigned to us, we are required to pay AbbVie Inc. additional milestone payments and royalties as follows: (i) $0.5 million upon filing a BLA with the FDA or non-U.S. equivalent regulatory body; (ii) $0.5 million upon FDA approval or approval by another non-U.S. equivalent regulatory body; and (iii) royalties of up to 3.5% of net sales for the longer of 10 years and the date of expiration of the last to expire licensed patent. Additionally, the PDL License provides for an annual maintenance fee of $150,000 until royalties paid exceed that amount.

As of the date of this filing, it is management’s conclusion that the probability of achieving the subsequent future clinical development and regulatory milestones is not reasonably determinable, thus the future milestone payments payable to Progenics and its sub-licensors are deemed contingent consideration and, therefore, are not currently accruable.

Going Concern

As reported in the accompanying financial statements, for the three months ended August 31, 2018 and August 31, 2017, we incurred net losses of approximately $14.4 million and $11.6 million, respectively. We have no activities that produced revenue in the periods presented and has sustained operating losses since inception.

We currently require and will continue to require a significant amount of additional capital to fund operations, pay our accounts payables, and our ability to continue as a going concern is dependent upon our ability to raise such additional capital, commercialize our product and achieve profitability. If we are not able to raise such additional capital on a timely basis or on favorable terms, we may need to scale back our operations or slow down or cease certain clinical trials or CMO activities, which could materially delay the timeframe to BLA submission. In extreme cases, we could be forced to file for bankruptcy protection, discontinue our operations or liquidate our assets.

Since inception, we have financed our activities principally from the sale of public and private equity securities and proceeds from convertible notes payable and related party notes payable. We intend to finance our future operating activities and our working capital needs largely from the sale of equity and debt securities, combined with additional funding from other traditional financing sources. As of the date of this filing, we have approximately 19 million shares of common stock authorized and available for issuance under our certificate of incorporation, as amended, and approximately $166 million available for future registered offerings of securities under our universal shelf registration statement on Form S-3, which was declared effective on March 9, 2018 (assuming the full exercise of outstanding warrants, at the currently applicable exercise prices, that were previously issued in registered transactions thereunder).

The sale of equity and convertible debt securities to raise additional capital may result in dilution to stockholders and those securities may have rights senior to those of common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these activities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangements could require us to relinquish valuable rights. We may require additional capital beyond currently anticipated needs. Additional capital, if available, may not be available on reasonable or non-dilutive terms. Please refer to the matters discussed under the heading “Risk Factors” above.

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. We have incurred losses for all periods presented and have a substantial accumulated deficit. As of August 31, 2018, 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 liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain additional operating capital, complete development of our product candidates, obtain FDA approval, outsource manufacturing of our products, and ultimately to attain profitability. We intend to seek additional funding through equity or debt offerings, licensing agreements or strategic alliances to implement our business plan. There are no assurances, however, that we will be successful in these endeavors.

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Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company’s exposure to market risk is limited to changes in the market price of its common stock and to a lesser extent foreign currency exchange risk.

Common Stock Price Risk

We do not use derivative instruments to hedge risks relating to its ongoing business operations or for speculative purposes. However, as described in greater detail in Note 5 - Derivative Liability to the accompanying financial statements, we are required to account for certain outstanding series of warrants as derivative instruments.

All derivative instruments are required to be recorded on the balance sheet at their fair values. Each quarter, management determines the fair value of the warrants accounted for as derivative instruments using a binomial lattice valuation mode. The key inputs in determining fair value of such derivative liabilities include our stock price and stock price volatility, and the then applicable risk free interest rate. Changes in these inputs affect the valuation of such derivatives and result in non-cash gain or loss each quarterly period. For example, a 10% increase or decrease in stock price would increase or decrease the value of the warrant derivative liability by approximately $0.4 million, resulting in a non-cash loss (for an increase) or gain (for a decrease) of the same amount. Similarly, a 10% increase or decrease in stock price volatility would increase or decrease the value of the warrant derivative liability by approximately $0.2 million, resulting in a non-cash loss (for an increase) or gain (for a decrease) of the same amount. Finally, a 10% increase or decrease in the risk free interest rate would not have a material effect on the value of the warrant derivative liability. Management’s discretion is required to estimate certain other factors described in Note 5 to the accompanying financial statements, which also contribute to the fair value estimates of such derivative liability.

During the three months ended August 31, 2018, we recorded a non-cash charge, or unrealized non-cash loss, from an increase in the fair value of the derivative liability associated with certain warrants of approximately $0.7 million, due primarily to an increase in our common stock price and a decrease in the calculated stock price volatility.

Foreign Currency Exchange Risk

We may face certain exposure to fluctuation in foreign currency exchange rates, due primarily to a license agreement with a third-party licensor under which we are required to pay annual license fees and/or royalties denominated in British pounds sterling. For more information about this license agreement, see Note 8 - License Agreements to the accompanying financial statements. Nevertheless, fluctuations in foreign exchange rates have not previously had, nor does management believe that they will have, any material impact on earnings, cash flows or other financial results of the Company.

Interest Rate Risk

As of August 31, 2018, we have only one promissory note, which has a fixed interest rate, thus we have no exposure to interest rate risk in the event of a fluctuation in interest rates.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer of the Company, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of August 31, 2018. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of August 31, 2018.

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Internal Control Over Financial Reporting

Changes in Control Over Financial Reporting

No changes occurred during the quarter ended August 31, 2018, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

The risks enumerated below are not the only risks we face, and the listed risk factors are not intended to be an all-inclusive discussion of all of the potential risks relating to our business. Any of the risk factors described below could significantly and adversely affect our business, prospects, financial condition and results of operations. Additional risks and uncertainties not currently known or that are currently considered to be immaterial may also materially and adversely affect our business.

Risks Related to Our Business

If the Company is unable to complete the ProstaGene Transaction and retain Dr. Pestell as Chief Medical Officer, the Company’s ability to explore certain cancer indications for PRO 140 could be impaired, and the Company could find it more difficult to continue raising the capital necessary to fund its ongoing business operations.

In the event the ProstaGene Transaction is not consummated, Dr. Pestell may not be retained as the Company’s Chief Medical Officer. The failure to retain Dr. Pestell could impair the Company’s ability to explore certain cancer indications for PRO 140. Moreover, Dr. Pestell has been an important figure in certain recent capital raising activities. The failure to retain Dr. Pestell could make it more difficult to continue raising the capital necessary to fund the Company’s ongoing business operations, including the preparation and filing of a BLA for the use of PRO 140 as a combination therapy to treat HIV. As a result of the foregoing, the failure to complete the ProstaGene Transaction could materially and adversely impact the Company and cause the market price of its common stock to decline.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

(a) Exhibits:

2.1	Acquisition Agreement by and among CytoDyn Inc., Point NewCo, Inc., Point Merger Sub, Inc., ProstaGene, LLC, and Dr.  Richard Pestell, dated August 27, 2018 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, as amended, filed August 28, 2018).
3.1	Certificate of Amendment to the Certificate of Incorporation of CytoDyn Inc. (incorporated by reference to Exhibit  3.1 to the Registrant’s Current Report on Form 8-K filed September 8, 2017).
4.1	Form of Warrant Agreement (September 2018 Offering) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed September 4, 2018).
10.1	Form of Subscription Agreement (September 2018 Offering) (incorporated by reference to Exhibit  10.1 to the Registrant’s Current Report on Form 8-K filed September 4, 2018).
10.2	Form of Indemnification Agreement.
10.3	Consulting Agreement between CytoDyn Inc. and Richard G. Pestell, M.D., Ph.D. dated as of August 27, 2018.
31.1*	Rule 13a-14(a) Certification by CEO of Registrant.
31.2 *	Rule 13a-14(a) Certification by CFO of the Registrant.
32.1 *	Certification of CEO of the Registrant pursuant to 18 U.S.C. Section 1350.
32.2 *	Certification of CFO of the Registrant pursuant to 18 U.S.C. Section 1350.
101.INS *	XBRL Instance Document.
101.SCH *	XBRL Taxonomy Extension Schema Document.
101.CAL *	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CYTODYN INC. (Registrant)
Dated: October 9, 2018	/s/ Nader Z. Pourhassan
	Nader Z. Pourhassan
	President and Chief Executive Officer
Dated: October 9, 2018	/s/ Michael D. Mulholland
	Michael D. Mulholland
	Chief Financial Officer, Treasurer and Corporate Secretary

EX-10.2

EXHIBIT 10.2

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into as of [         ], 2018 between CYTODYN INC., a Delaware corporation (the “Company”), and [         ] (“Indemnitee”).

WITNESSETH THAT:

WHEREAS, highly competent persons have become more reluctant to serve corporations as directors or officers unless they are provided with adequate protection through insurance or indemnification against risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, in order to attract and retain qualified individuals, the Company has obtained and will maintain, on an ongoing basis, at its sole expense, liability insurance to protect certain persons serving the Company from certain liabilities;

WHEREAS, the Board of Directors of the Company (the “Board”) recognizes the existence of a substantial increase in corporate litigation in general, subjecting officers and directors of corporations to expensive litigation risks, many of which are not covered by such liability insurance;

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining qualified individuals and the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, the Certificate of Incorporation of the Company (the “Charter”) requires indemnification of the officers and directors of the Company to the extent permitted by Delaware law, and the By-Laws of the Company (the “Bylaws”) require indemnification of the officers and directors of the Company subject to the limitations set forth therein. Officers and directors may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware, as may be amended from to time to time (“DGCL”). The Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining qualified persons is detrimental to the best interests of the Company’s stockholders and it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the Charter and Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

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WHEREAS, Indemnitee does not regard the protection available under the Charter, Bylaws and insurance as adequate in the present circumstances, and may not be willing to serve as a director or officer of the Company without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve or continue to serve on the condition that he is so indemnified.

NOW, THEREFORE, in consideration of the foregoing recitals, the Company and the Indemnitee hereby agree as follows:

1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by applicable law, including, without limitation, Section 145 of the DGCL. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

(a) Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid or required to be paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made.

(c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by applicable law, against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred

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by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

2. Contribution.

(a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(b) The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, or any other person, other than Indemnitee, who may be jointly liable with Indemnitee.

(c) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or required to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed by the Board as fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

3. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

4. Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within twenty (20) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free.

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5. Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 5(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in such case, at the discretion of the Board, by (1) a majority vote of a quorum of the Disinterested Directors or by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (2) by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (3) by the stockholders of the Company.

(c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 5(b) hereof, the Independent Counsel shall be selected by the Board and written notice shall be provided to Indemnitee of such selection. Indemnitee may, within 10 days after receipt of such written notice, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 11 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection by Indemnitee is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 5(a) hereof, each candidate for Independent Counsel selected by the Board shall have been objected to by Indemnitee, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 5(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 5(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 5(c), regardless of the manner in which such Independent Counsel was selected or appointed.

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(d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(e) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 5(e) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 5(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board, if appropriate, resolves to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

(f) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(g) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding.

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(h) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

6. Remedies of Indemnitee.

(a) In the event that (i) a determination is made pursuant to Section 5 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 4 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 5(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification pursuant to Section 3 is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 5 of this Agreement, Indemnitee shall be entitled to an adjudication in the Chancery Court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification or advancement of Expenses. Indemnitee shall commence such proceeding seeking adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 6(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication.

(b) In the event that a determination shall have been made pursuant to Section 5(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 6 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 5(b).

(c) If a determination shall have been made pursuant to Section 5(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 6, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) In the event that Indemnitee, pursuant to this Section 6, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all Expenses actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

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(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the relevant Proceeding.

7. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders, a resolution of the Board or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

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(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

8. Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 15(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law;

(c) for any violation of Section 9(b) or Rule 10b-5 of the Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law, whereby Indemnitee obtained any personal benefit from the transaction that is the subject of such violation;

(d) in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board of Directors of the Company authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; or

(e) if such indemnity is prohibited by Federal law or applicable public policy. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission, or to submit the question of indemnification to a court in certain circumstances, for a determination of the Company’s right under public policy to indemnify Indemnitee.

9. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is a director, officer, employee or agent of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be or may be subject to any Proceeding (or any proceeding commenced under Section 6 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

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10. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve or continue to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director or officer of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

11. Definitions. For purposes of this Agreement:

(a) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the request of the Company.

(b) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(c) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid or required to be paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(d) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

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(e) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, by reason of any action taken by him or of any inaction on his part while acting as a director, officer, employee, agent or fiduciary of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement. Without limitation of the foregoing, it is understood and agreed that a “Proceeding” shall specifically include, without limitation, any Proceeding arising out of the employment or engagement of any individual or entity by Employer and in which the complaining party alleges that such employment, engagement, or performance of services violates an agreement pursuant to which such individual or entity is bound.

12. Severability. The invalidity of unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

13. Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

14. Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

15. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent:

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(a) To Indemnitee at the address set forth below Indemnitee signature hereto.

(b) To the Company at:

CytoDyn Inc.

1111 Main Street, Suite 660

Vancouver, WA 98660

Attn: Corporate Secretary

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

17. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

18. Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably The Corporation Trust Company as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

SIGNATURE PAGE TO FOLLOW

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

COMPANY

CytoDyn Inc.

By:

Name:

Title:

INDEMNITEE

Name:

Address:

[Signature Page to Indemnification Agreement]

EX-10.3

EXHIBIT 10.3

CONSULTING AGREEMENT

This CONSULTING AGREEMENT (this “Agreement”) is made effective as of August 27, 2018 (the “Effective Date”) by and between:

  CYTODYN INC.   1111 Main Street, Suite 660   Vancouver, WA 98660   Hereinafter “Company” CONSULTANT NAME Richard G. Pestell, M.D., Ph.D. Hereinafter “Consultant”

WHEREAS, Company and Consultant desire to enter into this Agreement to provide the terms and conditions upon which Company may engage Consultant from time to time to provide services for individual projects.

NOW, THEREFORE, in consideration of the foregoing recital and the promises set forth herein the parties agree to the following:

1. Project Assignments.

1.1. The initial Project Assignment under this Agreement is attached hereto as Exhibit A.

1.2. If and when executed by both parties, Consultant will provide the services described on each Project Assignment (the “Services”) in substantially the form attached hereto as Exhibit A (each, a “Project Assignment”). Consultant will perform the Services in accordance with all applicable laws, rules, and regulations and in a professional manner consistent with industry standards.

1.3. Consultant may not subcontract or otherwise delegate its obligations under this Agreement without Company’s prior written consent. Before any Consultant employee or contractor performs services in connection with this Agreement, the employee or contractor and Consultant must have entered into a written agreement containing provisions substantially equivalent to Section 4 below.

1.4. Each party will discuss any changes in the scope of the Services that may affect the budget or timelines for a given Project Assignment with the other party. All changes to a Project Assignment, including, without limitation, any changes in scope, payments or timelines, will be set forth in an amended Project Assignment. No amended Project Assignment will be effective unless signed by an authorized Company representative and Consultant. Once such amended Project Assignment becomes effective, the Project Assignment will be changed to the extent set forth in the amended Project Assignment and will be amended to and governed in accordance with the terms of this Agreement.

2. Independent Contractor Relationship.

2.1. Consultant’s relationship with Company will be that of an independent contractor, and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Consultant is not the agent of Company and is not authorized to make any representation, contract, or commitment on behalf of Company. Because Consultant is an independent contractor, Company will not withhold or make payments for social security, make unemployment insurance or disability insurance contributions, or obtain worker’s

compensation insurance on Consultant’s behalf. Consultant agrees to accept exclusive liability for complying with all applicable state and federal laws governing independent contractors, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Consultant, its agents or employees under this Agreement. Consultant hereby agrees to reimburse, indemnify and defend Company against any and all such taxes or contributions, including without limitation penalties and interest.

3. Compensation.

3.1. Company shall pay Consultant for the Services in accordance with the applicable Project Assignment. The amounts set forth in the applicable Project Assignment represent Company’s maximum liability in connection with the Services covered by such Project Assignment.

3.2. If invoicing is required by a Project Assignment, Consultant shall invoice Company in accordance with the Project Assignment. Each invoice shall be itemized in sufficient detail to permit independent auditing and verification that the work covered by such invoice has been properly performed. Company shall pay each undisputed and valid invoice within thirty (30) days of receipt and verification. If any portion of an invoice is disputed, then Company shall pay the undisputed amounts as set forth in the preceding sentence and the parties shall use good faith efforts to reconcile the disputed amount as soon as practicable.

3.3. Company shall reimburse Consultant for travel and out-of-pocket expenses authorized by the Company and upon receipt by Company of copies of receipts or other appropriate evidence of such expenditures. Travel expenses incurred by Consultant must be consistent with Company’s travel policy. Company shall not reimburse Consultant for time spent traveling unless specifically authorized in advance.

3.4. All invoices for Services rendered and out-of-pocket expenses incurred must be submitted to Company within thirty (30) days from the date of completion of the Services. Company shall have no liability with respect to any amounts not invoiced within the preceding timeframe.

4. Intellectual Property / Confidentiality / Use of Materials

4.1. In order to facilitate Consultant’s services under this Agreement, it may be necessary for Company to disclose certain data and other proprietary information to Consultant, and/or to provide Consultant with compounds and/or samples (“Materials”) which, together with any information generated or discovered by Consultant in performing Services hereunder (collectively, “Proprietary Information”), Consultant agrees to retain in strict confidence and not to disclose or transfer to any party other than as authorized in writing by Company. Without limiting the generality of the foregoing, Consultant will maintain the Materials, including any analogs, derivatives and/or reproducible portions thereof, in confidence and will not transfer it to any third party, nor permit the Materials to be directly incorporated in any commercial product, without first securing Company’s written agreement. Consultant shall use the Proprietary Information only for performance of the Services in accordance with the terms of this Agreement. Consultant represents and warrants that all of its employees, Consultants and agents that will have access to any Proprietary Information are subject to written obligations of confidentiality and non-use with respect to such Proprietary Information at least as stringent as those set forth herein. Upon completion of Consultant’s services hereunder or written request by Company, Consultant will return all tangible forms of Proprietary Information in its possession to Company, unless directed otherwise by Company. These obligations of confidentiality and non-use will survive any expiration or termination of this Agreement for one (1) year, but will not apply to information: (a) that was previously known to Consultant as

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evidenced by Consultant’s written records, (b) that is lawfully obtained by Consultant from a source independent of Company, without breach of an obligation to Company, (c) that is now or becomes public knowledge other than by breach of this Agreement, or (d) that is received by Consultant from a third party who has the lawful right to disclose the Proprietary Information and who did not obtain the Proprietary Information in confidence either directly or indirectly from Company. Notwithstanding anything to the contrary in this Agreement, Consultant may disclose Proprietary Information if such disclosure is properly required by law, regulation, rule, act or order of any governmental authority or agency to be disclosed by Consultant; provided that Consultant will provide Company with reasonable advance notice of any such required disclosure and cooperate with Company in minimizing the extent of any such disclosure and in seeking such protective order(s) or the like as may be available to protect the confidentiality of the Proprietary Information; and provided further that Consultant will make such disclosure only to the extent such disclosure is legally required. Consultant further agrees that if any Proprietary Information becomes subject to the exceptions set forth in this Section, Consultant will not disclose that such Proprietary Information was received from and/or is used by Company unless such fact also becomes part of the public domain.

4.2. Nothing in this Agreement, or in the furnishing of Proprietary Information by Company, will be construed as giving Consultant any right, title, interest in or ownership of Proprietary Information.

4.3. Consultant understands and acknowledges the United States securities laws prohibit any person who has material non-public (“inside”) information about a company from purchasing or selling securities of such company, and prohibits communicating such information to any other person under circumstances where it is reasonably foreseeable that such person is likely to purchase or sell securities of such company. Consultant further acknowledges that Company’s Proprietary Information can constitute such material non-public information and agrees to comply with United States securities laws governing the use of such information.

4.4. Project results may not be published, presented, announced or referred to, in whole or in part, by Consultant without the prior express written consent of Company, which Company may withhold at its sole discretion.

4.5. Third-Party Information. Consultant understands that Company has received, and will in the future receive, from third parties confidential or proprietary information (“Third-Party Information”) subject to a duty on Company’s part to maintain the confidentiality of such information and use it only for certain limited purposes. Consultant agrees to hold Third-Party Information in confidence and not to disclose to anyone (other than Company personnel who need to know such information in connection with their work for Company) or to use, except in connection with Consultant’s work for Company, Third-Party Information unless expressly authorized in writing by an officer of Company.

4.6. Disclosure of Work Product. As used in this Agreement, the term “Work Product” means any copyrightable work of authorship. Consultant agrees to disclose promptly in writing to Company all Work Product that is solely or jointly authored by Consultant in the course of any work performed for Company (“Company Work Product”). Consultant agrees that any and all Company Work Product shall be the sole and exclusive property of Company.

4.7. Ownership of Work Product. Consultant hereby irrevocably assigns to Company all right, title and interest worldwide in and to the Company Work Product and all copyrights, trademarks, trade secrets and moral rights associated with such Company Work Product (the “Proprietary Rights”). Consultant retains no rights to use the Company Work Product and agrees not to challenge the validity of Company’s ownership in such Company Work Product. Consultant hereby grants to Company a non-exclusive, royalty-free, fully paid-up, irrevocable

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and world-wide right, with rights to sublicense through multiple tiers of sublicensees, to reproduce, make derivative works of, publicly perform, and publicly display in any form or medium (whether now known or later developed), distribute, make, use and sell any pre-existing intellectual property of Consultant incorporated or used in the Company Work Product in connection with its use of the Company Work Product.

4.8. Assistance. Consultant agrees to cooperate with Company or its designee(s), both during and after the term of this Agreement, to perfect and maintain Company’s copyright rights in and to the Company Work Product.

4.9. Consultant acknowledges that the promises or agreements contained in this Agreement relating to confidentiality and/or intellectual property are necessary and reasonable in order to protect Company and its business, and Consultant expressly agrees that monetary damages would be inadequate to compensate Company for the breach thereof, and that any such violation or threatened violation will cause irreparable injury to Company. Accordingly, in addition to any other remedies that may be available, in law, in equity or otherwise, Company shall be entitled to obtain injunctive relief against the breach or threatened breach by Consultant of such obligations, without the necessity of proving actual damages or posting bond.

5. Consultant Representations and Warranties; Compliance.

5.1. Consultant hereby represents and warrants that (a) the Company Work Product will be an original work of Consultant; and (b) Consultant has full right and power to enter into and perform this Agreement without the consent of any third party.

5.2. Conflicting Activities. During the term of this Agreement, Consultant and Company shall not take any action that would materially impair, interfere with, hinder or delay the ability of Company, its affiliates, Consultant and ProstaGene, LLC (“ProstaGene”) to consummate the transactions contemplated by the Transaction Agreement among the Company, ProstaGene and (for purposes of certain sections) Consultant, dated August 27, 2018 (the “Transaction Agreement”), including the execution of the Employment Agreements (as defined therein) in substantially the forms attached as exhibits thereto. Consultant and Company shall each comply with the procedures set forth in Section 3.2(e) of the form of Confidential Information, Inventions and Noncompetition Agreement attached as Exhibit E-2 to the Transaction Agreement, as though such Section 3.2(e) were a part of this Agreement, but solely to extent related to Company’s existing or demonstrably planned business (other than ProstaGene’s business).

5.3. Compliance with Laws. Consultant’s performance under this Agreement will conform with all applicable industry standards and supranational, national, and local laws, rules and regulations, including without limitation all applicable anti-kickback laws, and its services will be provided in a good and workmanlike manner.

6. Termination.

6.1 This Agreement shall terminate automatically upon the earlier of (a) the termination of the Transaction Agreement pursuant to its terms or (b) the appointment of Consultant as Chief Medical Officer, commensurate with the closing of the Transaction Agreement and the execution of the Employment Agreements in substantially the forms attached as exhibits thereto.

6.2 Either party may terminate this Agreement for the material breach of any material provision of this Agreement or the Transaction Agreement by the other party if the other party has not cured such breach within fifteen (15) days after written notice has been received from the non-breaching party.

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6.3 Expiration or termination of this Agreement or Project Assignment shall not relieve the parties of any obligation accruing prior to such expiration or termination, including the obligations of confidentiality and non-use in accordance with Section 4.1. In the event of termination by either party, Company shall pay Consultant in accordance with the applicable Project Assignment(s) for the applicable Services completed prior to the effective date of termination.

6.4 Upon termination of the Agreement or earlier as requested by Company, Consultant will deliver to Company any and all Materials, Work Product, Third Party Information or Proprietary Information of Company. Consultant further agrees that any property situated on Company’s premises and owned by Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.

7. General Provisions.

7.1 Governing Law. This Agreement will be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania.

7.2 Assignment. Neither party may assign or subcontract any of its obligations hereunder without the other party’s prior written consent. Any assignment not in accordance with this Section will be null and void.

7.3 Force Majeure. If the performance by Consultant or Company of any obligation under this Agreement, other than payment of money, is prevented or impaired by a Force Majeure, such party shall be excused from performance so long as such situation continues to prevent or impair performance, provided the party claiming such excuse has promptly notified the other party and uses its reasonable efforts to resume performance. “Force Majeure” shall mean an event beyond the reasonable control of a party, including ,without limitation, acts of public enemy, acts of any governmental authority, including governmental laws, ordinances, rules and regulations whether or not valid, acts of God, including fires, floods, epidemics and unusually severe weather, quarantine restrictions, strikes or lockouts, labor disputes or shortages, embargoes, war, riot, acts of terrorism, malicious acts of damages, accidents, interruptions or supplies, equipment malfunction, failure of electrical supply or other utilizes, or delays or failures in obtaining materials, supplies, equipment or transportation.

7.4 Waiver. No waiver by a party of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by a party of any right under this Agreement shall be construed as a waiver of any other right. A party shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

7.5 Severability. If any provision of this Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction: such provision shall be deemed amended to conform to applicable laws of such jurisdiction so as to be valid and enforceable, or, if it cannot be so amended without materially altering the intention of the parties, it shall be stricken; the validity, legality and enforceability of such provision shall not in any way be affected or impaired thereby in any other jurisdiction; and the remainder of this Agreement shall remain in full force and effect.

7.6 Survival. The terms and provisions of this Agreement which by their nature should survive expiration or termination of this Agreement shall survive any expiration or other termination of this Agreement.

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7.7 Injunctive Relief. The parties hereto agree that, with respect to the covenants included in Section 5.2 above, in addition to all other rights or remedies, each party shall be entitled to the remedy of specific performance mandating that the other party consummate such transactions. In an action for specific performance by any party against the other party, the other party shall not plead adequacy of damages at law.

7.8 Entire Agreement. This Agreement, including the exhibits hereto, contains the entire agreement between the parties with respect to its subject matter hereof and supersedes and/or merges all prior contracts, agreements, discussions and understandings relating to the same subject matter between the parties. No statement or inducements made by either party or an agent of either party which is not contained or referenced in this Agreement shall be valid or binding. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by an authorized representative of the party to be charged.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have entered into this CONSULTING AGREEMENT through their duly authorized representatives as of the Effective Date above.

CYTODYN INC.		RICHARD G. PESTELL, M.D., PH.D.
By: Name:	/s/ Nader Z. Pourhassan, Ph.D. Nader Z. Pourhassan, Ph.D.	/s/ Richard G. Pestell, M.D., Ph.D.
Title:	President and Chief Executive Officer

[Consulting Agreement]

EXHIBIT A

PROJECT ASSIGNMENT NO. 1

This Project Assignment, effective as of August 27, 2018, is issued under and governed by the terms and conditions of that certain Consulting Agreement by and between CytoDyn Inc. (“Company”) and Richard G. Pestell, M.D., Ph.D. (“Consultant”) effective as of August 27, 2018 (the “Agreement”). In the event that any item in this Project Assignment is inconsistent with the Agreement, the terms of this Project Assignment shall govern, but only with respect to the services set forth in this Project Assignment. Any capitalized terms used and not otherwise defined in this Project Assignment shall have the meaning ascribed to them in the Agreement.

1. Scope of Work.

Consultant will serve as CytoDyn’s Interim Chief Medical Officer. In such capacity, Consultant will (i) advise CytoDyn on all potential cancer indications for PRO 140, including any and all non-HIV indications for PRO 140 such as, but not limited to GvHD and MS, (ii) in Consultant’s discretion, initiate introductions of CytoDyn to pharmaceutical companies and other potential opportunities for strategic partnerships, (iii) participate with the CEO for in-person investor meetings or conference calls in connection with cultivating broader awareness of potential indications for PRO 140 and the assets that Company intends to acquire from ProstaGene and (iv) conduct such other activities as Consultant and Company may mutually agree from time to time until the termination of the Agreement.

2. Compensation.

$33,333.00 per month paid in advance on the first business day of each month or prorated if Effective Date is other than on the first business day of a calendar month.

3. Maximum payment:

Through the term of the Agreement, until such Agreement is terminated pursuant to Section 6 thereof.

4. Term.

Until terminated pursuant to Section 6 of the Agreement.

5. Deliverables.

N/A

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this PROJECT ASSIGNMENT NO. 1 by their duly authorized persons as of the effective date above.

CYTODYN INC.		RICHARD G. PESTELL, M.D., PH.D.
By: Name:	/s/ Nader Z. Pourhassan, Ph.D. Nader Z. Pourhassan, Ph.D.	/s/ Richard G. Pestell, M.D., Ph.D.
Title:	President and Chief Executive Officer

[Project Assignment No. 1 to Consulting Agreement]

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, Nader Z. Pourhassan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CytoDyn Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the registrant’s most-recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: October 9, 2018	/s/ Nader Z. Pourhassan
	Nader Z. Pourhassan
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Michael D. Mulholland, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CytoDyn Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the registrant’s most-recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: October 9, 2018	/s/ Michael D. Mulholland
	Michael D. Mulholland
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of CytoDyn Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended August 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Nader Z. Pourhassan, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 9, 2018	/s/ Nader Z. Pourhassan
	Nader Z. Pourhassan
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of CytoDyn Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended August 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Michael D. Mulholland, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 9, 2018	/s/ Michael D. Mulholland
	Michael D. Mulholland
	Chief Financial Officer

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Document and Entity Information - shares	3 Months Ended
	Aug. 31, 2018	Sep. 28, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Aug. 31, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Trading Symbol	CYDY
Entity Registrant Name	CYTODYN INC.
Entity Central Index Key	0001175680
Current Fiscal Year End Date	--05-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		255,762,949
Entity Emerging Growth Company	false
Entity Small Business	false

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Consolidated Balance Sheets	Aug. 31, 2018 USD ($)	May 31, 2018 USD ($)
Current assets:
Cash	$ 4,749,413	$ 1,231,445
Prepaid expenses	338,384	227,173
Prepaid service fees	2,451,983	1,862,009
Total current assets	7,539,780	3,320,627
Furniture and equipment, net	12,038	11,228
Intangibles, net	1,479,624	1,567,143
Total assets	9,031,442	4,898,998
Current liabilities:
Accounts payable	20,711,613	15,841,859
Accrued liabilities and compensation	633,746	757,778
Accrued license fees	233,800	133,600
Accrued interest payable	104,630
Convertible note payable, net	2,455,386
Total current liabilities	24,139,175	16,733,237
Long-term liabilities:
Convertible note payable, net	2,618,372
Derivative liability	2,071,199	1,323,732
Total long-term liabilities	4,689,571	1,323,732
Total liabilities	28,828,746	18,056,969
Commitments and Contingencies
Stockholders' (Deficit) equity
Series B convertible preferred stock, $0.001 par value; 400,000 shares authorized, 92,100 shares issued and outstanding at August 31, 2018 and May 31, 2018, respectively	92	92
Common stock, $0.001 par value; 450,000,000 and 375,000,000 shares authorized, 233,880,390 and 216,881,790 issued and 233,721,379 and 216,722,779 outstanding at August 31, 2018 and May 31, 2018, respectively	233,880	216,881
Additional paid-in capital	167,521,847	159,764,611
Accumulated (deficit)	(187,552,964)	(173,139,396)
Less: treasury stock, at par (159,011 shares at $0.001)	(159)	(159)
Total stockholders' (deficit)	(19,797,304)	(13,157,971)
Total liabilities and stockholders' (deficit) equity	$ 9,031,442	$ 4,898,998

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Aug. 31, 2018	May 31, 2018
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	450,000,000	375,000,000
Common stock, shares issued	233,880,390	216,881,790
Common stock, shares outstanding	233,721,379	216,722,779
Treasury stock, shares	159,011	159,011
Treasury Stock
Common stock, par value	$ 0.001	$ 0.001
Series B Convertible Preferred Stock
Series B Convertible preferred stock, par value	$ 0.001	$ 0.001
Series B Convertible preferred stock, shares authorized	400,000	400,000
Series B Convertible preferred stock, shares issued	92,100	92,100
Series B Convertible preferred stock, shares outstanding	92,100	92,100

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Consolidated Statements of Operations - USD ($)	3 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
Operating expenses:
General and administrative	$ 1,996,428	$ 1,569,680
Research and development	11,403,294	8,148,175
Amortization and depreciation	88,971	89,146
Total operating expenses	13,488,693	9,807,001
Operating loss	(13,488,693)	(9,807,001)
Interest income	979	787
Change in fair value of derivative liability	(747,467)	(362,666)
Interest expense:
Amortization of discount on convertible notes	(64,580)	(444,152)
Amortization of debt issuance costs	(9,178)	(113,700)
Inducement interest related to warrant exercise		(826,252)
Interest on convertible notes payable	(104,630)	(75,289)
Total interest expense	(178,388)	(1,459,393)
Loss before income taxes	(14,413,569)	(11,628,273)
Provision for taxes on income	0	0
Net loss	$ (14,413,569)	$ (11,628,273)
Basic and diluted loss per share	$ (0.07)	$ (0.08)
Basic and diluted weighted average common shares outstanding	218,594,628	151,738,244

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Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
Cash flows from operating activities:
Net loss	$ (14,413,569)	$ (11,628,273)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization and depreciation	88,971	89,146
Amortization of debt issuance costs	9,178	113,700
Amortization of discount on convertible notes	64,580	444,152
Inducement interest related to warrant exercise		826,252
Change in fair value of derivative liability	747,467	362,666
Stock-based compensation	283,346	254,953
Changes in current assets and liabilities:
(Increase)decrease in prepaid expenses	(701,185)	1,009,448
Increase in accounts payable and accrued expenses	4,950,552	1,527,847
Net cash used in operating activities	(8,970,660)	(7,000,109)
Cash flows from investing activities:
Furniture and equipment purchases	(2,262)
Net cash used in investing activities	(2,262)
Cash flows from financing activities:
Proceeds from sale of common stock and warrants	8,499,300
Proceeds from warrant exercises		1,647,500
Proceeds from convertible notes payable	5,000,000	4,888,500
Payment of offering costs	(1,008,410)	(365,227)
Net cash provided by financing activities	12,490,890	6,170,773
Net change in cash	3,517,968	(829,336)
Cash, beginning of period	1,231,445	1,775,583
Cash, end of period	4,749,413	946,247
Non-cash investing and financing transactions:
Financing costs associated with placement agent warrants		70,383
Debt discount and issuance costs associated with convertible notes payable	$ 700,000	$ 1,574,628

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Organization

3 Months Ended

Aug. 31, 2018

Organization

Note 1 – Organization

CytoDyn Inc. (the “Company”, “we” or “us”) was originally incorporated under the laws of Colorado on May 2, 2002 under the name RexRay Corporation (its previous name) and, effective August 27, 2015, reincorporated under the laws of Delaware. We are a clinical-stage biotechnology company focused on the clinical development and potential commercialization of humanized monoclonal antibodies to treat Human Immunodeficiency Virus (“HIV”) infection. Our lead product candidate, PRO 140, belongs to a class of HIV therapies known as entry inhibitors. These therapies block HIV from entering into and infecting certain cells.

The Company is developing a class of therapeutic monoclonal antibodies to address unmet medical needs in the areas of HIV and Graft-versus-Host Disease (“GvHD”). In addition, we are expanding the clinical focus of PRO 140 to include the evaluation in certain cancer and immunological indications where CCR antagonism has shown initial promise.

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Summary of Significant Accounting Policies

3 Months Ended

Aug. 31, 2018

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the financial results for these periods. The consolidated financial statements and notes thereto are presented as prescribed by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements for the fiscal years ended May 31, 2018 and 2017 and notes thereto in the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended May 31, 2018, filed with the Securities and Exchange Commission on July 27, 2018 and September 28, 2018, respectively. Operating results for the three months ended August 31, 2018 are not necessarily indicative of the results that may be expected for the entire year. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three months ended August 31, 2018 and August 31, 2017, (b) the financial position at August 31, 2018 and (c) cash flows for the three months ended August 31, 2018 and August 31, 2017.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Advanced Genetic Technologies, Inc. (“AGTI”) and CytoDyn Veterinary Medicine LLC (“CVM”), both of which are dormant entities. All intercompany transactions and balances are eliminated in consolidation.

Reclassifications

Certain prior year amounts shown in the accompanying consolidated financial statements have been reclassified to conform to the 2018 presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total stockholders’ (deficit) equity, net loss or loss per share.

Going Concern

The consolidated accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company had losses for all periods presented. The Company incurred a net loss of $14,413,569 for the three months ended August 31, 2018 and has an accumulated deficit of $187,552,964 as of August 31, 2018. These factors, among others, 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. The Company’s continuation as a going concern is dependent upon its ability to obtain additional operating capital, complete development of its product candidates, obtain U.S. Food & Drug Administration (“FDA”) approval, outsource manufacturing of the product candidates, and ultimately achieve initial revenues and attain profitability. The Company is currently engaging in significant research and development activities related to these product candidates, and expects to incur significant research and development expenses in the future primarily related to its clinical trials. These research and development activities are subject to significant risks and uncertainties. The Company intends to finance its future development activities and its working capital needs largely from the sale of equity and debt securities, combined with additional funding from other traditional sources. There can be no assurance, however, that the Company will be successful in these endeavors.

Use of Estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash

Cash is maintained at federally insured financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. Balances in excess of federally insured limits at August 31, 2018 and May 31, 2018 approximated $4.7 million and $1.1 million, respectively.

Identified Intangible Assets

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 350 Intangibles-Goodwill and Other, which establishes accounting standards for the impairment of long-lived assets such as intangible assets subject to amortization. The Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying value, the asset is considered impaired. Impairment losses are measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset. There were no impairment charges for the three months ended August 31, 2018 and 2017. The value of the Company’s patents would be significantly impaired by any adverse developments as they relate to the clinical trials pursuant to the patents acquired as discussed in Notes 7 and 9.

Research and Development

Research and development costs are expensed as incurred. Clinical trial costs incurred through third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development collaboration arrangements or other contractual agreements, the milestone payment obligations are expensed when the milestone conditions are probable and the amount of payment is reasonably estimable.

Pre-launch Inventory

The Company may scale-up and make commercial quantities of its product candidate prior to the date it anticipates that such product will receive final FDA approval. The scale-up and commercial production of pre-launch inventories involves the risk that such products may not be approved for marketing by the FDA on a timely basis, or ever. This risk notwithstanding, the Company may scale-up and build pre-launch inventories of product that have not yet received final governmental approval when the Company believes that such action is appropriate in relation to the commercial value of the product launch opportunity. The determination to capitalize is made once the Company (or its third party development partners) has filed a Biologics License Application (“BLA”) that has been acknowledged by the FDA as containing sufficient information to allow the FDA to conduct its review in an efficient and timely manner and management is reasonably certain that all regulatory and legal requirements will be satisfied. This determination is based on the particular facts and circumstances relating to the expected FDA approval of the drug product being considered. As of August 31, 2018 and May 31, 2018, the Company did not have pre-launch inventory that qualified for capitalization pursuant to U.S. GAAP ASC 330 “Inventory.”

Fair Value of Financial Instruments

At August 31, 2018 and May 31, 2018, the carrying value of the Company’s cash, accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of the instruments. The Company carries derivative financial instruments at fair value as required by U.S. GAAP.

Derivative financial instruments consist of financial instruments that contain a notional amount and one or more underlying variables (e.g., interest rate, security price, variable conversion rate or other variables), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. The Company follows the provisions of FASB ASC 815 “Derivatives and Hedging” (“ASC 815”), as their instruments are recorded as a derivative liability, at fair value, and FASB ASC 480 “Distinguishing Liabilities from Equity” (ASC 480), as it relates to warrant liability, with changes in fair value reflected in income.

Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.

Level 3. Unobservable inputs to the valuation methodology are significant to the measurement of the fair value of assets or liabilities. These Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that the Company was unable to corroborate with observable market data.

Liability measured at fair value on a recurring basis by level within the fair value hierarchy as of August 31, 2018 and May 31, 2018 is as follows:

	Fair Value Measurement at				Fair Value Measurement at
	August 31, 2018 (1)				May 31, 2018 (1)
	Using				Using
	Level 3		Total		Level 3		Total
Liability:
Derivative liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732
Total liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732

(1) The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of August 31, 2018 and May 31, 2018.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurements. These instruments are not quoted on an active market, so the Company uses a Binomial Lattice Model to estimate the value of the derivative liability. A Binomial Lattice Model was used because management believes it reflects all the assumptions that market participants would likely consider in negotiating the transfer of the warrant. The Company’s derivative liability is classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation model. The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended August 31, 2018 and the year ended May 31, 2018:

Investor warrants issued with registered direct equity offering	$	4,360,000
Placement agent warrants issued with registered direct equity offering		819,200
Fair value adjustments		(3,855,468	)
Balance at May 31, 2018		1,323,732
Fair value adjustments		747,467
Balance at August 31, 2018	$	2,071,199

Stock-Based Compensation

U.S. GAAP requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award (requisite service period) or when designated milestones have been achieved.

The Company accounts for stock-based awards established by the fair market value of the instrument using the Black-Scholes option pricing model utilizing certain weighted average assumptions including stock price volatility, expected term and risk-free interest rates, as of the grant date. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the stock-based award. The expected volatility is based on the historical volatility of the Company’s common stock on monthly intervals. The computation of the expected option term is based on the “simplified method,” as the Company issuances are considered “plain vanilla” options. For stock-based awards with defined vesting, the Company recognizes compensation expense over the requisite service period or when designated milestones have been achieved. The Company estimates forfeitures at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Based on limited historical experience of forfeitures, the Company estimated future unvested forfeitures at 0% for all periods presented.

Common Stock

On August 24, 2017, at the 2017 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 350,000,000 to 375,000,000. On June 7, 2018, at a special meeting of stockholders, a proposal was approved to increase the total number of authorized shares of common stock of the Company from 375,000,000 to 450,000,000. Subsequent to each stockholders’ meeting, an amendment to the Company’s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to each authorized share increase.

On November 1, 2017, the Company held a special meeting of stockholders, at which the stockholders approved a proposal to effect a reverse stock split at a ratio of any whole number between one-for-two and one-for-fifteen, as determined by the board of directors, and a simultaneous reduction in the total number of authorized shares of common stock to 200,000,000 at any time before August 24, 2018, if and as determined by the board of directors. The Company did not effect a reverse stock split prior to the August 24, 2018 expiration date, therefore the board of directors no longer has the authorization or ability to effect a reverse stock split.

Preferred Stock

The Company’s Board of Directors is authorized to issue up to 5,000,000 shares of preferred stock without stockholder approval. As of August 31, 2018, the Company has authorized the issuance of 400,000 shares of Series B Convertible Preferred Stock, of which 92,100 shares were outstanding. The remaining preferred shares authorized have no specified rights.

Treasury Stock

Treasury stock purchases are accounted for under the par value method, whereby the cost of the acquired stock is recorded at par value. During the year ended May 31, 2018, the Company purchased 159,011 shares of $0.001 par value treasury stock for shares tendered in satisfaction of income tax withholding, in connection with incentive compensation paid to certain officers in the form of common stock.

Debt Discount

During the three months ended August 31, 2018 and the year ended May 31, 2018, the Company incurred approximately $0.6 million and $1.5 million of debt discount related to the issuance of convertible notes, as described in Note 4. The discount is amortized over the life of the convertible promissory notes. During the three months ended August 31, 2018, and August 31, 2017 the Company recorded approximately $65,000 and $444,000, respectively, of related amortization.

Debt Issuance Cost

During the three months ended August 31, 2018 and the year ended May 31, 2018, the Company incurred direct costs associated with the issuance of a convertible notes, as described in Note 4, and recorded approximately $0.1 million and $0.4 million, respectively of debt issuance costs. In connection with the debt issuance costs, the Company recognized approximately $9,000 and $114,000 of related amortization for the three months ended August 31, 2018 and August 31, 2017, respectively.

Offering Costs

The Company incurred direct incremental costs associated with the sale of equity securities, as described in Notes 10 and 11. The costs were approximately $3.5 million for the year ended May 31, 2018, and approximately $1.0 million and $-0- for the three months ended August 31, 2018 and August 31, 2017, respectively. The offering costs were recorded as a component of equity upon receipt of proceeds.

Stock for Services

The Company periodically issues warrants to consultants for various services. The Black-Scholes option pricing model, as described more fully above, is utilized to measure the fair value of the equity instruments on the date of issuance. The Company recognizes the compensation expense associated with the equity instruments over the requisite service or vesting period.

Loss per Common Share

Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share would include the weighted average number of shares of common stock outstanding and potentially dilutive common stock equivalents. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share. For this reason, common stock options and warrants to purchase 145,856,851 and 80,582,715 shares of common stock were not included in the computation of basic and diluted weighted average number of shares of common stock outstanding for the three months ended August 31, 2018 and August 31, 2017, respectively. Additionally, as of August 31, 2018, shares of Series B convertible preferred stock in the aggregate of 92,100 shares can potentially convert into 921,000 shares of common stock.

Income Taxes

Deferred taxes are provided on the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Future tax benefits for net operating loss carry forwards are recognized to the extent that realization of these benefits is considered more likely than not. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (“ASC 740-10”). A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits for all periods presented. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefit in interest expense and penalties in operating expenses.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% effective as of January 1, 2018. In accordance with Section 15 of the Internal Revenue Code, we utilized a blended rate of 28.62% for our fiscal 2018 tax year, by applying a prorated percentage of the number of days prior to and subsequent to the January 1, 2018 effective date. For the fiscal year ended May 31, 2018, we recorded provisional charges for the re-measurement of the deferred tax assets and reduced our deferred taxes before the valuation allowance by $17,497,051 to our income tax expense. The net tax expense for the year ended May 31, 2018, is zero, due to the reduction in the deferred tax valuation allowance. The Company has a full valuation allowance as of August 31, 2018 and May 31, 2018, as management does not consider it more than likely than not that the benefits from the deferred taxes will be realized.

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Recent Accounting Pronouncements

3 Months Ended

Aug. 31, 2018

Recent Accounting Pronouncements

Note 3 – Recent Accounting Pronouncements

Recent accounting pronouncements, other than below, issued by the FASB (including its EITF), the AICPA and the SEC did not or are not believed by management to have a material effect on the Company’s present or future financial statements.

In March 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-05, Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendments in this Update add various Securities and Exchange Commission (“SEC) paragraphs pursuant to the issuance of SEC Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“Act”) (“SAB 118). The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. The Company has provided a reasonable estimate in the notes to the consolidated financial statements.

In July 2017, FASB issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Management is currently assessing the impact the adoption of ASU 2017-11 will have on the Company’s Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. Management is currently assessing the impact the adoption of ASU 2017-09 will have on the Company’s Consolidated Financial Statements.

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Convertible Instruments

3 Months Ended

Aug. 31, 2018

Convertible Instruments

Note 4 – Convertible Instruments

Series B Convertible Preferred Stock

During fiscal 2010, the Company issued 400,000 shares of Series B, $0.001 par value Convertible Preferred Stock (“Series B”) at $5.00 per share for cash proceeds totaling $2,009,000, of which 92,100 shares remain outstanding at August 31, 2018. Each share of the Series B is convertible into ten shares of the Company’s $0.001 par value common stock, including any accrued dividends, with an effective fixed conversion price of $0.50 per share. The holders of the Series B can only convert their shares to common shares provided the Company has sufficient authorized common shares at the time of conversion. Accordingly, the conversion option was contingent upon the Company increasing its authorized common shares, which occurred in April 2010, when the Company’s stockholders approved an increase in the authorized shares of common stock to 100,000,000. At the commitment date, which occurred upon such stockholder approval, the conversion option related to the Series B was beneficial. The intrinsic value of the conversion option at the commitment date resulted in a constructive dividend to the Series B holders of approximately $6,000,000. The constructive dividend increased and decreased additional paid-in capital by identical amounts. The Series B has liquidation preferences over the common shares at $5.00 per share plus any accrued dividends. Dividends are payable to the Series B holders when declared by the board of directors at the rate of $0.25 per share per annum. Such dividends are cumulative and accrue whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally available. The Series B holders have no voting rights. As of August 31, 2018 and May 31, 2018, the undeclared, accrued dividends were approximately $199,200 and $199,000, respectively, or 398,400 and 387,000 shares of common stock, respectively.

Short-term Convertible Notes

During the year ended May 31, 2018, the Company issued approximately $4.89 million in aggregate principal of short-term Convertible Notes, with a maturity date of January 31, 2018, and related warrants to investors for cash. The principal amount of the short-term Convertible Notes, including any accrued but unpaid interest thereon, was convertible at the election of the holder at any time into shares of common shares at any time prior to maturity at a conversion price of $0.75 per share. The short-term Convertible Notes bore simple interest at the annual rate of 7%. Principal and accrued interest, to the extent not previously paid or converted, is due and payable on the maturity date. At the commitment date, the Company determined that the conversion feature related to these short-term Convertible Notes to be beneficial to the investors. As a result, the Company determined the intrinsic value of the beneficial conversion feature utilizing the fair value of the underlying common stock on the commitment dates and the effective conversion price after discounting the short-term Convertible Notes for the fair value of the related warrants.

In connection with the sale of the short-term Convertible Notes, detachable common stock warrants to purchase a total of 4,025,656 common shares, with an exercise price of $1.00 per share and a five-year term were issued to the investors. The Company determined the fair value of the warrants at issuance using the Black-Scholes option pricing model utilizing certain weighted average assumptions, such as expected stock price volatility, expected term of the warrants, risk-free interest rates and expected dividend yield at the grant date.

	2018
Expected dividend yield	0%
Stock price volatility	69.80%
Expected term	5 year
Risk-free interest rate	1.77 - 1.93%
Grant-date fair value	$0.30 - $0.39

The fair value of the warrants, coupled with the beneficial conversion features, were recorded as a debt discount to the short-term Convertible Notes and a corresponding increase to additional paid-in capital was amortized over the term of the short-term Convertible Notes. The Company incurred debt discount of approximately $1.5 million related to the beneficial conversion feature and detachable warrants issued with the short-term Convertible Notes during the year ended May 31, 2018. Accordingly, the Company recognized approximately $-0- and $0.4 million of non-cash debt discount during the three months ended August 31, 2018 and August 31, 2017. In connection with the short-term Convertible Notes, the Company incurred direct issuance costs of approximately $0.4 million during the year ended May 31, 2018. The issuance costs were amortized over the term of the short-term Convertible Notes and accordingly, the Company recognized approximately $-0- and $114,000 of debt issuance costs during the three months ended August 31, 2018 and August 31, 2017, respectively.

On January 31, 2018, in connection with a registered direct equity offering, as fully described in Note 11, the short-term Convertible Notes in an aggregate principal amount of $5,788,500, plus accrued unpaid interest of approximately $243,000 were sold for 12,062,728 shares of common stock. The short-term Convertible Note investors also received warrants to purchase 7,718,010 shares of common stock. The securities were sold at a combined purchase price of $0.50 per share of common stock and related warrants, for aggregate gross proceeds to the Company of approximately $6.0 million. The Company repaid one short-term Convertible Note, including accrued interest in the aggregate of approximately $259,000. During the three months ended August 31, 2018 and August 31, 2017, the Company recognized approximately $-0- and $75,000, of interest expense related to the short-term Convertible Notes.

Activity related to the short-term Convertible Notes was as follows:

	August 31, 2018		May 31, 2018
Face amount of short-term Convertible Notes	$	—	$	6,038,500
Unamortized discount		—		—
Registered direct equity offering		—		(5,788,500	)
Note repayment		—		(250,000	)
Carrying value of short-term Convertible Notes	$	—	$	—

Long-term Convertible Note

On June 26, 2018, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note (the “Note”) with a two-year term to an institutional accredited investor in the initial principal amount of $5.7 million. The investor gave consideration of $5.0 million to the Company. The Note bears interest of 10% and is convertible into common stock, at $0.55 per share. The Note is convertible in total, or in part, of the outstanding balance, at any time after six months from the issue date upon five trading days’ notice, subject to certain adjustments and ownership limitations specified in the Note. The Investor may redeem any portion of the Note, at any time after six months from the issue date upon five trading days’ notice, subject to a maximum monthly redemption amount of $350,000. The securities purchase agreement requires the Company to reserve shares for future conversions or redemptions by dividing the outstanding principal balance plus accrued interest by the conversion price of $0.55 per share times 1.5.

In connection with the Note, the Company recorded debt discount of $0.6 million and debt issuance costs of $0.1 million. The discount and issuance costs will be amortized over the life of the Note, and accordingly, the Company recognized approximately $10,000 and $-0- amortization of debt issuance costs for the three months ended August 31, 2018 and August 31, 2017, respectively and approximately $65,000 and $-0- of amortization of debt discount for the three months ended August 31, 2018 and August 31, 2017, respectively. During the three months ended August 31, 2018 and August 31, 2017, the Company recognized approximately $104,000 and $-0-, of interest expense related to the Note.

Activity related to the Note was as follows:

	August 31, 2018
	Short term			Long term			Total			May 31, 2018
Face amount of Note	$	2,100,000		$	3,600,000		$	5,700,000		$	—
Monthly redemption		700,000			(700,000	)		—
Unamortized discount		(344,614	)		(281,628	)		(626,242	)		—
Carrying value of Note	$	2,455,386		$	2,618,372		$	5,073,758		$	—

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Derivative Liability

3 Months Ended

Aug. 31, 2018

Derivative Liability

Note 5 – Derivative Liability

The investor warrants issued with the September 2016 registered direct equity offering, and the placement agent warrants issued in conjunction with the offering, as fully described in Note 11, contain a provision for net cash settlement in the event that there is a fundamental transaction (contractually defined as a merger, sale of substantially all assets, tender offer or share exchange). If a fundamental transaction occurs in which the consideration issued consists principally of cash or stock in a successor entity, then the warrantholder has the option to receive cash equal to the fair value of the remaining unexercised portion of the warrant. Due to this contingent cash settlement provision, the investor and placement agent warrants require liability classification as derivatives in accordance with ASC 480 and ASC 815 and are recorded at fair value.

The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date September 15, 2016, May 31, 2018 and August 31, 2018:

	Shares Indexed		Derivative Liability
Inception date September 15, 2016		7,733,334	$	5,179,200
Balance May 31, 2018		7,733,334		1,323,732
Balance August 31, 2018		7,733,334	$	2,071,199

The Company recognized approximately $747,000 and $363,000 of non-cash loss, due to the changes in the fair value of the liability associated with such classified warrants during the three months ended August 31, 2018 and August 31, 2017, respectively.

ASC 820 provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition. Fair values for the warrants were determined using a Binomial Lattice (“Lattice”) valuation model.

The Company estimated the fair value of the warrant derivative liability as of inception date September 15, 2016, May 31, 2018 and August 31, 2018, using the following assumptions:

	September 15, 2016		May 31, 2018		August 31, 2018
Fair value of underlying stock	$	0.78	$	0.49	$	0.69
Risk free rate		1.20%		2.63%		2.72%
Expected term (in years)		5		3.3		3.04
Stock price volatility		106%		64%		64%
Expected dividend yield		—		—		—
Probability of Fundamental Transaction		50%		50%		50%
Probability of holder requesting cash payment		50%		50%		50%

Due to the fundamental transaction provision contained in the warrants, which could provide for early redemption of the warrants, the model also considered subjective assumptions related to the fundamental transaction provision. The fair value of the warrants will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes in interest and management’s assumptions related to the fundamental transaction provisions.

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Stock Options and Warrants

3 Months Ended

Aug. 31, 2018

Stock Options and Warrants

Note 6 – Stock Options and Warrants

The Company has one active stock-based equity plan at August 31, 2018, the CytoDyn Inc. 2012 Equity Incentive Plan, as amended (the “2012 Plan”) and one stock-based equity plan that is no longer active, but under which certain prior awards remain outstanding, the CytoDyn Inc. 2004 Stock Incentive Plan (the “2004 Plan” and, together with the 2012 Plan, the “Incentive Plans”). The 2012 Plan was approved by stockholders at the Company’s 2012 annual meeting to replace the 2004 Plan. The 2012 Plan was amended by stockholder approval in February 2015 to increase the number of shares available for issuance from 3,000,000 to 5,000,000 shares of common stock and in March 2016 to increase the number of shares available for issuance from 5,000,000 to 7,000,000 shares of common stock. At the annual meeting of stockholders held on August 24, 2017, the stockholders approved an amendment to the 2012 Plan to increase the number of shares available for issuance from 7,000,000 to 15,000,000 shares of common stock. As of August 31, 2018, the Company had 2,403,048 shares available for future stock-based grants under the 2012 Plan.

Stock Options

During the three months ended August 31, 2018, the Company granted annual stock option awards to directors to purchase a total of 680,822 shares of common stock. The exercise price of the stock option awards is $0.49 per share, except for one stock option award covering 80,822 shares of common stock, which has an exercise price of $0.47 per share. These stock option awards vest quarterly over one year and have a ten-year term. The grant date fair value related to these stock options was $0.31 per share, except the stock option award covering 80,822 shares of common stock, which was $0.30 per share. These awards reflect an increase in the annual non-employee director stock option award from 75,000 to 100,000 shares per year, effective for fiscal year 2019.

During the three months ended August 31, 2018, the Company granted a stock option award covering 950,000 shares of common stock with an exercise price of $0.49 per share, to its Executive Chairman. This stock option award vests ratably over 24 months, has a ten-year term and a grant date fair value of $0.41 per share.

During the three months ended August 31, 2018, the Company granted stock options, covering an aggregate of 875,000 shares of common stock, to executive management and employees with exercise prices of $0.49 per share. The stock option awards vest annually over three years, with a ten-year term and grant date fair values of $0.31 per share.

Warrants

On June 15, 2018, in connection with a registered direct equity offering, as fully described in Note 11, the Company issued warrants covering 1,970,000 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.75 per share. In connection with the registered direct offering, the Company also issued warrants covering 133,600 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.55 per share.

During the three months ended August 31, 2018, in connection with a private equity offering, as fully described in Note 10, the Company issued common stock warrants covering a total of 7,514,300 shares of common stock to investors. The investor warrants have a five-year term and an exercise price of $0.75 per share. In connection with this offering, the Company also issued common stock warrants covering 1,422,860 shares of common stock to the placement agent. The placement agent warrants have a five-year term and an exercise price of $0.50 per share.

During the year ended May 31, 2018, the Company determined to extend the expiration dates of certain warrants from May 31, 2017 to June 30, 2017 covering 3,295,000 shares of common stock. The warrants were originally issued in connection with 2012 convertible promissory notes and had an amended exercise price of $1.00 per share. The extension to June 30, 2017 was contingent upon immediate exercise of the warrants at a reduced exercise price of $0.50 per share. The Company received proceeds of approximately $1.6 million and, pursuant to U.S. GAAP, the Company recognized non-cash inducement interest expense of approximately $0.8 million, which represented the incremental increase in the fair value of the extended warrants.

Compensation expense related to stock options and compensatory warrants for the three months ended August 31, 2018 and August 31, 2017 was approximately $283,000 and $255,000, respectively. The grant date fair value of options and compensatory warrants vested during the three month periods ended August 31, 2018 and August 31, 2017 was approximately $692,000 and $447,000, respectively. As of August 31, 2018, there was approximately $1.1million of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 1.6 years.

The following table represents stock option and warrant activity as of and for the three months ended August 31, 2018:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Options and warrants outstanding—May 31, 2018		132,385,269		$	0.80		3.78	$	3,673
Granted		13,546,582			0.67		—		—
Exercised		—			—		—		—
Forfeited/expired/cancelled		(75,000	)		0.65		—		—
Options and warrants outstanding—August 31, 2018		145,856,851			0.79		3.74		1,710,190
Outstanding exercisable—August 31, 2018		141,382,362		$	0.79		3.58	$	1,200,567

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Acquisition of Patents

3 Months Ended

Aug. 31, 2018

Acquisition of Patents

Note 7 – Acquisition of Patents

As discussed in Note 9 below, the Company consummated an asset purchase on October 16, 2012, and paid $3,500,000 for certain assets, including intellectual property, certain related licenses and sublicenses, FDA filings and various forms of the PRO 140 drug substance. The Company followed the guidance in Financial Accounting Standards Topic 805 to determine if the Company acquired a business. Based on the prescribed accounting, the Company acquired assets and not a business. As of August 31, 2018, the Company has recorded and is amortizing $3,500,000 of intangible assets in the form of patents. The Company estimates the acquired patents have an estimated life of ten years. Subsequent to the acquisition date, the Company has continued to expand, amend and file new patents central to its current clinical trial strategies, which, in turn, have extended the protection period for certain methods of using PRO 140 and formulations comprising PRO 140 out through at least 2031 and 2038, respectively, in various countries.

The following presents intangible assets activity:

	August 31, 2018			May 31, 2018
Gross carrying amounts	$	3,500,000		$	3,500,000
Accumulated amortization		(2,056,365	)		(1,968,846	)
Total amortizable intangible assets, net		1,443,635			1,531,154
Patents currently not amortized		35,989			35,989
Carrying value of intangibles, net	$	1,479,624		$	1,567,143

Amortization expense related to acquired patents was approximately $87,500 for the three months ended August 31, 2018 and 2017, respectively. The estimated aggregate future amortization expense related to the Company’s intangible assets with finite lives is estimated at approximately $350,000 per year for approximately the next four years.

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License Agreements

3 Months Ended

Aug. 31, 2018

License Agreements

Note 8 – License Agreements

The Company has a license agreement with a third-party licensor covering the licensor’s “system know-how” technology with respect to the Company’s use of proprietary cell lines to manufacture new PRO 140 material. The Company accrues an annual license fee of £300,000 (approximately US$400,000 utilizing current exchange rates), which is payable annually in December, except for the December 2017 payment, which was extended to March 15, 2018. Future annual license fees and royalty rate will vary depending on whether the Company manufactures PRO 140, utilizes the third-party licensor as a contract manufacturer, or utilizes an independent party as a contract manufacturer. The licensor does not charge an annual license fee when it serves as the manufacturer. In addition, the Company will incur royalties of up to 0.75% to 2% of net sales, depending upon who serves as the manufacturer, when the Company commences their first commercial sale, which will continue as long as the license agreement is maintained.

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Commitments and Contingencies

3 Months Ended

Aug. 31, 2018

Commitments and Contingencies

Note 9 – Commitments and Contingencies

Under the Progenics Purchase Agreement, the Company acquired rights to the HIV viral-entry inhibitor drug candidate PRO 140, a humanized anti-CCR5 monoclonal antibody, as well as certain other related assets, including the existing inventory of bulk PRO 140 drug product, intellectual property, certain related licenses and sublicenses, and FDA regulatory filings. In connection with purchase, the Company has two remaining milestone payments, (i) $0.5 million upon filing a BLA with the FDA or non-U.S. equivalent regulatory body and (ii) $5.0 million, which will become due at the time of the first U.S. new drug application approval by the FDA or other non-U.S. approval for the sale of PRO 140. In addition, the Company will incur royalty payments of up to 5% on net sales during the period beginning on the date of the first commercial sale of PRO 140 until the later of (a) the expiration of the last to expire patent included in the acquired assets, and (b) 10 years, in each case determined on a country-by country basis. During the year ended May 31, 2016 the Company paid a milestone obligation of $1.5 million owed to Progenics as a result of the first dosing in a U.S. Phase 3 trial. To the extent that the remaining milestone payment and royalties are not timely made, under the terms of the Progenics Purchase Agreement, Progenics has certain repurchase rights relating to the assets sold to the Company thereunder. As of the date of this filing, it is management’s conclusion that the probability of achieving the subsequent future scientific research milestone is not reasonably determinable, thus the future milestone payments payable to Progenics and its sub-licensors are deemed contingent consideration and, therefore, are not currently accruable.

Payments to the third-party licensor and to Progenics are in addition to payments due under a Development and License Agreement, dated April 30, 1999 (the “PDL License”), between Protein Design Labs (now AbbVie Inc.) (“PDL”) and Progenics, which was assigned to the Company in the Progenics Purchase Agreement, pursuant to which the Company has an exclusive worldwide license to develop, make, have made, import, use, sell, offer to sell or have sold products that incorporate the humanized form of the PRO 140 antibody developed by PDL under the agreement the Company has paid various milestone obligations, with one remaining milestone payment of $0.5 million, which will become due upon FDA approval or approval by another non-U.S. equivalent regulatory body. In addition, the Company will incur royalties of up to 3.5% of net sales for the longer of 10 years and the date of expiration of the last to expire licensed patent. Additionally, the PDL License provides for an annual maintenance fee of $150,000 or until annual royalties paid exceed that amount. To the extent the remaining milestone payment and royalties are not timely made, under the terms of the PDL License, AbbVie Inc. has certain termination rights relating to the Company’s license of PRO 140 thereunder. As of the date of this filing, it is management’s conclusion that the probability of achieving the subsequent future scientific research milestones is not reasonably determinable, thus the future milestone payments payable to PDL, Progenics and its sub-licensors are deemed contingent consideration and, therefore, are not currently accruable. The Company has entered into project work orders, as amended, for each of its clinical research organization (“CRO”) and related laboratory vendors. Under the terms of these agreements, the Company incurs execution fees for direct services costs, which are recorded as a current asset. In the event the Company were to terminate any trial, it may incur certain financial penalties which would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range from an approximate low of $0.1 million to an approximate high of $1.4 million. In the remote circumstance that the Company would terminate all clinical trials, the collective financial penalties may range from an approximate low of $0.5 million to an approximate high of $2.3 million. During the year ended May 31, 2017, the Company entered into agreements with contract manufacturing companies. Under the terms of the agreements, the Company incurred approximately $2.1 million of execution fees for process validation and manufacturing activities, of which the remaining $0.7 million is reflected as a current asset, as of August 31, 2018. In the event the Company were to terminate any of the agreements, it may incur certain financial penalties which would become payable to the manufacturers. Conditioned on the timing of termination, the financial penalties may range up to an approximate high of $1.7 million. From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company’s financial position.

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Private Securities Offerings

3 Months Ended

Aug. 31, 2018

Private Securities Offerings

Note 10 – Private Securities Offerings

During the three months ended August 31, 2018, the Company conducted a private equity offering, in which accredited investors purchased unregistered common stock at $0.50 per share with warrant coverage rate of 50%. Pursuant to the offering, the Company sold a total of 15,028,600 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $7.5 million and issued to the investors five-year warrants covering 7,514,300 shares of common stock with an exercise price of $0.75 per share. The Company received net proceeds from the offering of approximately $6.6 million. In addition, the placement agent received warrants covering 1,422,860 shares of common stock (or 10% of total shares sold to investors) with a per share exercise price of $0.50, a five-year term. The placement agent warrants include a cashless exercise provision.

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Registered Direct Equity Offerings

3 Months Ended

Aug. 31, 2018

Registered Direct Equity Offerings

Note 11 – Registered Direct Equity Offerings

In September 2016, the Company entered into securities purchase agreements with certain institutional investors for the sale of 13,333,334 shares of common stock at a purchase price of $0.75 per share in a registered direct equity offering (the “Registered Offering”), pursuant to a registration statement on Form S-3. The investors in this Registered Offering also received warrants to purchase 6,666,667 shares of common stock with an exercise price of $1.00 per share and a five-year term. The Company received net proceeds from the Registered Offering of approximately $9.0 million after placement fees of 8% of the gross proceeds and various expenses. In addition, the placement agent received warrants covering 1,066,667 shares (or 8% of total shares sold to investors) with a per share exercise price of $0.825 and a five-year term.

A summary of the cash proceeds of the Registered Offering is shown below:

Gross proceeds from sale of common stock	$	10,000,000
Placement agent fees and expenses		1,010,000
Total net proceeds	$	8,990,000

As fully described in Note 5 above, the investor warrants and the placement agent warrants issued in conjunction with the Registered Offering are required to be accounted for in accordance with ASC 480 and ASC 815.

A summary of the ASC 480 allocation of the proceeds of the Registered Offering is as follows:

Allocated to common stock and additional paid in capital	$	6,334,417
Allocated to warrant liabilities		2,655,583
Total net proceeds	$	8,990,000

Closing costs included 1,066,667 warrants valued at $819,200 for placement agent fees. Based upon the estimated fair value of the stock and warrants in the units, the Company allocated $241,986 to financing expense and $577,214 as stock issuance costs.

On January 31, 2018, the Company entered into subscription agreements with certain investors who owned convertible promissory notes of the Company (the “Notes”) for the sale by the Company of 12,062,728 shares of common stock in a registered direct offering (the “January 31 Offering”). The investors in the January 31 Offering also received warrants to purchase 7,718,010 shares of common stock. The securities were sold at a combined purchase price of $0.50 per share of common stock and related warrants, for aggregate gross proceeds to the Company of approximately $6.0 million. The Notes matured on January 31, 2018, upon which date the Company became obligated to pay the principal amount of approximately $6.0 million on the Notes, plus accrued but unpaid interest of approximately $0.3 million, for aggregate payment obligations at maturity of approximately $6.3 million. The common stock and warrants were issued in full satisfaction of approximately $6.0 million of such payment obligations, with one holder of an aggregate principal amount and accrued unpaid interest of approximately $0.3 million electing to be repaid in cash instead of participating in the January 31, 2018 Offering. As a result, all of the proceeds from the January 31 Offering were used to satisfy the Company’s payment obligations pursuant to the Notes. The warrants will be exercisable for a period of five years commencing on their issuance date, at an exercise price of $0.75 per share of common stock, subject to certain ownership limitations and adjustments as provided under the terms of the warrants. The number of shares of common stock underlying the warrant issued to each investor was calculated as the difference between (x) the number of shares of common stock issued to each investor in the January 31, 2018 Offering in respect of the payment obligations relating solely to principal amounts on the Notes and (y) the number of shares of common stock underlying certain warrants originally issued to such investor in the original Notes offering. The effect was to bring each investor from 50% warrant coverage in the original offering of Notes, assuming conversion of the principal amount thereof at an original conversion price of $0.75 per share, to 100% warrant coverage after the January 31 Offering, assuming reinvestment of the principal amount on the Notes at $0.50 per share. The warrants in the January 31 Offering, had an original exercise price of $1.00 per share, therefore, due to the reduction of exercise price to $0.75 per share, the Company recognized a non-cash inducement interest expense of approximately $2.4 million due to the modification. In connection with this January 31 Offering, the Company paid a commission of $164,425 to the placement agent.

On June 15, 2018, the Company entered into subscription agreements with certain investors for the sale of 1,970,000 shares of common stock at a purchase price of $0.50 per shares in a registered direct offering, pursuant to a registration statement on Form S-3. The investors in the offering also received warrants to purchase 1,970,000 shares of common stock with an exercise price of $0.75 per share and a five-year term. The Company received net proceeds from the offering of approximately $0.9 million. In addition, the placement agent received warrants covering 133,600 shares of common stock (or 8% of total shares sold to investors) with a per share exercise price of $0.55, a five-year term and include a cashless exercise provision.

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Employee Benefit Plan

3 Months Ended

Aug. 31, 2018

Employee Benefit Plan

Note 12 – Employee Benefit Plan

The Company has an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code (the “Code”), covering all of its employees. The Company makes a qualified non-elective contribution of 3%, which consequently vests immediately. In addition, participants in the Plan may contribute a percentage of their compensation, but not in excess of the maximum allowed under the Code. During the three months ended August 31, 2018 and 2017, the Company incurred an expense of approximately $15,800 and $10,800, respectively, for qualified non-elective contributions.

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Related Party Transactions

3 Months Ended

Aug. 31, 2018

Related Party Transactions

Note 13 – Related Party Transactions

On July 26, 2017, Jordan G. Naydenov, a director with the Company, participated in the private placement of convertible promissory notes, as fully described in Note 4. Mr. Naydenov purchased a convertible promissory note, bearing interest of 7%, for $100,000 in aggregate principal and received a warrant covering 66,666 shares of common stock at an exercise price of $1.00. The terms and conditions of Mr. Naydenov’s investment were identical to those offered to all other investors in the offering and his investment was approved by the Audit Committee of the Board of Directors.

On July 28, 2017, Alpha Venture Capital Partners, LP (“AVCP”), participated in the private placement of convertible promissory notes, as fully described in Note 4. Carl C. Dockery, the principal of AVCP, is a director of the Company. AVCP purchased a convertible promissory note, bearing interest of 7%, for $50,000 in aggregate principal and received a warrant covering 33,333 shares of common stock at an exercise price of $1.00. The terms and conditions of the AVCP investment were identical to those offered to all other investors in the offering and his investment was approved by the Audit Committee of the Board of Directors.

On November 8, 2017, in connection with a private equity offering, a limited liability company in which Anthony D. Caracciolo, Executive Chairman of the Company, holds a partial ownership interest purchased $100,000 of common stock and warrants on terms identical to those applicable to the other investors in the private equity offering.

On January 31, 2018 each of Mr. Caracciolo, Mr. Naydenov and AVCP participated with other investors in the offering of common stock and warrants in satisfaction of the payment obligations relating to the convertible promissory notes, as fully described in Note 11 above.

The Audit Committee of the Board of Directors, comprised of independent directors, reviews and approves all related party transactions. The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.

On July 12, 2018, the Company announced certain leadership changes in connection with the strategic expansion and entry into certain cancer and immunologic indications. In connection with such leadership changes and effective July 11, 2018 Denis R. Burger, Ph.D. and A. Bruce Montgomery, M.D. resigned as members of the Company’s board of directors and Dr. Burger has also resigned as Chief Science Officer of the Company, which is not an executive officer position. In connection with the resignations of Dr. Burger and Dr. Montgomery, on July 10, 2018, the Company’s board of directors determined to accelerate all outstanding unvested stock options held by Dr. Burger and Dr. Montgomery, to vest immediately upon the effectiveness of their resignations and to retain the stock options’ exercise period through their respective expiration date. Stock options covering 500,000 shares held by Dr. Burger and stock options covering 100,000 shares held by Dr. Montgomery were subject to acceleration. The terms of the stock options remained otherwise unchanged.

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Subsequent Events

3 Months Ended

Aug. 31, 2018

Subsequent Events

Note 14 – Subsequent Events

Between September 4, 2018 and October 4, 2018, the Company conducted a private equity offering, in which accredited investors purchased common stock at $0.50 per share with warrant coverage ratio of 50%. Pursuant to the offering, the Company sold a total of 22,661,570 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $11.3 million and issued to the investors five-year warrants covering 11,330,785 shares of common stock with an exercise price of $0.75 per share. In connection with the equity offering, the Company paid an aggregate cash fee of approximately $1.3 million to the placement agent and issued warrants covering an aggregate of 2,174,157 shares of common stock to the placement agent as additional compensation. The placement agent warrants have a five-year term and an exercise price of $0.50 per share. The Company also paid a one-time non-accountable expense fee of $25,000 to the placement agent for its services in connection with the offering.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Aug. 31, 2018

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the financial results for these periods. The consolidated financial statements and notes thereto are presented as prescribed by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements for the fiscal years ended May 31, 2018 and 2017 and notes thereto in the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended May 31, 2018, filed with the Securities and Exchange Commission on July 27, 2018 and September 28, 2018, respectively. Operating results for the three months ended August 31, 2018 are not necessarily indicative of the results that may be expected for the entire year. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three months ended August 31, 2018 and August 31, 2017, (b) the financial position at August 31, 2018 and (c) cash flows for the three months ended August 31, 2018 and August 31, 2017.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Advanced Genetic Technologies, Inc. (“AGTI”) and CytoDyn Veterinary Medicine LLC (“CVM”), both of which are dormant entities. All intercompany transactions and balances are eliminated in consolidation.

Reclassifications

Reclassifications

Certain prior year amounts shown in the accompanying consolidated financial statements have been reclassified to conform to the 2018 presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total stockholders’ (deficit) equity, net loss or loss per share.

Going Concern

Going Concern

The consolidated accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company had losses for all periods presented. The Company incurred a net loss of $14,413,569 for the three months ended August 31, 2018 and has an accumulated deficit of $187,552,964 as of August 31, 2018. These factors, among others, 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. The Company’s continuation as a going concern is dependent upon its ability to obtain additional operating capital, complete development of its product candidates, obtain U.S. Food & Drug Administration (“FDA”) approval, outsource manufacturing of the product candidates, and ultimately achieve initial revenues and attain profitability. The Company is currently engaging in significant research and development activities related to these product candidates, and expects to incur significant research and development expenses in the future primarily related to its clinical trials. These research and development activities are subject to significant risks and uncertainties. The Company intends to finance its future development activities and its working capital needs largely from the sale of equity and debt securities, combined with additional funding from other traditional sources. There can be no assurance, however, that the Company will be successful in these endeavors.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash

Cash

Cash is maintained at federally insured financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. Balances in excess of federally insured limits at August 31, 2018 and May 31, 2018 approximated $4.7 million and $1.1 million, respectively.

Identified Intangible Assets

Identified Intangible Assets

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 350 Intangibles-Goodwill and Other, which establishes accounting standards for the impairment of long-lived assets such as intangible assets subject to amortization. The Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying value, the asset is considered impaired. Impairment losses are measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset. There were no impairment charges for the three months ended August 31, 2018 and 2017. The value of the Company’s patents would be significantly impaired by any adverse developments as they relate to the clinical trials pursuant to the patents acquired as discussed in Notes 7 and 9.

Research and Development

Research and Development

Research and development costs are expensed as incurred. Clinical trial costs incurred through third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development collaboration arrangements or other contractual agreements, the milestone payment obligations are expensed when the milestone conditions are probable and the amount of payment is reasonably estimable.

Pre-launch Inventory

Pre-launch Inventory

The Company may scale-up and make commercial quantities of its product candidate prior to the date it anticipates that such product will receive final FDA approval. The scale-up and commercial production of pre-launch inventories involves the risk that such products may not be approved for marketing by the FDA on a timely basis, or ever. This risk notwithstanding, the Company may scale-up and build pre-launch inventories of product that have not yet received final governmental approval when the Company believes that such action is appropriate in relation to the commercial value of the product launch opportunity. The determination to capitalize is made once the Company (or its third party development partners) has filed a Biologics License Application (“BLA”) that has been acknowledged by the FDA as containing sufficient information to allow the FDA to conduct its review in an efficient and timely manner and management is reasonably certain that all regulatory and legal requirements will be satisfied. This determination is based on the particular facts and circumstances relating to the expected FDA approval of the drug product being considered. As of August 31, 2018 and May 31, 2018, the Company did not have pre-launch inventory that qualified for capitalization pursuant to U.S. GAAP ASC 330 “Inventory.”

Fair Value of Financial Instruments

Fair Value of Financial Instruments

At August 31, 2018 and May 31, 2018, the carrying value of the Company’s cash, accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of the instruments. The Company carries derivative financial instruments at fair value as required by U.S. GAAP.

Derivative financial instruments consist of financial instruments that contain a notional amount and one or more underlying variables (e.g., interest rate, security price, variable conversion rate or other variables), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. The Company follows the provisions of FASB ASC 815 “Derivatives and Hedging” (“ASC 815”), as their instruments are recorded as a derivative liability, at fair value, and FASB ASC 480 “Distinguishing Liabilities from Equity” (ASC 480), as it relates to warrant liability, with changes in fair value reflected in income.

Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.

Level 3. Unobservable inputs to the valuation methodology are significant to the measurement of the fair value of assets or liabilities. These Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that the Company was unable to corroborate with observable market data.

Liability measured at fair value on a recurring basis by level within the fair value hierarchy as of August 31, 2018 and May 31, 2018 is as follows:

	Fair Value Measurement at				Fair Value Measurement at
	August 31, 2018 (1)				May 31, 2018 (1)
	Using				Using
	Level 3		Total		Level 3		Total
Liability:
Derivative liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732
Total liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732

(1) The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of August 31, 2018 and May 31, 2018.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurements. These instruments are not quoted on an active market, so the Company uses a Binomial Lattice Model to estimate the value of the derivative liability. A Binomial Lattice Model was used because management believes it reflects all the assumptions that market participants would likely consider in negotiating the transfer of the warrant. The Company’s derivative liability is classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation model. The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended August 31, 2018 and the year ended May 31, 2018:

Investor warrants issued with registered direct equity offering	$	4,360,000
Placement agent warrants issued with registered direct equity offering		819,200
Fair value adjustments		(3,855,468	)
Balance at May 31, 2018		1,323,732
Fair value adjustments		747,467
Balance at August 31, 2018	$	2,071,199

Stock-Based Compensation

Stock-Based Compensation

U.S. GAAP requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award (requisite service period) or when designated milestones have been achieved.

The Company accounts for stock-based awards established by the fair market value of the instrument using the Black-Scholes option pricing model utilizing certain weighted average assumptions including stock price volatility, expected term and risk-free interest rates, as of the grant date. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the stock-based award. The expected volatility is based on the historical volatility of the Company’s common stock on monthly intervals. The computation of the expected option term is based on the “simplified method,” as the Company issuances are considered “plain vanilla” options. For stock-based awards with defined vesting, the Company recognizes compensation expense over the requisite service period or when designated milestones have been achieved. The Company estimates forfeitures at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. Based on limited historical experience of forfeitures, the Company estimated future unvested forfeitures at 0% for all periods presented.

Common Stock

Common Stock

On August 24, 2017, at the 2017 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 350,000,000 to 375,000,000. On June 7, 2018, at a special meeting of stockholders, a proposal was approved to increase the total number of authorized shares of common stock of the Company from 375,000,000 to 450,000,000. Subsequent to each stockholders’ meeting, an amendment to the Company’s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to each authorized share increase.

On November 1, 2017, the Company held a special meeting of stockholders, at which the stockholders approved a proposal to effect a reverse stock split at a ratio of any whole number between one-for-two and one-for-fifteen, as determined by the board of directors, and a simultaneous reduction in the total number of authorized shares of common stock to 200,000,000 at any time before August 24, 2018, if and as determined by the board of directors. The Company did not effect a reverse stock split prior to the August 24, 2018 expiration date, therefore the board of directors no longer has the authorization or ability to effect a reverse stock split.

Preferred Stock

Preferred Stock

The Company’s Board of Directors is authorized to issue up to 5,000,000 shares of preferred stock without stockholder approval. As of August 31, 2018, the Company has authorized the issuance of 400,000 shares of Series B Convertible Preferred Stock, of which 92,100 shares were outstanding. The remaining preferred shares authorized have no specified rights.

Treasury Stock

Treasury Stock

Treasury stock purchases are accounted for under the par value method, whereby the cost of the acquired stock is recorded at par value. During the year ended May 31, 2018, the Company purchased 159,011 shares of $0.001 par value treasury stock for shares tendered in satisfaction of income tax withholding, in connection with incentive compensation paid to certain officers in the form of common stock.

Debt Discount

Debt Discount

During the three months ended August 31, 2018 and the year ended May 31, 2018, the Company incurred approximately $0.6 million and $1.5 million of debt discount related to the issuance of convertible notes, as described in Note 4. The discount is amortized over the life of the convertible promissory notes. During the three months ended August 31, 2018, and August 31, 2017 the Company recorded approximately $65,000 and $444,000, respectively, of related amortization.

Debt Issuance Cost

Debt Issuance Cost

During the three months ended August 31, 2018 and the year ended May 31, 2018, the Company incurred direct costs associated with the issuance of a convertible notes, as described in Note 4, and recorded approximately $0.1 million and $0.4 million, respectively of debt issuance costs. In connection with the debt issuance costs, the Company recognized approximately $9,000 and $114,000 of related amortization for the three months ended August 31, 2018 and August 31, 2017, respectively.

Offering Costs

Offering Costs

The Company incurred direct incremental costs associated with the sale of equity securities, as described in Notes 10 and 11. The costs were approximately $3.5 million for the year ended May 31, 2018, and approximately $1.0 million and $-0- for the three months ended August 31, 2018 and August 31, 2017, respectively. The offering costs were recorded as a component of equity upon receipt of proceeds.

Stock for Services

Stock for Services

The Company periodically issues warrants to consultants for various services. The Black-Scholes option pricing model, as described more fully above, is utilized to measure the fair value of the equity instruments on the date of issuance. The Company recognizes the compensation expense associated with the equity instruments over the requisite service or vesting period.

Loss per Common Share

Loss per Common Share

Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share would include the weighted average number of shares of common stock outstanding and potentially dilutive common stock equivalents. Because of the net losses for all periods presented, the basic and diluted weighted average shares outstanding are the same since including the additional shares would have an anti-dilutive effect on the loss per share. For this reason, common stock options and warrants to purchase 145,856,851 and 80,582,715 shares of common stock were not included in the computation of basic and diluted weighted average number of shares of common stock outstanding for the three months ended August 31, 2018 and August 31, 2017, respectively. Additionally, as of August 31, 2018, shares of Series B convertible preferred stock in the aggregate of 92,100 shares can potentially convert into 921,000 shares of common stock.

Income Taxes

Income Taxes

Deferred taxes are provided on the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Future tax benefits for net operating loss carry forwards are recognized to the extent that realization of these benefits is considered more likely than not. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (“ASC 740-10”). A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits for all periods presented. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefit in interest expense and penalties in operating expenses.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% effective as of January 1, 2018. In accordance with Section 15 of the Internal Revenue Code, we utilized a blended rate of 28.62% for our fiscal 2018 tax year, by applying a prorated percentage of the number of days prior to and subsequent to the January 1, 2018 effective date. For the fiscal year ended May 31, 2018, we recorded provisional charges for the re-measurement of the deferred tax assets and reduced our deferred taxes before the valuation allowance by $17,497,051 to our income tax expense. The net tax expense for the year ended May 31, 2018, is zero, due to the reduction in the deferred tax valuation allowance. The Company has a full valuation allowance as of August 31, 2018 and May 31, 2018, as management does not consider it more than likely than not that the benefits from the deferred taxes will be realized.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Aug. 31, 2018

Liability Measured at Fair Value on Recurring Basis by Level within Fair Value Hierarchy

Liability measured at fair value on a recurring basis by level within the fair value hierarchy as of August 31, 2018 and May 31, 2018 is as follows:

	Fair Value Measurement at				Fair Value Measurement at
	August 31, 2018 (1)				May 31, 2018 (1)
	Using				Using
	Level 3		Total		Level 3		Total
Liability:
Derivative liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732
Total liability	$	2,071,199	$	2,071,199	$	1,323,732	$	1,323,732

(1) The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of August 31, 2018 and May 31, 2018.

Reconciliation of Liability Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended August 31, 2018 and the year ended May 31, 2018:

Investor warrants issued with registered direct equity offering	$	4,360,000
Placement agent warrants issued with registered direct equity offering		819,200
Fair value adjustments		(3,855,468	)
Balance at May 31, 2018		1,323,732
Fair value adjustments		747,467
Balance at August 31, 2018	$	2,071,199

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Convertible Instruments (Tables)

3 Months Ended

Aug. 31, 2018

Activity Related to Notes

Activity related to the Note was as follows:

	August 31, 2018
	Short term			Long term			Total			May 31, 2018
Face amount of Note	$	2,100,000		$	3,600,000		$	5,700,000		$	—
Monthly redemption		700,000			(700,000	)		—
Unamortized discount		(344,614	)		(281,628	)		(626,242	)		—
Carrying value of Note	$	2,455,386		$	2,618,372		$	5,073,758		$	—

Short-Term Convertible Notes

Activity Related to Notes

Activity related to the short-term Convertible Notes was as follows:

	August 31, 2018		May 31, 2018
Face amount of short-term Convertible Notes	$	—	$	6,038,500
Unamortized discount		—		—
Registered direct equity offering		—		(5,788,500	)
Note repayment		—		(250,000	)
Carrying value of short-term Convertible Notes	$	—	$	—

Investor Warrants

Weighted Average Assumptions to Value Investor Warrants

The Company determined the fair value of the warrants at issuance using the Black-Scholes option pricing model utilizing certain weighted average assumptions, such as expected stock price volatility, expected term of the warrants, risk-free interest rates and expected dividend yield at the grant date.

	2018
Expected dividend yield	0%
Stock price volatility	69.80%
Expected term	5 year
Risk-free interest rate	1.77 - 1.93%
Grant-date fair value	$0.30 - $0.39

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Derivative Liability (Tables)

3 Months Ended

Aug. 31, 2018

Summary of Fair Value Warrant Derivative Liability and Related Common Shares

The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date September 15, 2016, May 31, 2018 and August 31, 2018:

	Shares Indexed		Derivative Liability
Inception date September 15, 2016		7,733,334	$	5,179,200
Balance May 31, 2018		7,733,334		1,323,732
Balance August 31, 2018		7,733,334	$	2,071,199

Assumptions used in Estimating Fair Value of Warrant Derivative Liability

The Company estimated the fair value of the warrant derivative liability as of inception date September 15, 2016, May 31, 2018 and August 31, 2018, using the following assumptions:

	September 15, 2016		May 31, 2018		August 31, 2018
Fair value of underlying stock	$	0.78	$	0.49	$	0.69
Risk free rate		1.20%		2.63%		2.72%
Expected term (in years)		5		3.3		3.04
Stock price volatility		106%		64%		64%
Expected dividend yield		—		—		—
Probability of Fundamental Transaction		50%		50%		50%
Probability of holder requesting cash payment		50%		50%		50%

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Stock Options and Warrants (Tables)

3 Months Ended

Aug. 31, 2018

Stock Option and Warrant Activity

The following table represents stock option and warrant activity as of and for the three months ended August 31, 2018:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Options and warrants outstanding—May 31, 2018		132,385,269		$	0.80		3.78	$	3,673
Granted		13,546,582			0.67		—		—
Exercised		—			—		—		—
Forfeited/expired/cancelled		(75,000	)		0.65		—		—
Options and warrants outstanding—August 31, 2018		145,856,851			0.79		3.74		1,710,190
Outstanding exercisable—August 31, 2018		141,382,362		$	0.79		3.58	$	1,200,567

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Acquisition of Patents (Tables)

3 Months Ended

Aug. 31, 2018

Intangible Assets Activity

The following presents intangible assets activity:

	August 31, 2018			May 31, 2018
Gross carrying amounts	$	3,500,000		$	3,500,000
Accumulated amortization		(2,056,365	)		(1,968,846	)
Total amortizable intangible assets, net		1,443,635			1,531,154
Patents currently not amortized		35,989			35,989
Carrying value of intangibles, net	$	1,479,624		$	1,567,143

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Registered Direct Equity Offerings (Tables)

3 Months Ended

Aug. 31, 2018

Summary of ASC 480 Allocation of Proceeds of Registered Offering

A summary of the cash proceeds of the Registered Offering is shown below:

Gross proceeds from sale of common stock	$	10,000,000
Placement agent fees and expenses		1,010,000
Total net proceeds	$	8,990,000

Summary of Cash Proceeds of Registered Offering

A summary of the ASC 480 allocation of the proceeds of the Registered Offering is as follows:

Allocated to common stock and additional paid in capital	$	6,334,417
Allocated to warrant liabilities		2,655,583
Total net proceeds	$	8,990,000

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Summary of Significant Accounting Policies - Additional Information (Detail)		3 Months Ended		8 Months Ended	12 Months Ended
	Nov. 01, 2017 shares	Aug. 31, 2018 USD ($) shares	Aug. 31, 2017 USD ($) shares	Aug. 31, 2018 USD ($) shares	May 31, 2018 USD ($) $ / shares shares	Dec. 31, 2017	Jun. 07, 2018 shares	Aug. 24, 2017 shares	Aug. 23, 2017 shares	Apr. 30, 2010 shares
Summary Of Significant Accounting Policies [Line Items]
Net loss		$ (14,413,569)	$ (11,628,273)
Accumulated (deficit)		(187,552,964)		$ (187,552,964)	$ (173,139,396)
Balance in excess of federally insured limits		4,700,000		4,700,000	1,100,000
Impairment charges		0	0
Pre-launch inventory qualified for capitalization		$ 0		$ 0	$ 0
Estimated future unvested forfeitures		0.00%
Common stock, shares authorized | shares	200,000,000	450,000,000		450,000,000	375,000,000		450,000,000	375,000,000	350,000,000	100,000,000
Treasury stock, par value | $ / shares					$ 0.001
Treasury stock, shares | shares					159,011
Debt discount		$ 626,242		$ 626,242
Amortization of discount on convertible notes		64,580	444,152
Direct costs associated with the convertible notes		100,000			$ 400,000
Amortization of debt issuance costs		$ 9,178	$ 113,700
Common stock options and warrants to purchase | shares		145,856,851	80,582,715
Unrecognized benefits		$ 0		$ 0
Federal statutory income tax rate, percent				21.00%		35.00%
Effective income tax rate reconciliation, at blended income tax rate, percent				28.62%
Tax cuts and jobs act of 2017, incomplete accounting, change in tax rate, deferred tax liability, provisional income tax benefit					17,497,051
Provision for taxes on income		0	$ 0		0
Equity Securities
Summary Of Significant Accounting Policies [Line Items]
Deferred offering costs		1,000,000	0	$ 1,000,000	3,500,000
Short-Term Convertible Notes
Summary Of Significant Accounting Policies [Line Items]
Amortization of debt issuance costs		9,000	114,000
Short-Term Convertible Notes | Detachable Common Stock Warrants
Summary Of Significant Accounting Policies [Line Items]
Debt discount		600,000		$ 600,000	$ 1,500,000
Amortization of discount on convertible notes		$ 65,000	$ 444,000
Series B Convertible Preferred Stock
Summary Of Significant Accounting Policies [Line Items]
Preferred Stock Shares authorized to be issued | shares		400,000		400,000	400,000
Common stock options and warrants to purchase | shares		92,100		92,100	92,100
Common shares issued upon conversion of preferred stock | shares		921,000
Maximum
Summary Of Significant Accounting Policies [Line Items]
Stockholders equity note stock split conversion ratio	0.067
Preferred Stock Shares authorized to be issued | shares		5,000,000		5,000,000
Minimum
Summary Of Significant Accounting Policies [Line Items]
Stockholders equity note stock split conversion ratio	0.500

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Liability Measured At Fair Value on Recurring Basis by Level within Fair Value Hierarchy (Detail) - USD ($)		Aug. 31, 2018	May 31, 2018
Liability:
Derivative liability	[1]	$ 2,071,199	$ 1,323,732
Total liability	[1]	2,071,199	1,323,732
Level 3
Liability:
Derivative liability	[1]	2,071,199	1,323,732
Total liability	[1]	$ 2,071,199	$ 1,323,732

[1] The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of August 31, 2018 and May 31, 2018.

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Liability Measured At Fair Value on Recurring Basis by Level within Fair Value Hierarchy (Parenthetical) (Detail) - USD ($)		Aug. 31, 2018	May 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities fair value	[1]	$ 2,071,199	$ 1,323,732
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets fair value		0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities fair value		$ 0	$ 0

[1] The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of August 31, 2018 and May 31, 2018.

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Reconciliation of Liability Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3) (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Aug. 31, 2018	May 31, 2018
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair value adjustments	$ 747,467	$ (3,855,468)
Ending Balance	$ 2,071,199	1,323,732
Investor Warrants Issued with Registered Direct Equity Offering
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Warrants issued		4,360,000
Placement Agent Warrants Issued with Registered Direct Equity Offering
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Warrants issued		$ 819,200

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Convertible Instruments - Additional Information (Detail)			1 Months Ended	3 Months Ended		12 Months Ended
	Jun. 26, 2018 USD ($) $ / shares	Jan. 31, 2018 USD ($) $ / shares shares	Aug. 31, 2018 USD ($) $ / shares shares	Aug. 31, 2018 USD ($) $ / shares shares	Aug. 31, 2017 USD ($)	May 31, 2018 USD ($) $ / shares shares	May 31, 2010 USD ($) $ / shares shares	Jun. 07, 2018 shares	Nov. 01, 2017 shares	Aug. 24, 2017 shares	Aug. 23, 2017 shares	Apr. 30, 2010 shares
Class of Stock [Line Items]
Common stock, shares authorized | shares			450,000,000	450,000,000		375,000,000		450,000,000	200,000,000	375,000,000	350,000,000	100,000,000
Common stock, par value | $ / shares			$ 0.001	$ 0.001		$ 0.001
Debt discount			$ 626,242	$ 626,242
Amortization of debt discount				64,580	$ 444,152
Amortization of debt issuance costs				9,178	113,700
Proceeds from sale of common stock and warrant				8,499,300
Interest expense				104,630	75,289
Conversion of Preferred Stock to Common Stock
Class of Stock [Line Items]
Undeclared dividend				199,200		$ 199,000
Accrued dividend			$ 398,400	398,400		$ 387,000
Short-Term Convertible Notes
Class of Stock [Line Items]
Conversion price | $ / shares						$ 0.75
Convertible note, aggregate principal		$ 6,000,000				$ 4,890,000
Convertible note maturity date		Jan. 31, 2018				Jan. 31, 2018
Convertible notes, interest rate						7.00%
Common stock warrants to purchase shares | shares		7,718,010
Exercise price of warrants, per share | $ / shares		$ 0.75
Payment obligation against which common stock issued		$ 5,788,500
Accrued but unpaid interest		$ 243,000
Number of shares to be sold | shares		12,062,728
Sale of Stock, Price Per Share | $ / shares		$ 0.50
Proceeds from sale of common stock and warrant		$ 6,000,000
Repayment of note		$ 259,000				$ 250,000
Interest expense				$ 0	75,000
Short-Term Convertible Notes | Investor Warrants
Class of Stock [Line Items]
Common stock warrants to purchase shares | shares			4,025,656	4,025,656
Exercise price of warrants, per share | $ / shares			$ 1.00	$ 1.00
Term of warrants			5 years
Short-Term Convertible Notes | Detachable Common Stock Warrants
Class of Stock [Line Items]
Debt discount			$ 600,000	$ 600,000		1,500,000
Amortization of debt discount				65,000	444,000
Unamortized issuance costs						$ 400,000
Amortization of debt issuance costs				0	114,000
Note
Class of Stock [Line Items]
Convertible notes, interest rate	10.00%
Debt discount			600,000	600,000
Amortization of debt discount				65,000	0
Unamortized issuance costs			$ 100,000	100,000
Amortization of debt issuance costs				10,000	0
Convertible promissory note maturity period	2 years
Convertible promissory note principle amount	$ 5,700,000
Proceeds from convertible promissory note	$ 5,000,000
Common stock conversion price | $ / shares	$ 0.55
Convertible promissory note maximum redemption amount	$ 350,000
Convertible promissory note redemption description	The Investor may redeem any portion of the Note, at any time after six months from the issue date upon five trading days' notice, subject to a maximum monthly redemption amount of $350,000.
Consecutive trading days	5
Terms of conversion	1.5
Interest expense				$ 104,000	$ 0
Common Stock
Class of Stock [Line Items]
Number of common shares issued upon conversion of preferred stock | shares			10	10
Conversion price | $ / shares			$ 0.50	$ 0.50
Series B Convertible Preferred Stock
Class of Stock [Line Items]
Series B Convertible preferred stock, shares issued | shares			92,100	92,100		92,100	400,000
Preferred Stock, Share issuance price | $ / shares							$ 5.00
Cash proceeds							$ 2,009,000
Series B Convertible preferred stock, shares outstanding | shares			92,100	92,100		92,100
Constructive dividend to Preferred stock holders				$ 6,000,000
Liquidation preference on common shares | $ / shares			$ 5.00	$ 5.00
Dividends are payable to preferred stock holders | $ / shares				0.25
Convertible preferred stock, par value | $ / shares			$ 0.001	$ 0.001		$ 0.001	$ 0.001

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Weighted Average Assumptions to Value Investor Warrants (Detail) - $ / shares		3 Months Ended	12 Months Ended
	Sep. 15, 2016	Aug. 31, 2018	May 31, 2018
Expected Term (In Years)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected term	5 years	3 years 15 days	3 years 3 months 19 days
Risk Free Interest Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Risk-free interest rate	1.20%	2.72%	2.63%
Grant Date Fair Value
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Grant-date fair value	$ 0.78	$ 0.69	$ 0.49
Detachable Common Stock Warrants | Short-Term Convertible Notes | Expected Dividend Yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected dividend yield		0.00%
Detachable Common Stock Warrants | Short-Term Convertible Notes | Stock Price Volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Stock price volatility		69.80%
Detachable Common Stock Warrants | Short-Term Convertible Notes | Expected Term (In Years)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected term		5 years
Detachable Common Stock Warrants | Minimum | Short-Term Convertible Notes | Risk Free Interest Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Risk-free interest rate		1.77%
Detachable Common Stock Warrants | Minimum | Short-Term Convertible Notes | Grant Date Fair Value
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Grant-date fair value		$ 0.30
Detachable Common Stock Warrants | Maximum | Short-Term Convertible Notes | Risk Free Interest Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Risk-free interest rate		1.93%
Detachable Common Stock Warrants | Maximum | Short-Term Convertible Notes | Grant Date Fair Value
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Grant-date fair value		$ 0.39

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Activity Related to Notes (Detail) - USD ($)		3 Months Ended	12 Months Ended
	Jan. 31, 2018	Aug. 31, 2018	May 31, 2018
Debt Instrument [Line Items]
Face amount of Note		$ 5,700,000
Unamortized discount		(626,242)
Carrying value of Note		5,073,758
Short-Term Debt
Debt Instrument [Line Items]
Face amount of Note		2,100,000
Monthly redemption		700,000
Unamortized discount		(344,614)
Carrying value of Note		2,455,386
Long-Term Debt
Debt Instrument [Line Items]
Face amount of Note		3,600,000
Monthly redemption		(700,000)
Unamortized discount		(281,628)
Carrying value of Note		$ 2,618,372
Short-Term Convertible Notes
Debt Instrument [Line Items]
Face amount of Note	$ 6,300,000		$ 6,038,500
Registered direct equity offering			(5,788,500)
Note repayment	$ (259,000)		$ (250,000)

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Summary of Fair Value Warrant Derivative Liability and Related Common Shares (Detail) - USD ($)		Aug. 31, 2018	May 31, 2018	Sep. 15, 2016
Derivative [Line Items]
Derivative liability	[1]	$ 2,071,199	$ 1,323,732
Registered Direct Equity Offering | Investor Warrants Issued with Registered Direct Equity Offering
Derivative [Line Items]
Shares indexed		7,733,334	7,733,334	7,733,334
Derivative liability		$ 2,071,199	$ 1,323,732	$ 5,179,200

[1] The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of August 31, 2018 and May 31, 2018.

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Derivative Liability - Additional Information (Detail) - USD ($)	3 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
Derivative [Line Items]
Change in fair value of derivative liability	$ (747,467)	$ (362,666)

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Assumptions used in Estimating Fair Value of Warrant Derivative Liability (Detail) - $ / shares		3 Months Ended	12 Months Ended
	Sep. 15, 2016	Aug. 31, 2018	May 31, 2018
Grant Date Fair Value
Derivative [Line Items]
Fair value of underlying stock	$ 0.78	$ 0.69	$ 0.49
Risk Free Interest Rate
Derivative [Line Items]
Risk free rate	1.20%	2.72%	2.63%
Expected Term (In Years)
Derivative [Line Items]
Expected term (in years)	5 years	3 years 15 days	3 years 3 months 19 days
Stock Price Volatility
Derivative [Line Items]
Stock price volatility	106.00%	64.00%	64.00%
Expected Dividend Yield
Derivative [Line Items]
Expected dividend yield	0.00%	0.00%	0.00%
Probability of Fundamental Transaction
Derivative [Line Items]
Probability of Fundamental Transaction	50.00%	50.00%	50.00%
Probability of Holder Requesting Cash Payment
Derivative [Line Items]
Probability of holder requesting cash payment	50.00%	50.00%	50.00%

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Stock Options and Warrants - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Aug. 31, 2018	Aug. 31, 2017	May 31, 2018	Jun. 15, 2018	Aug. 24, 2017	Sep. 30, 2016	Mar. 31, 2016	Feb. 28, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common Stock issued	233,880,390		216,881,790
Proceeds from Issuance of Common Stock	$ 8,990,000
Inducement interest related to warrant extensions		$ 826,252	$ 800,000
Compensation expense	$ 283,346	254,953
Placement Agent
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants to purchase common shares, shares				133,600		1,066,667
Term of warrants				5 years		5 years
Exercise price of warrants, per share				$ 0.55		$ 0.825
Investor
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of warrants, per share			$ 0.50
Common Stock issued			3,295,000
Proceeds from Issuance of Common Stock			$ 1,600,000
Before Inducement | Investor
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of warrants, per share			$ 1.00
Class of warrant or right expiration date			Jun. 30, 2017
Private Equity Offering
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants to purchase common shares, shares	7,514,300
Term of warrants	5 years
Exercise price of warrants, per share	$ 0.75
Proceeds from Issuance of Common Stock	$ 6,600,000
Private Equity Offering | Placement Agent
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants to purchase common shares, shares	1,422,860
Term of warrants	5 years
Exercise price of warrants, per share	$ 0.50
Subscription Agreements
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants to purchase common shares, shares				1,970,000
Term of warrants				5 years
Exercise price of warrants, per share				$ 0.75
2012 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 283,000	255,000
Grant date fair value of options and warrants	692,000	$ 447,000
Unrecognized compensation expense	$ 1,100,000
Weighted average period over which unrecognized compensation expense is expected to be recognized	1 year 7 months 6 days
2012 Equity Incentive Plan | Employee Stock Option One | Managing Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Stock options, term	10 years
2012 Equity Incentive Plan | Employee Stock Option One | Managing Director | Range One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option granted, Shares	680,822
Stock option granted, exerices price	$ 0.49
2012 Equity Incentive Plan | Employee Stock Option One | Managing Director | Range Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option granted, Shares	80,822
Stock option granted, exerices price	$ 0.47
2012 Equity Incentive Plan | Employee Stock Option One | Non Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option granted, Shares	80,822
Stock option granted, exerices price	$ 0.30
Stock options grant date fair value	$ 0.31
2012 Equity Incentive Plan | Employee Stock Option One | Non Employee Directors [Member] | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual increase stock option granted, shares	75,000
2012 Equity Incentive Plan | Employee Stock Option One | Non Employee Directors [Member] | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual increase stock option granted, shares	100,000
2012 Equity Incentive Plan | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future stock-based grants	2,403,048
2012 Equity Incentive Plan | Stock Options | Before Amendment
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future issuance					7,000,000		5,000,000	3,000,000
2012 Equity Incentive Plan | Stock Options | After Amendment
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for future issuance					15,000,000		7,000,000	5,000,000
2012 Equity Incentive Plan | Stock Options | Executive Management and Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option granted, Shares	875,000
Vesting period	3 years
Stock options, term	10 years
Stock options grant date fair value	$ 0.31
Stock options granted, exercise price, lower range limit	$ 0.49
2012 Equity Incentive Plan | Stock Options | Executive Chairman
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option granted, Shares	950,000
Stock option granted, exerices price	$ 0.49
Vesting period	24 months
Stock options, term	10 years
Stock options grant date fair value	$ 0.41

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Stock Options and Warrants (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Aug. 31, 2018	May 31, 2018
Stock option and warrant activity
Options and warrants outstanding, Number of Shares	132,385,269
Granted, Number of Shares	13,546,582
Exercised, Number of Shares	0
Forfeited/expired/cancelled, Number of Shares	(75,000)
Options and warrants outstanding, Number of Shares	145,856,851	132,385,269
Outstanding exercisable, Number of Shares	141,382,362
Options and warrants outstanding, Weighted Average Exercise Price	$ 0.80
Granted, Weighted Average Exercise Price	0.67
Exercised, Weighted Average Exercise Price	0
Forfeited/expired/cancelled, Weighted Average Exercise Price	0.65
Options and warrants outstanding, Weighted Average Exercise Price	0.79	$ 0.80
Outstanding exercisable, Weighted Average Exercise Price	$ 0.79
Options and warrants outstanding, Weighted Average Remaining Contractual Life in Years	3 years 8 months 26 days	3 years 9 months 11 days
Outstanding exercisable, Weighted Average Remaining Contractual Life in Years	3 years 6 months 29 days
Options and warrants outstanding, Aggregate Intrinsic Value	$ 1,710,190	$ 3,673
Outstanding exercisable, Aggregate Intrinsic Value	$ 1,200,567

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Acquisition of patents - Additional Information (Detail) - USD ($)		3 Months Ended
	Oct. 16, 2012	Aug. 31, 2018	Aug. 31, 2017
Acquired Finite-Lived Intangible Assets [Line Items]
Intangible asset acquired gross		$ 3,500,000
Estimated aggregate future amortization expense in next twelve months		350,000
Estimated aggregate future amortization expense in year two		350,000
Estimated aggregate future amortization expense in year three		350,000
Estimated aggregate future amortization expense in year four		350,000
Patents
Acquired Finite-Lived Intangible Assets [Line Items]
Asset purchase, cash paid	$ 3,500,000
Estimated useful life of acquired asset	10 years
Amortization expense related to acquired patents		$ 87,500	$ 87,500

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Intangible Assets Activity (Detail) - USD ($)	Aug. 31, 2018	May 31, 2018
Acquired Finite-Lived Intangible Assets [Line Items]
Gross carrying amounts	$ 3,500,000	$ 3,500,000
Accumulated amortization	(2,056,365)	(1,968,846)
Total amortizable intangible assets, net	1,443,635	1,531,154
Patents currently not amortized	35,989	35,989
Carrying value of intangibles, net	$ 1,479,624	$ 1,567,143

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License Agreements - Additional Information (Detail)	Aug. 31, 2018 USD ($)	May 31, 2018 USD ($)	Mar. 15, 2018 USD ($)	Mar. 15, 2018 GBP (£)
Licenses Agreements [Line Items]
Accrued license fee	$ 233,800	$ 133,600	$ 400,000	£ 300,000
Minimum
Licenses Agreements [Line Items]
Royalty on every net sales	0.75%
Maximum
Licenses Agreements [Line Items]
Royalty on every net sales	2.00%

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Commitments and Contingencies - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Aug. 31, 2018	May 31, 2016	May 31, 2018
Commitments and Contingencies [Line Items]
Asset Purchase Agreement Aggregate Consideration Paying Period	10 years
Payment to acquire other assets		$ 1,500,000
Prepaid execution fees for process validation and manufacturing activities	$ 2,451,983		$ 1,862,009
Minimum
Commitments and Contingencies [Line Items]
Royalty on every net sales	0.75%
Maximum
Commitments and Contingencies [Line Items]
Royalty on every net sales	2.00%
Development Milestone Payments
Commitments and Contingencies [Line Items]
Asset Purchase Agreement Aggregate Consideration Paying Period	10 years
Minimum annual license maintenance fees	$ 150,000
Project Work Order | Termination of Any One Clinical Trial | Minimum
Commitments and Contingencies [Line Items]
Financial penalties	100,000
Project Work Order | Termination of Any One Clinical Trial | Maximum
Commitments and Contingencies [Line Items]
Financial penalties	1,400,000
Project Work Order | Termination of All Clinical Trials | Minimum
Commitments and Contingencies [Line Items]
Financial penalties	500,000
Project Work Order | Termination of All Clinical Trials | Maximum
Commitments and Contingencies [Line Items]
Financial penalties	2,300,000
Contract Manufacturing Companies
Commitments and Contingencies [Line Items]
Execution fees for process validation and manufacturing activities	2,100,000
Prepaid execution fees for process validation and manufacturing activities	700,000
Contract Manufacturing Companies | Termination of Any One Clinical Trial | Maximum
Commitments and Contingencies [Line Items]
Financial penalties	1,700,000
Biologic License Application with the FDA or Non-U.S. Equivalent Regulatory Body | Milestone Payments
Commitments and Contingencies [Line Items]
Potential future milestone and royalties payments	500,000
First U.S. New Drug Application Approval by the FDA or Other Non-U.S. Approval | Milestone Payments
Commitments and Contingencies [Line Items]
Potential future milestone and royalties payments	$ 5,000,000
Royalty on every net sales	5.00%
FDA Approval or Approval by Another Non-U.S. Equivalent Regulatory Body | Development Milestone Payments
Commitments and Contingencies [Line Items]
Potential future milestone and royalties payments	$ 500,000
Royalty on every net sales	3.50%

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Private Securities Offerings - Additional Information (Detail) - USD ($)		1 Months Ended	3 Months Ended
	Jun. 15, 2018	Sep. 30, 2016	Aug. 31, 2018	May 31, 2018
Equity and Equity Units Offering Disclosure [Line Items]
Common stock, par value			$ 0.001	$ 0.001
Proceeds from issuance of common shares			$ 8,990,000
Placement Agent
Equity and Equity Units Offering Disclosure [Line Items]
Exercise price of warrants, per share	$ 0.55	$ 0.825
Warrants to purchase common shares, shares	133,600	1,066,667
Percentage of shares, issued as warrants	8.00%	8.00%
Term of warrants	5 years	5 years
Private Equity Offering
Equity and Equity Units Offering Disclosure [Line Items]
Exercise price of warrants, per share			$ 0.75
Warrant covering common stock shares purchased, percentage			50.00%
Common stock sold at private equity offering			15,028,600
Common stock, par value			$ 0.001
Proceeds from private equity offering			$ 7,500,000
Term of warrants			5 years
Warrants to purchase common shares, shares			7,514,300
Proceeds from issuance of common shares			$ 6,600,000
Term of warrants			5 years
Private Equity Offering | Placement Agent
Equity and Equity Units Offering Disclosure [Line Items]
Exercise price of warrants, per share			$ 0.50
Warrants to purchase common shares, shares			1,422,860
Percentage of shares, issued as warrants			10.00%
Term of warrants			5 years
Private Equity Offering | Warrants
Equity and Equity Units Offering Disclosure [Line Items]
Exercise price of warrants, per share			$ 0.75
Warrants to purchase common shares, shares			7,514,300

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Registered Direct Equity Offerings - Additional Information (Detail) - USD ($)					1 Months Ended	3 Months Ended	12 Months Ended
	Jun. 15, 2018	Feb. 01, 2018	Jan. 31, 2018	Jan. 30, 2018	Sep. 30, 2016	Aug. 31, 2018	May 31, 2018
Stockholders Equity Note [Line Items]
Proceeds from issuance of common shares						$ 8,990,000
Warrants issued included in closing costs						1,066,667
Fair value of placement agent warrants						$ 819,200
Proceeds allocated to financing expense						241,986
Issuance cost incurred						577,214
Gross proceeds from issuance of common stock						8,499,300
Long-term debt and capital lease obligations including current maturities						$ 5,700,000
Investor
Stockholders Equity Note [Line Items]
Class of warrants, exercise price							$ 0.50
Proceeds from issuance of common shares							$ 1,600,000
Short-Term Convertible Notes
Stockholders Equity Note [Line Items]
Purchase price, per share			$ 0.50
Warrants to purchase common shares, shares			7,718,010
Class of warrants, exercise price			$ 0.75
Term of warrants			5 years
Number of shares to be sold			12,062,728
Gross proceeds from issuance of common stock			$ 6,000,000
Debt Instrument, maturity date			Jan. 31, 2018				Jan. 31, 2018
Debt Instrument, face amount			$ 6,000,000				$ 4,890,000
Debt Instrument, accrued interest			300,000
Long-term debt and capital lease obligations including current maturities			6,300,000				6,038,500
Stock repurchased during period, value			$ 259,000				$ 250,000
Percentage of warrants coverage		100.00%	50.00%
Conversion of stock				$ 0.75
Reinvestment of the principal amount per share			$ 0.50
2013 Convertible Notes | Investor | Detachable Common Stock Warrants
Stockholders Equity Note [Line Items]
Inducement interest related to convertible notes			$ 2,400,000
2013 Convertible Notes | Investor | Detachable Common Stock Warrants | Minimum
Stockholders Equity Note [Line Items]
Class of warrants, exercise price			$ 0.75
2013 Convertible Notes | Investor | Detachable Common Stock Warrants | Maximum
Stockholders Equity Note [Line Items]
Class of warrants, exercise price			$ 1.00
Placement Agent
Stockholders Equity Note [Line Items]
Warrants to purchase common shares, shares	133,600				1,066,667
Class of warrants, exercise price	$ 0.55				$ 0.825
Term of warrants	5 years				5 years
Percentage of shares, issued as warrants	8.00%				8.00%
Placement Agent | Short-Term Convertible Notes
Stockholders Equity Note [Line Items]
Cash commission paid			$ 164,425
Securities Purchase Agreement
Stockholders Equity Note [Line Items]
Number of shares to be sold					13,333,334
Purchase price, per share					$ 0.75
Warrants to purchase common shares, shares					6,666,667
Class of warrants, exercise price					$ 1.00
Term of warrants					5 years
Proceeds from issuance of common shares					$ 9,000,000
Placement agent's fees, as a percentage of gross proceeds					8.00%
Subscription Agreements
Stockholders Equity Note [Line Items]
Number of shares to be sold	1,970,000
Purchase price, per share	$ 0.50
Warrants to purchase common shares, shares	1,970,000
Class of warrants, exercise price	$ 0.75
Term of warrants	5 years
Proceeds from issuance of common shares	$ 900,000

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Summary of Cash Proceeds of Registered Offering (Detail)	3 Months Ended
	Aug. 31, 2018 USD ($)
Stockholders Equity Note [Line Items]
Gross proceeds from sale of common stock	$ 10,000,000
Placement agent fees and expenses	1,010,000
Total net proceeds	$ 8,990,000

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Summary of ASC 480 Allocation of Proceeds of Registered Offering (Detail)	3 Months Ended
	Aug. 31, 2018 USD ($)
Stockholders Equity Note [Line Items]
Proceeds from issuance of common shares	$ 8,990,000
Common Stock Including Additional Paid in Capital
Stockholders Equity Note [Line Items]
Proceeds from issuance of common shares	6,334,417
Warrants (equity allocation)
Stockholders Equity Note [Line Items]
Proceeds from issuance of common shares	$ 2,655,583

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Employee Benefit Plan - Additional Information (Detail) - Employee Savings Plan - USD ($)	3 Months Ended
	Aug. 31, 2018	Aug. 31, 2017
Defined Contribution Plan Disclosure [Line Items]
Qualified non-elective contribution	3.00%
Qualified non-elective contribution expense	$ 15,800	$ 10,800

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Related Party Transactions - Additional Information (Detail) - USD ($)				3 Months Ended
	Nov. 08, 2017	Jul. 28, 2017	Jul. 26, 2017	Aug. 31, 2018	Jul. 10, 2018
Private Equity Offering
Related Party Transaction [Line Items]
Proceeds from private equity offering				$ 7,500,000
Warrants to purchase common shares, shares				7,514,300
Exercise price of warrants, per share				$ 0.75
Chief Science Officer
Related Party Transaction [Line Items]
Stock options covered					500,000
Managing Director
Related Party Transaction [Line Items]
Stock options covered					100,000
Jordan G. Naydenov | Private Equity Offering
Related Party Transaction [Line Items]
Warrants to purchase common shares, shares			66,666
Exercise price of warrants, per share			$ 1.00
Jordan G. Naydenov | Short Term Convertible Promissory Notes | Private Equity Offering
Related Party Transaction [Line Items]
Purchased short term convertible promissory note interest			7.00%
Proceeds from private equity offering			$ 100,000
Alpha Venture Capital Partners, L.P.
Related Party Transaction [Line Items]
Warrants to purchase common shares, shares		33,333
Exercise price of warrants, per share		$ 1.00
Alpha Venture Capital Partners, L.P. | Short Term Convertible Promissory Notes
Related Party Transaction [Line Items]
Purchased short term convertible promissory note interest		7.00%
Proceeds from private equity offering		$ 50,000
Anthony D Caracciolo | Private Equity Offering
Related Party Transaction [Line Items]
Stock and warrants issued during period value common stock and warrants	$ 100,000

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Subsequent Events - Additional Information (Detail) - USD ($)	1 Months Ended	3 Months Ended
	Oct. 04, 2018	Aug. 31, 2018	Jun. 15, 2018	May 31, 2018	Sep. 30, 2016
Subsequent Event [Line Items]
Common stock, par value		$ 0.001		$ 0.001
Placement Agent
Subsequent Event [Line Items]
Exercise price of warrants, per share			$ 0.55		$ 0.825
Term of warrants			5 years		5 years
Warrants to purchase common shares, shares			133,600		1,066,667
Private Equity Offering
Subsequent Event [Line Items]
Exercise price of warrants, per share		$ 0.75
Warrant covering common stock shares purchased, percentage		50.00%
Common stock sold at private equity offering		15,028,600
Common stock, par value		$ 0.001
Proceeds from private equity offering		$ 7,500,000
Term of warrants		5 years
Warrants to purchase common shares, shares		7,514,300
Private Equity Offering | Warrants
Subsequent Event [Line Items]
Exercise price of warrants, per share		$ 0.75
Warrants to purchase common shares, shares		7,514,300
Private Equity Offering | Placement Agent
Subsequent Event [Line Items]
Exercise price of warrants, per share		$ 0.50
Term of warrants		5 years
Warrants to purchase common shares, shares		1,422,860
Private Equity Offering | Subsequent Event
Subsequent Event [Line Items]
Exercise price of warrants, per share	$ 0.50
Warrant covering common stock shares purchased, percentage	50.00%
Common stock sold at private equity offering	22,661,570
Common stock, par value	$ 0.001
Proceeds from private equity offering	$ 11,300,000
Term of warrants	5 years
Private Equity Offering | Subsequent Event | Warrants
Subsequent Event [Line Items]
Exercise price of warrants, per share	$ 0.75
Warrants to purchase common shares, shares	11,330,785
Private Equity Offering | Subsequent Event | Placement Agent
Subsequent Event [Line Items]
Exercise price of warrants, per share	$ 0.50
Term of warrants	5 years
Warrants to purchase common shares, shares	2,174,157
Aggregate cash fee	$ 1,300,000
Payment of one-time non-accountable expense fee	$ 25,000