0001193125-19-005378.txt : 20190109 0001193125-19-005378.hdr.sgml : 20190109 20190109163220 ACCESSION NUMBER: 0001193125-19-005378 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 67 CONFORMED PERIOD OF REPORT: 20181130 FILED AS OF DATE: 20190109 DATE AS OF CHANGE: 20190109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CytoDyn Inc. CENTRAL INDEX KEY: 0001175680 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 753056237 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-49908 FILM NUMBER: 19518511 BUSINESS ADDRESS: STREET 1: 1111 MAIN STREET, SUITE 660 CITY: VANCOUVER STATE: WA ZIP: 98660 BUSINESS PHONE: 360-980-8524 MAIL ADDRESS: STREET 1: 1111 MAIN STREET, SUITE 660 CITY: VANCOUVER STATE: WA ZIP: 98660 FORMER COMPANY: FORMER CONFORMED NAME: CYTODYN INC DATE OF NAME CHANGE: 20031114 FORMER COMPANY: FORMER CONFORMED NAME: REXRAY CORP DATE OF NAME CHANGE: 20020617 10-Q 1 d683024d10q.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 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   83-1887078

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer or

Identification No.)

1111 Main Street, Suite 660

Vancouver, Washington

  98660
(Address of principal executive offices)   (Zip Code)

(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 December 31, 2018, there were 292,923,481 shares outstanding of the registrant’s $0.001 par value common stock.

 

 

 


Table of Contents


Table of Contents

PART I

Item 1. Financial Statements.

CytoDyn Inc.

Consolidated Balance Sheets

 

     November 30, 2018     May 31, 2018  
     (unaudited)        

Assets

    

Current assets:

    

Cash

   $ 772,361     $ 1,231,445  

Prepaid expenses

     200,890       227,173  

Prepaid service fees

     2,954,624       1,862,009  
  

 

 

   

 

 

 

Total current assets

     3,927,875       3,320,627  

Furniture and equipment, net

     10,127       11,228  

Intangibles, net

     16,452,951       1,567,143  
  

 

 

   

 

 

 

Total assets

   $ 20,390,953     $ 4,898,998  
  

 

 

   

 

 

 

Liabilities and Stockholders’ (Deficit) Equity

    

Current liabilities:

    

Accounts payable

   $ 18,852,414     $ 15,841,859  

Accrued liabilities and compensation

     560,013       757,778  

Accrued license fees

     347,333       133,600  

Accrued interest on convertible notes

     23,001       —    

Convertible note payable, net

     4,200,000       —    
  

 

 

   

 

 

 

Total current liabilities

     23,982,761       16,733,237  
  

 

 

   

 

 

 

Long-term liabilities:

    

Convertible note payable, net

     1,396,974       —    

Derivative liabilities

     3,075,142       1,323,732  
  

 

 

   

 

 

 

Total long-term liabilities

     4,472,116       1,323,732  
  

 

 

   

 

 

 

Total liabilities

     28,454,877       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 November 30, 2018 and May 31, 2018, respectively

     92       92  

Common stock, $0.001 par value; 600,000,000 and 375,000,000 shares authorized, 290,808,960 and 216,881,790 issued and 290,649,949 and 216,722,779 outstanding at November 30, 2018 and May 31, 2018, respectively

     290,810       216,881  

Additional paid-in capital

     193,503,678       159,764,611  

Accumulated (deficit)

     (201,858,345     (173,139,396

Less: treasury stock, at par (159,011 shares at $0.001)

     (159     (159
  

 

 

   

 

 

 

Total stockholders’ (deficit)

     (8,063,924     (13,157,971
  

 

 

   

 

 

 

Total liabilities and stockholders’ (deficit) equity

   $ 20,390,953     $ 4,898,998  
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

3


Table of Contents

CytoDyn Inc.

Consolidated Statements of Operations

(Unaudited)

 

     Three Months Ended November 30,     Six Months Ended November 30,  
     2018     2017     2018     2017  

Operating expenses:

        

General and administrative

   $ 2,663,745     $ 1,608,743     $ 4,594,804     $ 3,178,420  

Research and development

     12,869,244       9,077,172       24,337,910       17,225,348  

Amortization and depreciation

     154,801       89,136       243,772       178,282  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     15,687,790       10,775,051       29,176,486       20,582,050  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (15,687,790     (10,775,051     (29,176,486     (20,582,050

Interest income

     1,021       422       2,002       1,206  

Change in fair value of derivative liabilities

     281,055       829,600       (466,412     466,934  

Interest expense:

        

Amortization of discount on convertible notes

     (52,954     (728,843     (117,534     (1,172,995

Amortization of debt issuance costs

     (10,411     (168,429     (19,589     (282,129

Loss on extinguishment of convertible note

     (1,519,603     —         (1,519,603     —    

Inducement interest related to warrant exercise

     —         —         —         (826,252

Interest on convertible note payable

     (143,617     (105,384     (248,247     (180,673
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     (1,726,585     (1,002,656     (1,904,973     (2,462,049
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (17,132,299     (10,947,685     (31,545,869     (22,575,959

Income tax benefit

     2,826,919       —         2,826,919       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (14,305,380   $ (10,947,685   $ (28,718,950   $ (22,575,959
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted loss per share

   $ (0.06   $ (0.07   $ (0.12   $ (0.15
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted weighted average common shares outstanding

     259,088,835       157,843,773       238,731,091       154,774,327  
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

4


Table of Contents

CytoDyn Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

     Six Months Ended November 30,  
     2018     2017  

Cash flows from operating activities:

    

Net loss

   $ (28,718,950   $ (22,575,959

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

    

Amortization and depreciation

     243,772       178,282  

Amortization of debt issuance costs

     19,589       282,129  

Amortization of discount on convertible notes

     117,534       1,172,995  

Inducement interest related to warrant exercise

     —         826,252  

Interest expense associated with derivative liabilities

     —         —    

Change in fair value of derivative liabilities

     466,412       (466,934

Stock-based compensation

     1,510,486       529,617  

Loss on extinguishment of convertible note

     1,519,603       —    

Deferred income tax benefit

     (2,826,919     —    

Changes in current assets and liabilities:

    

(Increase) decrease in prepaid expenses

     (1,807,629     907,606  

Increase in accounts payable and accrued expenses

     3,283,113       6,256,192  
  

 

 

   

 

 

 

Net cash used in operating activities

     (26,192,989     (12,889,820
  

 

 

   

 

 

 

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

     23,463,585       7,050,651  

Proceeds from warrant exercises

     —         1,647,500  

Proceeds from convertible note payable

     5,000,000       4,888,500  

Payment of offering costs

     (2,727,418     (1,175,575
  

 

 

   

 

 

 

Net cash provided by financing activities

     25,736,167       12,411,076  
  

 

 

   

 

 

 

Net change in cash

     (459,084     (478,744

Cash, beginning of period

     1,231,445       1,775,583  
  

 

 

   

 

 

 

Cash, end of period

   $ 772,361     $ 1,296,839  
  

 

 

   

 

 

 

Non-cash investing and financing transactions:

    

Financing costs associated with placement agent warrants

   $ —       $ 70,383  
  

 

 

   

 

 

 

Accrued interest converted into note payable

   $ 225,245     $ —    
  

 

 

   

 

 

 

Debt discount associated with convertible notes payable

   $ 700,000     $ 1,574,628  
  

 

 

   

 

 

 

Common stock issued for acquisition of ProstaGene, LLC

   $ 11,558,000       —    
  

 

 

   

 

 

 

Derivative liability associated a convertible note payable

   $ 1,284,998     $ —    
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

5


Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

 

     Preferred Stock      Common Stock      Treasury Stock  
     Shares      Amount      Shares      Amount      Shares      Amount  

Balance May 31, 2017

     92,100      $ 92        149,468,244      $ 149,468        —        $ —    

First Quarter Fiscal Year Ended May 31, 2018

                 

Proceeds from warrant exercise ($0.50/share)

     —          —          3,295,000        3,295        —          —    

Offering costs related to warrant tender offer

     —          —          —          —          —          —    

Proceeds from private equity offering ($0.50/share)

     —          —          —          —          —          —    

Offering costs related to private equity offering

     —          —          —          —          —          —    

Proceeds from registered direct offering ($0.50/share)

     —          —          —          —          —          —    

Offering costs related to registered direct offering

     —          —          —          —          —          —    

Legal fees in connection with equity offerings

     —          —          —          —          —          —    

Interest expense related to warrant tender offer

     —          —          —          —          —          —    

Interest expense related to conversion of notes payable

     —          —          —          —          —          —    

Stock issued for bonuses and tendered for income tax

     —          —          —          —          —          —    

Stock issued for board compensation

     —          —          —          —          —          —    

Stock-based compensation

     —          —          —          —          —          —    

Interest expense related to warrant extension

     —          —          —          —          —          —    

Debt discount related to convertible notes payable

     —          —          —          —          —          —    

Net loss August 31, 2017

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance August 31, 2017

     92,100      $ 92        152,763,244      $ 152,763        —        $ —    

Second Quarter Fiscal Year Ended May 31, 2018

                 

Proceeds from warrant exercise ($0.50/share)

     —          —          —          —          —          —    

Offering costs related to warrant tender offer

     —          —          —          —          —          —    

Proceeds from private equity offering ($0.50/share)

     —          —          6,651,800        6,652        —          —    

Offering costs related to private equity offering

     —          —          —          —          —          —    

Proceeds from registered direct offering ($0.50/share)

     —          —          5,720,111        5,720        —          —    

Offering costs related to registered direct offering

     —          —          —          —          —          —    

Legal fees in connection with equity offerings

     —          —          —          —          —          —    

Interest expense related to conversion of notes payable

     —          —          —          —          —          —    

Interest expense related to warrant tender offer

     —          —          —          —          —          —    

Stock issued for bonuses and tendered for income tax

     —          —          —          —          —          —    

Stock issued for board compensation

     —          —          —          —          —          —    

Stock-based compensation

     —          —          —          —          —          —    

Interest expense related to warrant extension

     —          —          —          —          —          —    

Debt discount related to convertible notes payable

     —          —          —          —          —          —    

Net loss November 30, 2017

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance November 30, 2017

     92,100      $ 92        165,135,155      $ 165,135        —        $ —    

 

See accompanying notes to consolidated financial statements

 

6


Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

 

     Preferred Stock      Common Stock      Treasury Stock  
     Shares      Amount      Shares      Amount      Shares      Amount  

Third Quarter Fiscal Year Ended May 31, 2018

                 

Proceeds from warrant exercise ($0.50/share)

     —          —          —          —          —          —    

Offering costs related to warrant tender offer

     —          —          —          —          —          —    

Proceeds from private equity offering ($0.50/share)

     —          —          28,635,104        28,635        —          —    

Offering costs related to private equity offering

     —          —          —          —          —          —    

Proceeds from registered direct offering ($0.50/share)

     —          —          15,133,742        15,134        —          —    

Offering costs related to registered direct offering

     —          —          —          —          —          —    

Legal fees in connection with equity offerings

     —          —          —          —          —          —    

Interest expense related to conversion of notes payable

     —          —          —          —          —          —    

Interest expense related to warrant tender offer

     —          —          —          —          —          —    

Stock issued for bonuses and tendered for income tax

     —          —          —          —          —          —    

Stock issued for board compensation

     —          —          —          —          —          —    

Stock-based compensation

     —          —          —          —          —          —    

Interest expense related to warrant extension

     —          —          —          —          —          —    

Debt discount related to convertible notes payable

     —          —          —          —          —          —    

Net loss February 28, 2018

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance February 28, 2018

     92,100      $ 92        208,904,001      $ 208,904        —        $ —    

Fourth Quarter Fiscal Year Ended May 31, 2018

                 

Proceeds from warrant exercise ($0.50/share)

     —          —          3,027,263        3,027        —          —    

Offering costs related to warrant tender offer

     —          —          —          —          —          —    

Proceeds from private equity offering ($0.50/share)

     —          —          —          —          —          —    

Offering costs related to private equity offering

     —          —          —          —          —          —    

Proceeds from registered direct offering ($0.50/share)

     —          —          4,640,000        4,640        —          —    

Offering costs related to registered direct offering

     —          —          —          —          —          —    

Legal fees in connection with equity offerings

     —          —          —          —          —          —    

Interest expense related to conversion of notes payable

     —          —          —          —          —          —    

Interest expense related to warrant tender offer

     —          —          —          —          —          —    

Stock issued for bonuses and tendered for income tax

     —          —          310,526        310        159,011        (159

Stock issued for board compensation

     —          —          —          —          —          —    

Stock-based compensation

     —          —          —          —          —          —    

Interest expense related to warrant extension

     —          —          —          —          —          —    

Debt discount related to convertible notes payable

     —          —          —          —          —          —    

Net Loss May 31, 2018

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance May 31, 2018

     92,100      $ 92        216,881,790      $ 216,881        159,011      $ (159

See accompanying notes to consolidated financial statements

 

7


Table of Contents

CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

 

     Preferred Stock      Common Stock      Treasury Stock  
     Shares      Amount      Shares      Amount      Shares      Amount  

Balance May 31, 2018

     92,100      $ 92        216,881,790      $ 216,881        159,011      $ (159

First Quarter Fiscal Year Ended May 31, 2019

                 

Acquisition of ProstaGene LLC

     —          —          —          —          —          —    

Issuance of stock payment shares

     —          —          —          —          —          —    

Proceeds from registered direct offering ($0.50/share)

     —          —          1,970,000        1,970        —          —    

Offering costs related to registered direct offering

     —          —          —          —          —          —    

Proceeds from private equity offering ($0.50/share)

     —          —          15,028,600        15,029        —          —    

Offering costs related to private equity offering

     —          —          —          —          —          —    

Legal fees in connection with equity offerings

     —          —          —          —          —          —    

Stock-based compensation

     —          —          —          —          —          —    

Net Loss August 31, 2018

     —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance August 31, 2018

     92,100      $ 92        233,880,390      $ 233,880        159,011      $ (159

Second Quarter Fiscal Year Ended May 31, 2019

                 

Acquisition of ProstaGene LLC

     —          —          18,658,000        18,658        —          —    

Issuance of stock payment shares

     —          —          8,342,000        8,342        —          —    

Proceeds from registered direct offering ($0.50/share)

     —          —          —          —          —          —    

Offering costs related to registered direct offering

     —          —          —          —          —          —    

Proceeds from private equity offering ($0.50/share)

     —          —          29,928,570        29,930        —          —    

Offering costs related to private equity offering

     —          —          —          —          —          —    

Legal fees in connection with equity offerings

     —          —          —          —          —          —    

Stock-based compensation

     —          —          —          —          —          —    

Net Loss November 30, 2018

     —          —             —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance November 30, 2018

     92,100      $ 92        290,808,960      $ 290,810        159,011      $ (159
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes to consolidated financial statements

 

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CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

 

 

     Additional
Paid-In Capital
    Accumulated
Deficit
    Total     Fiscal Year
To Date
 

Balance May 31, 2017

   $ 121,736,921     $ (122,989,715   $ (1,103,234   $ (1,103,234

First Quarter Fiscal Year Ended May 31, 2018

        

Proceeds from warrant exercise ($0.50/share)

     1,644,205       —         1,647,500       1,647,500  

Offering costs related to warrant tender offer

     —         —         —         —    

Proceeds from private equity offering ($0.50/share)

     —         —         —         —    

Offering costs related to private equity offering

     —         —         —         —    

Proceeds from registered direct offering ($0.50/share)

     —         —         —         —    

Offering costs related to registered direct offering

     —         —         —         —    

Legal fees in connection with equity offerings

     —         —         —         —    

Interest expense related to warrant tender offer

     —         —         —         —    

Interest expense related to conversion of notes payable

     —         —         —         —    

Stock issued for bonuses and tendered for income tax

     —         —         —         —    

Stock issued for board compensation

     —         —         —         —    

Stock-based compensation

     254,952       —         254,952       254,952  

Interest expense related to warrant extension

     826,252       —         826,252       826,252  

Debt discount related to convertible notes payable

     1,645,010       —         1,645,010       1,645,010  

Net loss August 31, 2017

     —         (11,628,273     (11,628,273     (11,628,273
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance August 31, 2017

   $ 126,107,340     $ (134,617,988   $ (8,357,793   $ (8,357,793
        

 

 

 

Second Quarter Fiscal Year Ended May 31, 2018

        

Proceeds from warrant exercise ($0.50/share)

     —         —         —         1,647,500  

Offering costs related to warrant tender offer

     —         —         —         —    

Proceeds from private equity offering ($0.50/share)

     3,318,745       —         3,325,397       3,325,397  

Offering costs related to private equity offering

     (312,456     —         (312,456     (312,456

Proceeds from registered direct offering ($0.50/share)

     3,719,534       —         3,725,254       3,725,254  

Offering costs related to registered direct offering

     (319,228     —         (319,228     (319,228

Legal fees in connection with equity offerings

     (178,664     —         (178,664     (178,664

Interest expense related to conversion of notes payable

     —         —         —         —    

Interest expense related to warrant tender offer

     —         —         —         —    

Stock issued for bonuses and tendered for income tax

     —         —         —         —    

Stock issued for board compensation

     —         —         —         —    

Stock-based compensation

     274,665       —         274,665       529,617  

Interest expense related to warrant extension

     —         —         —         826,252  

Debt discount related to convertible notes payable

     —         —         —         1,645,010  

Net loss November 30, 2017

     —         (10,947,685     (10,947,685     (22,575,958
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance November 30, 2017

   $ 132,609,936     $ (145,565,673   $ (12,790,510   $ (12,790,510
        

 

 

 

See accompanying notes to consolidated financial statements

 

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CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

 

     Additional
Paid-In Capital
    Accumulated
Deficit
    Total     Fiscal Year
To Date
 

Balance November 30, 2017

   $ 132,609,936     $ (145,565,673   $ (12,790,510   $ (12,790,510
        

 

 

 

Third Quarter Fiscal Year Ended May 31, 2018

        

Proceeds from warrant exercise ($0.50/share)

     —         —         —         1,647,500  

Offering costs related to warrant tender offer

     —         —         —         —    

Proceeds from private equity offering ($0.50/share)

     14,288,916       —         14,317,551       17,642,948  

Offering costs related to private equity offering

     (1,416,786     —         (1,416,786     (1,729,242

Proceeds from registered direct offering ($0.50/share)

     7,551,031       —         7,566,165       11,291,419  

Offering costs related to registered direct offering

     (331,621     —         (331,621     (650,849

Legal fees in connection with equity offerings

     (166,222     —         (166,222     (344,886

Interest expense related to conversion of notes payable

     2,352,045       —         2,352,045       2,352,045  

Interest expense related to warrant tender offer

     —         —         —         —    

Stock issued for bonuses and tendered for income tax

     —         —         —         —    

Stock issued for board compensation

     260,190       —         260,190       260,190  

Stock-based compensation

     566,609       —         566,609       1,096,226  

Interest expense related to warrant extension

     —         —         —         826,252  

Debt discount related to convertible notes payable

     —         —         —         1,645,010  

Net loss February 28, 2018

     —         (17,950,100     (17,950,100     (40,526,058
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance February 28, 2018

   $ 155,714,098     $ (163,515,773   $ (7,592,679   $ (7,592,679
        

 

 

 

Fourth Quarter Fiscal Year Ended May 31, 2018

        

Proceeds from warrant exercise ($0.50/share)

     1,510,604       —         1,513,631       3,161,131  

Offering costs related to warrant tender offer

     (73,234     —         (73,234     (73,234

Proceeds from private equity offering ($0.50/share)

     —         —         —         17,642,948  

Offering costs related to private equity offering

     —         —         —         (1,729,242

Proceeds from registered direct offering ($0.50/share)

     2,315,360       —         2,320,000       13,611,419  

Offering costs related to registered direct offering

     (206,300     —         (206,300     (857,149

Legal fees in connection with equity offerings

     (188,548     —         (188,548     (533,434

Interest expense related to conversion of notes payable

     —         —         —         2,352,045  

Interest expense related to warrant tender offer

     393,686       —         393,686       393,686  

Stock issued for bonuses and tendered for income tax

     104,394       —         104,545       104,545  

Stock issued for board compensation

     —         —         —         260,190  

Stock-based compensation

     194,551       —         194,551       1,290,777  

Interest expense related to warrant extension

     —         —         —         826,252  

Debt discount related to convertible notes payable

     —         —         —         1,645,010  

Net Loss May 31, 2018

     —         (9,623,623     (9,623,623     (50,149,681
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance May 31, 2018

   $ 159,764,611     $ (173,139,396   $ (13,157,971   $ (13,157,971
        

 

 

 

See accompanying notes to consolidated financial statements

 

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CytoDyn Inc.

Consolidated Statement of Changes in Stockholders’ (Deficit)/ Equity

(Unaudited)

 

     Additional
Paid-In Capital
    Accumulated
Deficit
    Total     Fiscal Year
To Date
 

Balance May 31, 2018

   $ 159,764,611     $ (173,139,396   $ (13,157,971   $ (13,157,971

First Quarter Fiscal Year Ended May 31, 2019

        

Acquisition of ProstaGene LLC

     —         —         —         —    

Issuance of stock payment shares

     —         —         —         —    

Proceeds from registered direct offering ($0.50/share)

     983,030       —         985,000       985,000  

Offering costs related to registered direct offering

     (75,151     —         (75,151     (75,151

Proceeds from private equity offering ($0.50/share)

     7,499,271       —         7,514,300       7,514,300  

Offering costs related to private equity offering

     (882,716     —         (882,716     (882,716

Legal fees in connection with equity offerings

     (50,544     —         (50,544     (50,544

Stock-based compensation

     283,346       —         283,346       283,346  

Net Loss August 31, 2018

     —         (14,413,569     (14,413,569     (14,413,569
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance August 31, 2018

   $ 167,521,847     $ (187,552,965   $ (19,797,305     (19,797,305

Second Quarter Fiscal Year Ended May 31, 2019

        

Acquisition of ProstaGene LLC

     11,539,342       —         11,558,000       11,558,000  

Issuance of stock payment shares

     —         —         8,342       8,342  

Proceeds from registered direct offering ($0.50/share)

     —         —         —         985,000  

Offering costs related to registered direct offering

     —         —         —         (75,151

Proceeds from private equity offering ($0.50/share)

     14,934,355       —         14,964,285       22,478,585  

Offering costs related to private equity offering

     (1,693,354     —         (1,693,354     (2,576,070

Legal fees in connection with equity offerings

     (25,652     —         (25,652     (76,195

Stock-based compensation

     1,227,140       —         1,227,140       1,510,486  

Net Loss November 30, 2018

       (14,305,380     (14,305,380     (28,718,950
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance November 30, 2018

   $ 193,503,678     $ (201,858,345   $ (8,063,924   $ (8,063,924
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements

 

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CYTODYN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF NOVEMBER 30, 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. Effective November 16, 2018, we implemented a holding company reorganization, as a result of which, we became the successor issuer and reporting company to the former CytoDyn Inc. (now our wholly owned subsidiary, CytoDyn Operations Inc.). 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, leronlimab (PRO 140), belongs to a class of HIV therapies known as entry inhibitors that 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 leronlimab (PRO 140) to include the evaluation of 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 November 30, 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 and six months ended November 30, 2018 and November 30, 2017, (b) the financial position at November 30, 2018 and (c) cash flows for the six month periods ended November 30, 2018 and November 30, 2017.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, CytoDyn Operations Inc., Advanced Genetic Technologies, Inc. (“AGTI”) and CytoDyn Veterinary Medicine LLC (“CVM”), of which both AGTI and CVM 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 $28,718,950 for the six months ended November 30, 2018 and has an accumulated deficit of $201,858,345 as of November 30, 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

 

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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 November 30, 2018 and May 31, 2018 approximated $0.5 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 six months ended November 30, 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 November 30, 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 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.

 

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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.

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of November 30, 2018 and May 31, 2018 is as follows:

 

     Fair Value Measurement at      Fair Value Measurement at  
     November 30, 2018 (1)      May 31, 2018 (1)  
     Using             Using         
     Level 3      Total      Level 3      Total  

Liabilities:

           

Derivative liability - warrants

   $ 1,789,066      $ 1,789,066      $ 1,323,732      $ 1,323,732  

Derivative liability - convertible note redemption provision

     1,286,076        1,286,076        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 3,075,142      $ 3,075,142      $ 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 November 30, 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. The Company uses a Binomial Lattice Model to estimate the value of the warrant derivative liability and a Monte Carlo Simulation to value the derivative liability of the redemption provision within a convertible promissory note. These valuation models were used because management believes they reflect all the assumptions that market participants would likely consider in negotiating the transfer of the instruments. The Company’s derivative liabilities are classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation models. 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 six months ended November 30, 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  

Inception date value of redemption provision

     1,284,998  

Fair value adjustments

     466,412  
  

 

 

 

Balance at November 30, 2018

   $ 3,075,142  
  

 

 

 

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. Periodically, the Company will issue restricted common stock to third parties as compensation for services rendered. Such stock awards are valued at fair market value on the effective date of the Company’s obligation.

 

 

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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 8, 2018 at the 2018 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 450,000,000 to 600,000,000. Subsequent to the 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 the authorized share increase.

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 November 30, 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 six months ended November 30, 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 six months ended November 30, 2018 and November 30, 2017, the Company recorded approximately $117,500 and $1.2 million of related amortization.

Debt Issuance Cost

During the six months ended November 30, 2018 and the year ended May 31, 2018, the Company incurred direct costs associated with the issuance of 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 $20,000 and $0.3 million of related amortization for the six months ended November 30, 2018 and November 30, 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 $2.7 million and $0.6 million for the six months ended November 30, 2018 and November 30, 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 155,836,676 and 87,551,801 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 six months ended November 30, 2018 and November 30, 2017, respectively. Additionally, as of November 30, 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 Accounting Standards Codification (“ASC”) ASC 740-10 “Uncertainty in Income Taxes”. 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. For the year ending May 31, 2019 a deferred tax rate of 21% is being utilized and a corresponding valuation allowance adjustment is being recorded for the generation of deferred tax assets reversing in the future. For the three months ending November 30, 2018 the Company recorded a $2,826,919 deferred income tax benefit from a reduction in the Company’s deferred tax valuation allowance resulting from recording a deferred tax liability of $2,826,919 in connection with the acquisition of assets in the ProstaGene LLC transaction (see Note 7) . The deferred tax liability represents the tax effect of the difference in the carrying value of the assets and their tax basis at acquisition. The Company has a full valuation allowance on the Company’s net deferred tax assets as of November 30, 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 August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13 Fair Value Measurement (Topic 820) Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update provides guidance that remove, modify and add to the disclosure requirements related to fair value measurements. The guidance removes the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 assets, the policy for timing and transfers between levels and the valuation process for Level 3 fair value measurements. The guidance modifies disclosure requirements for investments in certain entities that calculate net asset value and clarifies the purpose of the measurement uncertainty disclosure. The guidance adds requirements to disclose changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements and to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

In June 2018, FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share Based Payment Accounting. The amendments in this Update expand the scope of stock compensation to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance in this Update does not apply to transactions involving equity instruments granted to a lender or investor that provides financing to the issuer. The guidance is effective for fiscal years beginning after December 31, 2018 including interim periods within the fiscal year. The Company is currently assessing the impact this Update may have on its consolidated financial statements.

In March 2018, FASB issued 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.

 

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In July 2017, FASB issued 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. The adoption of ASU 2017-09 did not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which narrows the definition of a business and clarifies that to be considered a business, the fair value of gross assets acquired (or disposed of) should not be concentrated in a single identifiable asset or a group of similar identifiable assets. In addition, to be considered a business, an acquisition would have to include an input and a substantive process that together will significantly contribute to the ability to create an output. Also, the amendments narrow the definition of the term “output” so that it is consistent with how outputs are defined in ASC Topic 606, Revenue from Contracts with Customers. This ASU was effective for the Company on June 1, 2018. Adoption of this new guidance must be applied on a prospective basis. The adoption of this ASU did not have a significant impact on the Company’s consolidated financial statements.

Business combinations are accounted for by applying the acquisition method in accordance with ASC 805, Business Combinations. Under the acquisition method, identifiable assets acquired and liabilities assumed are measured at their fair values as of the date of acquisition and are recognized separately from goodwill. The results of operations of the acquired entity are included in the consolidated statement of income from the date of acquisition. Customers recognize goodwill when the acquisition price exceeds the estimated fair value of the net assets acquired.

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 November 30, 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

 

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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 November 30, 2018 and May 31, 2018, the undeclared, accrued dividends were approximately $205,000 and $199,000, respectively, or 410,000 and 387,000 shares of common stock, respectively.

Short-term Convertible Notes

During the fiscal 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 $1.2 million of non-cash debt discount during the six months ended November 30, 2018 and November 30, 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 $0.3 million of debt issuance costs during the six months ended November 30, 2018 and November 30, 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 six months ended November 30, 2018 and November 30, 2017, the Company recognized approximately $-0- and $75,000, of interest expense related to the short-term Convertible Notes.

 

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

 

     November 30, 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 $20,000 and $-0- amortization of debt issuance costs for the six months ended November 30, 2018 and November 30, 2017, respectively and approximately $118,000 and $-0- of amortization of debt discount for the six months ended November 30, 2018 and November 30, 2017, respectively.

Effective November 15, 2018, the Note was amended to allow the Investor to redeem the monthly redemption amount of $350,000 in cash or stock, at the lesser of (i) $0.55, or (ii) the lowest closing bid price of the Company’s common stock during the 20 days prior to the conversion, multiplied by a conversion factor of 85%. The variable rate redemption provision meets the definition of a derivative instrument and subsequent to the amendment, it no longer meets the criteria to be considered indexed to the Company’s own stock. As of November 15, 2018, the redemption provision requires bifurcation as a derivative liability at fair value under the guidance in ASC Topic No. 815, “Derivatives and Hedging.”

The amendment of the Note was also evaluated under ASC Topic 470-50-40, “Debt Modifications and Extinguishments.” Based on the guidance, the instruments were determined to be substantially different, and debt extinguishment accounting was applied. We recorded approximately $1.5 million as an extinguishment loss, which was the difference in the net carrying value of the Note prior to the amendment of approximately $5.4 million, and the fair value of the Note and embedded derivatives after the amendment of approximately $6.9 million. The extinguishment loss includes a write-off of unamortized debt issuance costs and the debt discount associated with the original Note. During the six months ended November 30, 2018 and November 30, 2017, the Company recognized approximately $248,000 and $-0-, of interest expense related to the Notes.

Activity related to the Note was as follows:

 

     November 30, 2018         
     Short term      Long term      Total      May 31, 2018  

Face amount of convertible promissory note

   $ —        $ —        $ —        $  —    

June 26, 2018 convertible promissory note

     2,100,000        3,600,000        5,700,000        —    

Monthly redemption

     700,000        (700,000      —          —    

Unamortized discount at August 31, 2018

     (344,614      (281,628      (626,242      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Carrying value of convertible notes at August 31, 2018

   $ 2,455,386      $ 2,618,372      $ 5,073,758      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Carrying value of convertible notes at November 30, 2018

   $ 4,200,000      $ 1,396,974      $ 5,596,974      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Note 5 – Derivative Liabilities

The investor and placement agent warrants, issued in connection with a registered direct offering in September 2016, contained 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, whereby such other Person or group acquires more than 50% of the outstanding common stock). 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, August 31, 2018 and November 30, 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  

Balance November 30, 2018

     7,733,334      $ 1,789,066  

The Company recognized approximately $466,000 of non-cash loss and approximately $467,000 of non-cash gain, due to the changes in the fair value of the liability associated with such classified warrants during the six months ended November 30, 2018 and November 30, 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 November 30, 2018, using the following assumptions:

 

     September 15,
2016
    May 31,
2018
    November 30,
2018
 

Fair value of underlying stock

   $ 0.78     $ 0.49     $ 0.58  

Risk free rate

     1.20     2.63     2.83

Expected term (in years)

     5       3.3       2.79  

Stock price volatility

     106     64     62

Expected dividend yield

     —         —         —    

Probability of Fundamental Transaction

     50     50     95

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 rates and management’s assumptions related to the fundamental transaction provisions.

As described above in Note 4, the redemption provision embedded in the Note required bifurcation and measurement at fair value as a derivative. The fair value of the convertible note redemption provision derivative liability was calculated using a Monte Carlo Simulation which uses randomly generated stock-price paths obtained through a Geometric Brownian Motion stock price simulation. Various assumptions used in the valuation model included: annual volatility of 58.8%, risk free rate of 2.78%, an exercise factor of 2x and an expected term of 1.61 years.

The fair value of the derivative liability resulting from the redemption provision was approximately $1.28 million as of its inception date, November 15, 2018 and November 30, 2018. The fair value of the redemption provision will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes in interest rates and management’s assumptions related to the redemption factor. The Company recognized approximately $1,100 of non-cash loss, due to the changes in the fair value of the liability associated with such classified redemption provision between the inception date and November 30, 2018.

 

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The following table summarizes the fair value of the convertible note redemption provision derivative liability as of inception date November 15, 2018 and November 30, 2018:

 

     Net Proceeds      Derivative
Liability
 

Inception date, November 15, 2018

   $ 5,000,000      $ 1,284,998  

Balance November 30, 2018

   $ 5,000,000      $ 1,286,076  

The Company estimated the fair value of the redemption provision using the following assumptions on the closing date of November 15, 2015 and November 30, 2018:

 

     November 15,
2018
    November 30,
2018
 

Fair value of underlying stock

   $ 0.57     $ 0.58  

Risk free rate

     2.78     2.78

Expected term (in years)

     1.61       1.61  

Stock price volatility

     58.8     58.8

Expected dividend yield

     —         —    

Discount factor

     85     85

Note 6 – Stock Options and Warrants

The Company has one active stock-based equity plan at November 30, 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 November 30, 2018, the Company had 553,048 shares available for future stock-based grants under the 2012 Plan.

Stock Options

During the six months ended November 30, 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 six months ended November 30, 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 six months ended November 30, 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. Additionally, the Company granted a stock option covering an aggregate of 1,000,000 shares of common stock, to an officer with an exercise price of $0.565 per share. The stock option award vests 50% upon grant and 50% on April 8, 2019; it has a ten-year term and grant date fair value of $0.30 per share. The Company also granted stock options, covering an aggregate of 500,000 shares of common stock to directors for consulting services with an exercise price of $0.565 per share. The stock option awards vest upon grant, have a ten-year term and grant date fair value of $0.30 per share.

During the six months ended November 30, 2018, the Company granted a stock option award covering 350,000 shares of common stock with an exercise price of $0.551 per share to Dr. Richard G. Pestell, M.D., Ph.D., in connection with his employment agreement as Chief Medical Officer and the closing of the ProstaGene transaction described in Note 7. The stock option award vests annually over three years, with a ten-year term and grant date fair value of $0.30 per share.

 

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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 six months ended November 30, 2018, in connection with a private equity offering, as fully described in Note 10, the Company issued common stock warrants covering a total of 22,478,585 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 4,245,117 shares of common stock to the placement agent. The placement agent warrants have a five-year term, an exercise price of $0.50 per share and a cashless exercise provision.

During the six months ended November 30, 2018, the Company issued compensable warrants covering an aggregate of 300,000 shares of common stock to consultants. The warrants have a five-year term, an exercise price of $0.56 per share and a grant date fair value of $0.30 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, compensatory warrants and common stock reserved for advisory services, for the three and six months ended November 30, 2018 and November 30, 2017 was approximately $1.2 million and $275,000 and $1.5 million and $530,000, respectively. The grant date fair value of options and compensatory warrants vested during the three and six month periods ended November 30, 2018 and November 30, 2017 was approximately $485,000 and $127,000 and $1.2 million and $574,000, respectively. As of November 30, 2018, there was approximately $5.7 million of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 2.69 years.

The following table represents stock option and warrant activity as of and for the six months ended November 30, 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

     33,483,124        0.69        —          —    

Exercised

     —          —          —          —    

Forfeited/expired/cancelled

     (10,031,717      0.75        —          —    
  

 

 

          

Options and warrants outstanding - November 30, 2018

     155,836,676        0.78        3.97        769,360  
  

 

 

          

Outstanding exercisable - November 30, 2018

     150,960,607      $ 0.78        3.80      $ 565,356  
  

 

 

          

Note 7 – Acquisition of Patents and Intangibles

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 leronlimab (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 November 30, 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 leronlimab (PRO 140) and formulations comprising leronlimab (PRO 140) out through at least 2031 and 2038, respectively, in various countries.

 

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On November 16, 2018, the Company completed the acquisition of substantially all of the assets of ProstaGene, LLC (“ProstaGene”), a biotechnology start-up company, which included patents related to clinical research, a proprietary CCR5 technology for early cancer diagnosis, and a noncompetition agreement with ProstaGene’s founder and Chief Executive Officer, Richard G. Pestell, M.D., Ph.D. The acquisition of ProstaGene’s assets expands the Company’s clinical development of leronlimab (PRO 140) into cancer indications and commercialization of certain cancer diagnostic tests.

The aggregate purchase price paid for the ProstaGene acquisition was $11,558,000 based on the issuance of 20,278,000 shares of common stock of CytoDyn at $0.57 per share, including 1,620,000 shares earned, but not yet issued, by the investment bank for advisory services. In connection with the purchase, the Company entered into a Stock Restriction Agreement (“Agreement”), restricting the transfer of 8,342,000 shares of common stock payable to Dr. Pestell for a three-year period from the closing date of the transaction. In the event Dr. Pestell’s employment with the Company is terminated, 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 shares. The Restricted Shares will vest and be released from the Agreement in three equal annual installments commencing one year after the closing date of the acquisition of ProstaGene.

A summary of the net purchase price and allocation to the acquired assets is as follows:

 

     ProstaGene, LLC  

CytoDyn Inc. Equity

   $ 11,558,000  

Acquisition Expenses

     741,297  

Release of Deferred Tax Asset

     2,826,919  
  

 

 

 

Total Cost of Acquisition

   $ 15,126,216  
  

 

 

 

Intangible assets

   $ 15,126,216  

Other

     —    
  

 

 

 

Allocation of Acquisition Costs

   $ 15,126,216  
  

 

 

 

Assets acquired from ProstaGene include (1) patents issued in the United States and Australia related to “Prostate Cancer Cell Lines, Gene Signatures and Uses Thereof” and “Use of Modulators of CCR5 in the Treatment of Cancer and Cancer Metastasis,” (2) an algorithm used to identify a 14-gene signature to predict the likelihood and severity of cancer diagnoses, and (3) a noncompetition agreement in connection with an employment agreement with Dr. Pestell as Chief Medical Officer of the Company. The fair value of the assets acquired approximates the consideration paid. The Company did not assume any liabilities. The Company accounted for the ProstaGene acquisition as an asset acquisition under ASC 805-10-55 “Business Combinations” because the assets retained from ProstaGene do not include an assembled workforce, and the gross value of the assets acquired meets the screen test in ASC 805-10-55-5A related to substantially all of the fair value being concentrated in a single asset or group of assets (i.e., the proprietary technology and patents) and, thus, is not considered a business. Thus, management concluded that the acquisition did not include both an input and substantive processes that together significantly contribute to the ability to create outputs.

The fair value of the technology acquired is identified using the Income Approach. The fair value of the patents acquired is identified using the Cost to Reproduce Method. The fair value of noncompetition agreement acquired is identified using the Residual Value Method. Goodwill is not recorded as the transaction represents an asset acquisition in accordance with ASU 2017-01. Acquisition costs for asset acquisitions are capitalized and included in the total cost of the transaction. In addition, pursuant to ASC 805, the net tax effect of the deferred tax liability arising from the book to tax basis differences is recorded as a cost of the acquisition.

 

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The following presents intangible assets activity:

 

     November 30, 2018      May 31, 2018  

Gross carrying amounts

   $ 3,500,000      $ 3,500,000  

Intangible asset acquisition:

     

ProstaGene, LLC

     15,126,216        —    

Accumulated amortization

     (2,209,254      (1,968,846
  

 

 

    

 

 

 

Total amortizable intangible assets, net

     16,416,962        1,531,154  

Patents currently not amortized

     35,989        35,989  
  

 

 

    

 

 

 

Carrying value of intangibles, net

   $ 16,452,951      $ 1,567,143  
  

 

 

    

 

 

 

Amortization expense related to intangible assets patents was approximately $152,900 and $240,400 and $87,500 and $175,000 for the three and six months ended November 30, 2018 and 2017, respectively. The estimated aggregate future amortization expense related to the Company’s intangible assets with finite lives is estimated, on average, to be approximately $1.6 million per year for the next five 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 leronlimab (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 and 2018 payments, which were extended to March 15, 2018 and March 15, 2019, respectively. Future annual license fees and royalty rate will vary depending on whether the Company manufactures leronlimab (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 leronlimab (PRO 140), a humanized anti-CCR5 monoclonal antibody, as well as certain other related assets, including the existing inventory of bulk leronlimab (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 leronlimab (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 leronlimab (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 leronlimab (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 leronlimab (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.

 

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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 up to $0.2 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 $1.1 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, which have been utilized. 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 $0.3 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 six months ended November 30, 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 44,957,170 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $22.5 million and issued to the investors five-year warrants covering 22,478,585 shares of common stock with an exercise price of $0.75 per share. The Company received net proceeds from the offering of approximately $19.9 million. In addition, the placement agent received warrants covering 4,245,117 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 and include a cashless exercise provision. 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.

Note 11 – Registered Direct Equity Offerings

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.

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 and six months ended November 30, 2018 and 2017, the Company incurred an expense of approximately $15,200 and $31,000 and $10,800 and $21,500, respectively, for qualified non-elective contributions.

 

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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. Dr. Burger also resigned as Chief Science Officer of the Company, which was not an executive officer position. On July 10, 2018, In connection with the resignations of Dr. Burger and Dr. Montgomery, the Company’s board of directors determined to accelerate the vesting of all outstanding and unvested stock options held by Dr. Burger and Dr. Montgomery. Upon the effectiveness of their resignations, stock options covering 500,000 shares 100,000 shares, held by Dr. Burger and Dr. Montgomery, respectively became fully vested. The stock options retained their exercise period through their respective expiration dates and the terms of the stock options remained otherwise unchanged.

On November 16, 2018, the Company closed its acquisition of ProstaGene, as described in Note 7. In connection with the closing of the acquisition, the Company hired Dr. Pestell as its Chief Medical Officer. As previously disclosed by the Company, Dr. Pestell is the holder of approximately 77.2% of the outstanding equity interests in ProstaGene and consequently holds an indirect interest in approximately (i) 8,611,427 of 13,258,000 shares of the Company’s common stock, currently pending distribution by ProstaGene to its members, and (ii) 4,171,013 of 5,400,000 shares of common stock, currently held in escrow for the benefit of ProstaGene and its members, which are subject to forfeiture to satisfy certain indemnity obligations of ProstaGene and will be released ratably every six months over the eighteen-month period following the closing date. In addition, as specified in a Stock Restriction Agreement with the Company entered into on the closing date, 8,342,000 additional shares of common stock previously distributed to Dr. Pestell in the ProstaGene acquisition are currently subject to transfer restrictions and forfeiture obligations, subject to certain continuing employment obligations of Dr. Pestell, which will vest ratably each year over the three-years period following the closing date.

As specified in a Confidential Information, Inventions and Noncompetition Agreement between the Company and Dr. Pestell, which was entered into on the closing date of the ProstaGene acquisition, the Company may participate in the development and license of certain intellectual property created by Dr. Pestell, in connection with Dr. Pestell’s ongoing research obligations to outside academic institutions. The Company also has the right to work with Dr. Pestell to manage any potential conflict between the Company’s clinical development activities and such ongoing research obligations.

 

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Note 14 – Subsequent Events

Between December 7, 2018 and December 11, 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 2,018,000 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $1.0 million and issued to the investors five-year warrants covering 1,009,000 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 $0.1 million to the placement agent and issued warrants covering an aggregate of 201,800 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 and a cashless exercise provision.

On December 10, 2018, Anthony D. Caracciolo resigned as the Chairman of the Board, but remains a director and Scott A. Kelly, M.D., was named Chairman of the Board. On December 19, 2018, the Compensation Committee of the Board approved an amendment to certain compensation arrangements for Anthony D. Caracciolo, pursuant to which his employment with the Company would be extended through April 16, 2019, at a salary reduced from $16,667 to $5,000 per month, with continuing benefits. In addition, the Compensation Committee approved an extension to 10-years of the expiration terms of certain previously awarded stock options covering an aggregate of 150,000 shares of the Company’s common stock, provided that such stock options are out-of-the-money upon the date of such extension. These arrangements were conditioned upon Mr. Caracciolo’s agreement to resign from the Board upon identification by the Company of an appropriately qualified candidate to fill the vacancy. Mr. Caracciolo has agreed to the foregoing terms. These arrangements were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On December 22, 2018 the board of directors appointed Nitya G. Ray, Ph.D., as Chief Technology Officer – Head of Process Sciences, Manufacturing and Supply Chain. In connection with Dr. Ray’s appointment, the Company and Dr. Ray entered into an Employment Agreement that provides for (i) an annual base salary of $335,000, (ii) a target annual bonus equal to 50% of base salary, (iii) an initial signing bonus of $100,000 to be paid in two equal installments of $50,000 over the course of six months from the date of signing and (iv) other customary benefits described in the form of employment agreement. In connection with the appointment of Dr. Ray, the Company also issued Dr. Ray a stock option award under the Company’s equity incentive plan, covering 400,000 shares of the Company’s common stock, vesting in three equal annual installments from the grant date.

On December 27, 2018, the Company received a redemption notice from the holder of the Company’s convertible note issued on June 26, 2018, requesting the redemption of $100,000 of the outstanding balance thereof. In satisfaction of the redemption notice, the Company issued 255,532 shares of common stock to the note holder in accordance with the terms of the convertible note. Following the redemption, the outstanding balance of the convertible note, including accrued but unpaid interest, was approximately $5.9 million.

Beginning December 28, 2018 through January 8, 2019, the Company issued $3.1 million (of which $0.5 million was purchased by Michael A. Klump, a director, on terms identical to all other investors) in aggregate principal amount of unsecured convertible promissory notes (the “Notes”) and related warrants (the “Warrants”) to purchase common stock of the Company (the “Common Stock”), to accredited investors (the “Private Placements”) pursuant to subscription agreements entered into with each investor (collectively, the “Subscription Agreements”), in exchange for cash in an equal amount. The proceeds of the Private Placements are anticipated to be used for general working capital and to fund clinical trials.

The principal amount of the Notes plus unpaid accrued interest at an annual rate of 10.0% is convertible at the election of the holders into shares of Common Stock at any time prior to maturity, at an initial conversion price of $0.50 per share, with an aggregate of 6,200,000 shares of the Company’s Common Stock initially underlying the Notes. As part of the investment in the Notes, the Company also issued Warrants exercisable for 50% of the shares into which the Notes are convertible, with Warrants for an aggregate of 3,100,000 shares of Common Stock issued in the Private Placements. The Warrants are exercisable at a price of $0.30 per share. The Warrants are currently exercisable in full and will expire five years from the date of issuance. The Subscription Agreements contain certain “piggyback” registration rights relating to resales of shares of Common Stock underlying the Notes and the Warrants.

As a result of the issuance of the Notes, pursuant to the terms of the Placement Agent Agreement, dated July 26, 2018, entered into in connection with a recently completed private securities offering, the placement agent in that offering earned a “tail fee” comprising warrants exercisable for 620,000 shares of Common Stock (the “Placement Agent Warrants”) and a cash fee of $372,000. The Placement Agent Warrants are exercisable at a price of $0.50 per share and will expire five years from the date of issuance. The Placement Agent Warrants provide for cashless exercise.

 

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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, clinical priorities, the results of clinical trials for the Company’s drug candidate, and various other matters, many of which are beyond our 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 our financial condition and results of operations should be read in conjunction with the other sections of this Quarterly Report, including our 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 our 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 four years of suppressed viral load with leronlimab (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 leronlimab (PRO 140).

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

This is a pivotal 25-week trial for leronlimab (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, we reported that we 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 leronlimab (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. Forty-seven out of fifty-two patients have successfully completed this trial and most of the patients have transitioned into an FDA-cleared rollover study, as described below, in order to provide continued access to leronlimab (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 $14 million. The successful results of this trial will serve 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 leronlimab (PRO 140) therapy in order to maintain suppressed viral load. If this study enrolls 40 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 $3 million to $4 million.

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

This is a trial of over 370 patients that assesses using leronlimab (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 the 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 of 700 mg will result in a much higher response rate, which is supported by preliminary data and

 

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most likely be the dose used for leronlimab (PRO 140) in the future. The estimates for the total cost of this trial currently range from $22 million to $25 million, with an expected $8 million to $9 million remaining in connection with maintaining patients to provide safety data for the BLA filing. We expect enrollment to be completed in 2019. Subject to the continuation of a high responder rate from preliminary data from the 700 mg dose arm, this trial may be discontinued if and when we successfully file a protocol for a pivotal Phase 3 trial for monotherapy and receives clearance from the FDA to initiate such a trial.

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 leronlimab (PRO 140) as an add-on therapy to standard graft-versus-host disease (“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 leronlimab (PRO 140) for the prevention of GvHD. In March 2018, we announced that the Independent Data Monitoring Committee (“IDMC”) for leronlimab (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 pretreatment 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 leronlimab (PRO 140). The amendments also provide for a 100% increase in the dose of leronlimab (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. Due to the necessary prioritization of limited capital, enrollment under the amended protocol has been delayed.

Cancer and Immunological Applications for Leronlimab (PRO 140)

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

The target of leronlimab (PRO 140) is the important G protein coupled receptor CCR5. CCR5 is more than the pathway to HIV replication; it is also a crucial component of inflammatory responses and is a key mediator in many cancer metastasis. We believe this opens the potential for multiple pipeline opportunities for leronlimab (PRO 140). CCR5 is a protein located on the surface of white blood cells and cancer epithelial cells that serves as a receptor for 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. We believe the mechanism of action of leronlimab (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 the surface of epithelial cells in certain cancers. Some disease processes that we believe could benefit from CCR5 blockade include many types of common cancers, GvHD (a reaction occurring in some patients after bone marrow transplantation), autoimmunity and chronic inflammation, such as rheumatoid arthritis and psoriasis. Recent published data by Richard G. Pestell, M.D., Ph.D., our 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 published data clearly indicated that cancer cells that can metastasize express CCR5. Metastases are the cause of death in the vast majority of cancer patients. Moreover, Dr. Pestell’s prior publication indicates that CCR5 antagonists can turn off certain calcium signaling and reduce the migration of CCR5 positive cancer cells. Inhibition of CCR5 signaling blocks the guided migration and reduces the metastasis. Leronlimab (PRO 140) has demonstrated (in an in-vitro study) that it also turns off calcium signaling and blocks breast cancer cellular invasion. Furthermore, published studies showed current chemotherapy induces 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.

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

 

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As a result of the foregoing, we are expanding the clinical focus with leronlimab (PRO 140) to include the evaluation in certain cancer and immunological indications where CCR5 antagonism has shown initial promise. We recently filed an investigational new drug application (“IND”) with the FDA and received approval in late November 2018 to begin a clinical trial with leronlimab (PRO 140) for metastatic triple-negative breast cancer. We also previously initiated our first clinical trial with leronlimab (PRO 140) in an immunological indication – a Phase 2 clinical trial with leronlimab (PRO 140) for GvHD in patients with AML or MDS who are undergoing bone marrow stem cell transplantation. As noted above, enrollment under the amended protocol for the GvHD trial has been delayed subject to increased capital resources. In addition, we also intend to explore potential strategic partnerships with certain pharmaceutical companies, including for the development of follow-on technologies involving the use of leronlimab (PRO 140) alongside their existing products.

The Company will require a significant amount of additional capital to complete the foregoing clinical trials for HIV and make its BLA submission, as well as to advance its trials for GvHD and certain cancer indications. See “Liquidity and Capital Resources” below.

ProstaGene Transaction

On November 16, 2018, we completed an acquisition with ProstaGene, LLC, a Delaware limited liability company (“ProstaGene”). The ProstaGene transaction was consummated pursuant to the Transaction Agreement (the “Transaction Agreement”), dated as of August 27, which provided for the purchase of substantially all of the assets and rights, and the assumption of certain liabilities and obligations, associated with ProstaGene. In order to achieve certain tax efficiencies for the selling members of ProstaGene, as an initial step in the transaction, we effected a holding company reorganization under Section 251(g) of the Delaware General Corporation Law. The terms of the ProstaGene transaction were previously reported in our Current Reports on Form 8-K filed with the Securities and Exchange Commission on November 19, 2018 and August 28, 2018. As described in Note 7 to the accompanying financial statements, the aggregate purchase price paid in the ProstaGene transaction was approximately $11.6 million, which was recorded as intangibles, including a certain proprietary technology in an algorithm, noncompetition agreements and patents. Such intangibles have estimated amortizable lives from three years to 13 years.

We are currently evaluating strategic opportunities with respect to the assets acquired in the ProstaGene transaction, including potential licensing or other opportunities to monetize intellectual property assets relating to prostate cancer diagnostics. As an integral part of the acquisition of ProstaGene, we acquired a proprietary technology that demonstrated in a retrospective clinical trial assessing patients for more than 10 years that its prostate cancer prognostic test (“PCa Test”) provides substantial additive discriminate value for predicting outcomes of patients diagnosed with prostate cancer compared to the intermediate Gleason score, the current standard for prostate cancer diagnosis. The clinical objective is to more precisely guide therapeutic options for men thereby avoiding unnecessary surgery (prostatectomy) and radiation and/or chemotherapy with its attendant side effects.

Results of Operations for the three months ended November 30, 2018 and 2017 are as follows:

For the three months ended November 30, 2018 and November 30, 2017, the Company had no activities that produced revenues from operations.

For the three months ended November 30, 2018, the Company incurred a net loss of approximately $14.3 million, as compared to a net loss of approximately $10.9 million for the similar period in 2017. The increase in net loss of approximately $3.4 million related primarily to increases in research and development expenses of approximately $3.8 million and increases in general and administrative expenses of approximately $1.1 million and a decrease in the non-cash benefit from change in derivative liabilities of approximately $0.6 million, a non-comparable non-cash loss on extinguishment of debt of approximately $1.5 million, offset by a reduction in interest expenses of approximately $0.8 million and a deferred tax benefit of approximately $2.8 million, which arose from the recognition of a deferred income tax benefit from a reduction in the Company’s deferred tax valuation allowance resulting from recording a deferred tax liability of $2,826,919 in connection with the acquisition of assets in the ProstaGene transaction. The deferred tax liability represents the tax effect of the difference in the carrying value of the assets and their tax basis at acquisition. The loss per share for the quarters ended November 30, 2018 and November 30, 2017 was $(0.06) and $(0.07), respectively, with the reduction in loss per share (despite an increase in aggregate net loss) caused by a significant increase in the number of shares outstanding from the prior period.

For the three months ended November 30, 2018 and November 30, 2017, operating expenses totaled approximately $15.7 million and $10.8 million, respectively, consisting of research and development, general and administrative expenses, and amortization and depreciation. The increase in operating expenses of approximately $4.9 million, or 45.6%, was attributable to increases in research and development expenses of approximately $3.8 million and increased general and administrative expenses of approximately $1.1 million. General and administrative expenses, which totaled approximately $2.7 million for the three months ended November 30, 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 $1.1 million, or 66%, for the three months ended November 30, 2018 was due to an increase in non-cash stock-based compensation expenses of approximately $1.0 million, in connection stock issued for advisory services and employee awards, coupled with increased insurance and investor relations expenses, offset by a reduction in expenses for professional services.

 

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Research and development (“R&D”) expenses, which totaled approximately $12.7 million for the three months ended November 30, 2018, increased approximately $3.8 million, or 42%, over the comparable 2017 quarter principally due to higher manufacturing-related expenses in connection with the preparation of our BLA filing. For the quarter ended November 30, 2018, R&D expenditures continue to be primarily devoted to: (1) 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 quantities of leronlimab (PRO 140), (2) our pivotal Phase 2b/3 combination therapy trial and our investigative Phase 2b/3 monotherapy trial, and (3) continuing activities necessary to complete the BLA filing with the FDA.

We expect R&D expenses in future periods to level off modestly to reflect completion of manufacturing activities in preparation for an anticipated BLA filing in the first half of 2019, followed by a potential strategic advancement in clinical priorities for a pivotal monotherapy trial and cancer indications, all of which are subject to the availability of sufficient additional capital. Any acceleration in clinical activities would increase R&D expenses.

For the three months ended November 30, 2018, the Company recognized a non-cash benefit associated with the decrease in fair value of derivative liabilities of approximately $0.3 million, as compared to a non-cash benefit of approximately $0.8 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 liabilities and record a corresponding non-cash benefit or non-cash charge, as a consequence of a decrease or increase, respectively, in the calculated derivative liabilities.

Interest expense for the three months ended November 30, 2018 totaled approximately $1.7 million, as compared to approximately $1.0 million for the similar quarter in 2017. The components of interest expense include a loss on extinguishment of a long-term convertible note, accrued interest on a convertible note, along with the amortization of debt discount and debt issuance costs. On November 15, 2018, as previously reported, the Company amended the convertible note to include an additional feature which allows the holder to receive the redemption amount (a) in cash or (b) by converting the redemption amount into shares of common stock. The amendment caused the embedded redemption provision to require bifurcation as a liability at fair value under ASC 815 (Topic 815). In addition, management also considered the accounting for the amendment under the accounting guidance in ASC 470, Debt (Topic 470), and determined that the amendment was substantive and extinguishment accounting applied. Accordingly, the carrying value of the original debt on the modification date is derecognized and the new debt is recorded at fair value. The difference was recorded as an extinguishment loss of approximately $1.5 million.

The future trends in all expenses will be driven, in large part, by the future outcomes of clinical trials and their correlative effect on research and development expenses, as well as general and administrative expenses, in addition to manufacturing of new additional quantities of commercial leronlimab (PRO 140), along with the necessary regulatory processes to confirm its qualification for future sale, if approved. The 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 our Annual Report on Form 10-K for the year ended May 31, 2018 and in our Form 10-Q for the quarterly period ended August 31, 2018 in the section titled “Risk Factors” in Part II, Item 1A.

Results of Operations for the six months ended November 30, 2018 and 2017 are as follows:

For the six months ended November 30, 2018 and November 30, 2017, the Company had no activities that produced revenues from operations.

For the six months ended November 30, 2018, the Company incurred a net loss of approximately $28.7 million, as compared to a net loss of approximately $22.6 million for the similar period in 2017. The increase in net loss of approximately $6.1 million related primarily to increases in research and development expenses of approximately $7.1 million, increases in general and administrative expenses of approximately $1.4 million, non-cash expense from change in derivative liabilities of approximately $0.9 million, offset by a deferred tax benefit approximately $2.8 million, and a reduction in interest expenses of approximately $0.6 million. The credit for taxes on income arose from the recognition of a deferred income tax benefit from a reduction in the Company’s deferred tax valuation allowance resulting from recording a deferred tax liability of $2,826,919 in connection with the acquisition of assets in the ProstaGene LLC transaction. The deferred tax liability represents the tax effect of the difference in the carrying value of the assets and their tax basis at acquisition. The loss per share for the six months ended November 30, 2018 and November 30, 2017 was $(0.12) and $(0.15), respectively, with the reduction in loss per share (despite an increase in aggregate net loss) caused by a significant increase in the number of shares outstanding from the prior period.

For the six months ended November 30, 2018 and November 30, 2017, operating expenses totaled approximately $29.2 million and $20.6 million, respectively, consisting of research and development, general and administrative expenses, and amortization and depreciation. The increase in operating expenses of approximately $8.6 million, or 42%, was attributable to increases in research and development expenses of approximately $7.1 million and an increase in general and administrative expenses of approximately $1.4 million.

 

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General and administrative expenses, which totaled approximately $4.6 million for the six months ended November 30, 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 $1.4 million, or 45%, for the six months ended November 30, 2018 over the comparable period a year ago was primarily due to an increase in non-cash stock-based compensation expenses of approximately $1.0 million in connection with common stock issued for advisory services and an employee awards.

Research and development (“R&D”) expenses, which totaled approximately $24.3 million for the six months ended November 30, 2018, increased approximately $7.1 million, or 41%, over the comparable 2017 period principally due to higher manufacturing-and clinical trial elated expenses. For the six-month period ended November 30, 2018, R&D expenditures continue to be primarily devoted to: (1) 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 quantities of leronlimab (PRO 140), (2) our pivotal Phase 2b/3 combination therapy trial and our investigative Phase 2b/3 monotherapy trial, and (3) continuing activities necessary to complete the BLA filing with the FDA.

We expect R&D expenses in future periods to level off modestly to reflect completion of manufacturing activities preparation for an anticipated BLA filing in the first half of 2019 followed by a potential strategic advancement in clinical priorities for a pivotal monotherapy trial and cancer indications, all of which are subject to the availability of sufficient additional capital. Any acceleration in clinical activities would increase R&D expenses.

For the six months ended November 30, 2018, the Company recognized a non-cash charge associated with the increase in fair value of derivative liabilities of approximately $0.5 million, as compared to a non-cash benefit of approximately $0.5 in the similar 2017 period. 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 liabilities and record a corresponding non-cash benefit or non-cash charge, as a consequence of a decrease or increase, respectively, in the calculated derivative liabilities.

Interest expense for the six months ended November 30, 2018 totaled approximately $1.9 million, as compared to approximately $2.5 million for the similar period in 2017. The components of interest expense include a loss on extinguishment of a long-term convertible note, accrued interest on a convertible note, along with the amortization of debt discount and debt issuance costs. On November 15, 2018, as previously reported, the Company amended the convertible note to include an additional feature which allows the holder to receive the redemption amount (a) in cash or (b) by converting the redemption amount into shares of common stock. The amendment caused the embedded redemption provision to require bifurcation as a liability at fair value under ASC 815 (Accounting Standards Codification Derivatives and Hedging (Topic 815). In addition, management also considered the accounting for the amendment under the accounting guidance in ASC 470, Debt (Topic 470), and determined that the amendment was substantive and extinguishment accounting applied. Accordingly, the carrying value of the original debt on the modification date is derecognized and the new debt is recorded at fair value. The difference was recorded as an extinguishment loss of approximately $1.5 million.

The future trends in all expenses will be driven, in large part, by the future outcomes of clinical trials and their correlative effect on research and development expenses, as well as general and administrative expenses, in addition to manufacturing of new additional quantities of commercial leronlimab (PRO 140), along with the necessary regulatory processes to confirm its qualification for future sale, if approved. The 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 our Annual Report on Form 10-K for the year ended May 31, 2018 and in our Form 10-Q for the quarterly period ended August 31, 2018 in the section titled “Risk Factors” in Part II, Item 1A

Liquidity and Capital Resources

The Company’s cash position at November 30, 2018 decreased approximately $0.4 million to approximately $0.8 million, as compared to a balance of approximately $1.2 million as of May 31, 2018. The net decrease in cash for the six months ended November 30, 2018 was attributable to net cash used in operating activities of approximately $26.2 million, offset in part by net cash provided by financing activities of approximately $25.7 million.

As of November 30, 2018, the Company had significant negative working capital of approximately $20.1 million compared to negative working capital of approximately $13.4 million at May 31, 2018, an increase in negative working capital of approximately $6.7 million attributable primarily to cash used in operations.

 

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Cash Flows

Net cash used in operating activities totaled approximately $26.2 million during the six months ended November 30, 2018, which reflects an increase of approximately $13.3 million of net cash used in operating activities over the six months ended November 30, 2017. The increase in net cash used in operating activities was due to an increase in net loss of approximately $6.1 million, coupled with an increase in working capital components totaling approximately $5.7 million, a non-cash loss on extinguishment of debt of approximately $1.5 million and increased stock based compensation of approximately $1.0 million, which was mitigated in part by non-cash deferred income tax benefit of approximately $2.8 million, a reduction in amortization of approximately $2.1 million and a non-cash credit of approximately $1 million due to the change in derivative liabilities.

Net cash used in investing activities was immaterial during the six months ended November 30, 2018, and there was no activity during the six months ended November 30, 2017.

Net cash provided by financing activities of approximately $25.7 million during the six months ended November 30, 2018, increased approximately $13.3 million over the $12.4 million of net cash provided by financing activities during the six months ended November 30, 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 $23.5 million, an increase of approximately $16.4 million in net proceeds from the sale of similar securities, offset by an increase of approximately $1.6 million in offering costs. During the 2017 six-month period the Company realized non-comparable proceeds of approximately $1.6 million from the exercise of warrants.

Capital Requirements

We have not generated revenue to date, and will not generate product revenue in the foreseeable future, although revenues are anticipated to be realized following approval of the Company’s BLA. We expect to continue to incur significant operating losses as expenses continue as we proceed with clinical trials with respect to leronlimab (PRO 140) and continue to advance it 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 leronlimab (PRO 140), along with the increasing activities to prepare and file a BLA for leronlimab (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 leronlimab (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 leronlimab (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 leronlimab (PRO 140). Management will continue to assess manufacturing capacity requirements as new market information becomes available regarding anticipated demand, subject to FDA approval. 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 $0.3 million. These CMO undertakings are anticipated to require approximately $9 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 up to $0.2 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 $1.1 million.

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 leronlimab (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 leronlimab (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.

 

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Going Concern

As reported in the accompanying consolidated financial statements, for the six months ended November 30, 2018 and November 30, 2017, we incurred net losses of approximately $28.7 million and $22.6 million, respectively. We have no activities that produced revenue in the periods presented and have 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. Our failure to raise additional capital could also affect our relationships with key vendors, disrupting our ability to timely execute our business plan. 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 124 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 November 30, 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 a significant amount of additional operating capital, complete development of our product candidate, obtain FDA approval, outsource manufacturing of our product, 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.

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.

Not applicable.

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 November 30, 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 November 30, 2018.

 

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Internal Control Over Financial Reporting

Changes in Control Over Financial Reporting

No changes occurred during the quarter ended November 30, 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.

There have been no material changes in the risk factors applicable to us from those identified in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 27, 2018, as amended on September 28, 2018, as supplemented by the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on October 9, 2018.

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.

 

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Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Exhibits:

 

    2.1   Transaction 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   Amended and Restated Certificate of Incorporation of CytoDyn Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K12G3 filed November 19, 2018).
    3.2   Amended and Restated Bylaws of CytoDyn Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K12G3 filed November 19, 2018).
    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).
    4.2   Amended and Restated Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K12G3 filed November 19, 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   Convertible Promissory Note Amendment and Restatement, dated November  15, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K12G3 filed November 19, 2018).
  10.3   Escrow Agreement, dated as of November  16, 2018, by and among ProstaGene, LLC, CytoDyn Inc., and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K12G3 filed November  19, 2018).
  10.4   Stock Restriction Agreement, dated as of November 16, 2018, by and among CytoDyn Inc., ProstaGene, LLC and Dr. Richard  G. Pestell (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K12G3 filed November 19, 2018).
  10.5   Confidential Information, Inventions and Noncompetition Agreement, dated as of November  16, 2018, by and among CytoDyn Inc., CytoDyn Operations Inc. and Dr. Richard  G. Pestell (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K12G3 filed November 19, 2018).
  10.6   Employment Agreement, dated as of November 16, 2018, by and among CytoDyn, Inc., CytoDyn Operations Inc. and Dr. Richard  G. Pestell (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K12G3 filed November 19, 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: January 9, 2019      

/s/ Nader Z. Pourhassan

      Nader Z. Pourhassan
      President and Chief Executive Officer
Dated: January 9, 2019      

/s/ Michael D. Mulholland

      Michael D. Mulholland
      Chief Financial Officer, Treasurer and Corporate Secretary
EX-31.1 2 d683024dex311.htm EX-31.1 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: January 9, 2019      

/s/ Nader Z. Pourhassan

      Nader Z. Pourhassan
      President and Chief Executive Officer
EX-31.2 3 d683024dex312.htm EX-31.2 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: January 9, 2019      

/s/ Michael D. Mulholland

      Michael D. Mulholland
      Chief Financial Officer
EX-32.1 4 d683024dex321.htm EX-32.1 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 November 30, 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: January 9, 2019      

/s/ Nader Z. Pourhassan

      Nader Z. Pourhassan
      President and Chief Executive Officer
EX-32.2 5 d683024dex322.htm EX-32.2 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 November 30, 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: January 9, 2019      

/s/ Michael D. Mulholland

      Michael D. Mulholland
      Chief Financial Officer
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The guidance removes the requirements to disclose the amount and reasons for transfers between Level&#xA0;1 and Level&#xA0;2 assets, the policy for timing and transfers between levels and the valuation process for Level&#xA0;3 fair value measurements. The guidance modifies disclosure requirements for investments in certain entities that calculate net asset value and clarifies the purpose of the measurement uncertainty disclosure. The guidance adds requirements to disclose changes in unrealized gains or losses included in other comprehensive income for recurring Level&#xA0;3 fair value measurements and to disclose the range and weighted average used to develop significant unobservable inputs for Level&#xA0;3 fair value measurements. The guidance is effective for fiscal years beginning after December&#xA0;15, 2019 and interim periods within those fiscal years. The Company does not expect the adoption to have a material impact on its consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In June 2018, FASB issued ASU <font style="WHITE-SPACE: nowrap">No.&#xA0;2018-07,</font> <i>Compensation &#x2013; Stock Compensation (Topic 718)</i>, <i>Improvements to Nonemployee Share Based Payment Accounting.</i> The amendments in this Update expand the scope of stock compensation to include share-based payment transactions for acquiring goods and services from nonemployees.&#xA0;The guidance in this Update does not apply to transactions involving equity instruments granted to a lender or investor that provides financing to the issuer. The guidance is effective for fiscal years beginning after December 31, 2018 including interim periods within the fiscal year. The Company is currently assessing the impact this Update may have on its consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In March 2018, FASB issued ASU <font style="WHITE-SPACE: nowrap">No.&#xA0;2018-05,</font><i>&#xA0;Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.</i><i>&#xA0;118</i>.&#xA0;The amendments in this Update add various Securities and Exchange Commission (&#x201C;SEC) paragraphs pursuant to the issuance of SEC Accounting Bulletin No.&#xA0;118,<i>&#xA0;Income Tax Accounting Implications of the Tax Cuts and Jobs Act</i>&#xA0;(&#x201C;Act&#x201D;) (&#x201C;SAB 118).&#xA0;The SEC issued SAB 118 to address concerns about reporting entities&#x2019; ability to timely comply with the accounting requirements to recognize all of the effects of the Act in the period of enactment.&#xA0;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.&#xA0;The Company has provided a reasonable estimate in the notes to the consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> In July 2017, FASB issued ASU <font style="WHITE-SPACE: nowrap">No.&#xA0;2017-11,</font><i>&#xA0;Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815).</i>&#xA0;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&#x2019;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 (&#x201C;EPS&#x201D;) 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 <font style="WHITE-SPACE: nowrap">Subtopic&#xA0;470-20,&#xA0;Debt&#x2014;&#xA0;&#xA0;Debt</font> 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&#xA0;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 <font style="WHITE-SPACE: nowrap">ASU&#xA0;2017-11&#xA0;will</font> have on the Company&#x2019;s consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In May 2017, the FASB issued <font style="WHITE-SPACE: nowrap">ASU&#xA0;2017-09,</font><i>&#xA0;Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting.</i>&#xA0;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&#xA0;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. The adoption of <font style="WHITE-SPACE: nowrap">ASU&#xA0;2017-09</font> did not have a material impact on the Company&#x2019;s consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In January 2017, the FASB issued ASU <font style="WHITE-SPACE: nowrap">2017-01,</font> <i>Clarifying the Definition of a Business</i>, which narrows the definition of a business and clarifies that to be considered a business, the fair value of gross assets acquired (or disposed of) should not be concentrated in a single identifiable asset or a group of similar identifiable assets. In addition, to be considered a business, an acquisition would have to include an input and a substantive process that together will significantly contribute to the ability to create an output. Also, the amendments narrow the definition of the term &#x201C;output&#x201D; so that it is consistent with how outputs are defined in ASC Topic 606, <i>Revenue from Contracts with Customers</i>. This ASU was effective for the Company on June&#xA0;1, 2018. Adoption of this new guidance must be applied on a prospective basis. The adoption of this ASU did not have a significant impact on the Company&#x2019;s consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Business combinations are accounted for by applying the acquisition method in accordance with ASC 805, <i>Business Combinations</i>. Under the acquisition method, identifiable assets acquired and liabilities assumed are measured at their fair values as of the date of acquisition and are recognized separately from goodwill. The results of operations of the acquired entity are included in the consolidated statement of income from the date of acquisition. Customers recognize goodwill when the acquisition price exceeds the estimated fair value of the net assets acquired.</p> </div> 19589 false 117534 155836676 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <b>Basis of Presentation</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (&#x201C;U.S. GAAP&#x201D;) 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 <font style="WHITE-SPACE: nowrap">Form&#xA0;10-Q.&#xA0;Accordingly,</font> 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&#xA0;31, 2018 and 2017 and notes thereto in the Company&#x2019;s Annual Report on <font style="WHITE-SPACE: nowrap">Form&#xA0;10-K&#xA0;and</font> <font style="WHITE-SPACE: nowrap">Form&#xA0;10-K/A&#xA0;for</font> the fiscal year ended May&#xA0;31, 2018, filed with the Securities and Exchange Commission on July&#xA0;27, 2018 and September&#xA0;28, 2018, respectively. Operating results for the three months ended November&#xA0;30, 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)&#xA0;the results of operations for the three and six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, (b)&#xA0;the financial position at November&#xA0;30, 2018 and (c)&#xA0;cash flows for the six month periods ended November&#xA0;30, 2018 and November&#xA0;30, 2017.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Note 7 &#x2013; Acquisition of Patents and Intangibles</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> As discussed in Note 9 below, the Company consummated an asset purchase on October&#xA0;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 leronlimab (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 November&#xA0;30, 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 leronlimab (PRO 140) and formulations comprising leronlimab (PRO 140) out through at least 2031 and 2038, respectively, in various countries.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> On November&#xA0;16, 2018, the Company completed the acquisition of substantially all of the assets of ProstaGene, LLC (&#x201C;ProstaGene&#x201D;), a biotechnology <font style="WHITE-SPACE: nowrap">start-up</font> company, which included patents related to clinical research, a proprietary CCR5 technology for early cancer diagnosis, and a noncompetition agreement with ProstaGene&#x2019;s founder and Chief Executive Officer, Richard G. Pestell, M.D., Ph.D. The acquisition of ProstaGene&#x2019;s assets expands the Company&#x2019;s clinical development of leronlimab (PRO 140) into cancer indications and commercialization of certain cancer diagnostic tests.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The aggregate purchase price paid for the ProstaGene acquisition was $11,558,000 based on the issuance of 20,278,000 shares of common stock of CytoDyn at $0.57 per share, including 1,620,000 shares earned, but not yet issued, by the investment bank for advisory services. In connection with the purchase, the Company entered into a Stock Restriction Agreement (&#x201C;Agreement&#x201D;), restricting the transfer of 8,342,000 shares of common stock payable to Dr.&#xA0;Pestell for a three-year period from the closing date of the transaction. In the event Dr.&#xA0;Pestell&#x2019;s employment with the Company is terminated, as defined in the employment agreement, the Company will have an option to repurchase such Restricted Shares from Dr.&#xA0;Pestell at a purchase price of $0.001 per shares. The Restricted Shares will vest and be released from the Agreement in three equal annual installments commencing one year after the closing date of the acquisition of ProstaGene.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> A summary of the net purchase price and allocation to the acquired assets is as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="82%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">ProstaGene,&#xA0;LLC</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> CytoDyn Inc. Equity</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,558,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Acquisition Expenses</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">741,297</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Release of Deferred Tax Asset</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,826,919</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total Cost of Acquisition</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Intangible assets</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Allocation of Acquisition Costs</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Assets acquired from ProstaGene include (1)&#xA0;patents issued in the United States and Australia related to &#x201C;Prostate Cancer Cell Lines, Gene Signatures and Uses Thereof&#x201D; and &#x201C;Use of Modulators of CCR5 in the Treatment of Cancer and Cancer Metastasis,&#x201D; (2) an algorithm used to identify a <font style="WHITE-SPACE: nowrap">14-gene</font> signature to predict the likelihood and severity of cancer diagnoses, and (3)&#xA0;a noncompetition agreement in connection with an employment agreement with Dr.&#xA0;Pestell as Chief Medical Officer of the Company. The fair value of the assets acquired approximates the consideration paid. The Company did not assume any liabilities. The Company accounted for the ProstaGene acquisition as an asset acquisition under ASC <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">805-10-55</font></font> &#x201C;Business Combinations&#x201D; because the assets retained from ProstaGene do not include an assembled workforce, and the gross value of the assets acquired meets the screen test in ASC <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">805-10-55-5A</font></font></font> related to substantially all of the fair value being concentrated in a single asset or group of assets (i.e., the proprietary technology and patents) and, thus, is not considered a business. Thus, management concluded that the acquisition did not include both an input and substantive processes that together significantly contribute to the ability to create outputs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The fair value of the technology acquired is identified using the Income Approach. The fair value of the patents acquired is identified using the Cost to Reproduce Method. The fair value of noncompetition agreement acquired is identified using the Residual Value Method. Goodwill is not recorded as the transaction represents an asset acquisition in accordance with ASU <font style="WHITE-SPACE: nowrap">2017-01.</font> Acquisition costs for asset acquisitions are capitalized and included in the total cost of the transaction. In addition, pursuant to ASC 805, the net tax effect of the deferred tax liability arising from the book to tax basis differences is recorded as a cost of the acquisition.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> The following presents intangible assets activity:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="68%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Gross carrying amounts</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,500,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,500,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Intangible asset acquisition:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> ProstaGene, LLC</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accumulated amortization</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(2,209,254</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,968,846</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total amortizable intangible assets, net</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,416,962</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,531,154</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Patents currently not amortized</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">35,989</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">35,989</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of intangibles, net</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,452,951</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,567,143</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Amortization expense related to intangible assets patents was approximately $152,900 and $240,400 and $87,500 and $175,000 for the three and six months ended November&#xA0;30, 2018 and 2017, respectively. The estimated aggregate future amortization expense related to the Company&#x2019;s intangible assets with finite lives is estimated, on average, to be approximately $1.6&#xA0;million per year for the next five years.</p> </div> <div> <p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>Note 12 &#x2013; Employee Benefit Plan</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> The Company has an employee savings plan (the &#x201C;Plan&#x201D;) pursuant to Section&#xA0;401(k) of the Internal Revenue Code (the &#x201C;Code&#x201D;), covering all of its employees. The Company makes a <font style="white-space:nowrap">qualified&#xA0;non-elective&#xA0;contribution</font> 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 and six months ended November&#xA0;30, 2018 and 2017, the Company incurred an expense of approximately $15,200 and $31,000 and $10,800 and $21,500, respectively, for qualified <font style="white-space:nowrap">non-elective</font> contributions.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Cash</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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 November&#xA0;30, 2018 and May&#xA0;31, 2018 approximated $0.5&#xA0;million and $1.1&#xA0;million, respectively.</p> </div> <div> <p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> N<b>ote 8 &#x2013; License Agreements</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> The Company has a license agreement with a third-party licensor covering the licensor&#x2019;s <font style="white-space:nowrap">&#x201C;system&#xA0;know-how&#x201D;&#xA0;technology</font> with respect to the Company&#x2019;s use of proprietary cell lines to manufacture new leronlimab (PRO 140) material. The Company accrues an annual license fee of &#xA3;300,000 (approximately US$400,000 utilizing current exchange rates), which is payable annually in December, except for the December 2017 and 2018 payments, which were extended to March&#xA0;15, 2018 and March&#xA0;15, 2019, respectively. Future annual license fees and royalty rate will vary depending on whether the Company manufactures leronlimab (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.</p> </div> <div> <p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>Note 9 &#x2013; Commitments and Contingencies</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> Under the Progenics Purchase Agreement, the Company acquired rights to the HIV viral-entry inhibitor drug candidate leronlimab (PRO 140), a humanized anti-CCR5 monoclonal antibody, as well as certain other related assets, including the existing inventory of bulk leronlimab (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&#xA0;million upon filing a BLA with the FDA <font style="white-space:nowrap">or&#xA0;non-U.S.&#xA0;equivalent</font> regulatory body and (ii) $5.0&#xA0;million, which will become due at the time of the first U.S. new drug application approval by the FDA or <font style="white-space:nowrap">other&#xA0;non-U.S.&#xA0;approval</font> for the sale of leronlimab (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 leronlimab (PRO 140) until the later of (a)&#xA0;the expiration of the last to expire patent included in the acquired assets, and (b) 10 years, in each case determined on <font style="white-space:nowrap">a&#xA0;country-by&#xA0;country</font> basis. During the year ended May&#xA0;31, 2016 the Company paid a milestone obligation of $1.5&#xA0;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&#x2019;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 <font style="white-space:nowrap">its&#xA0;sub-licensors&#xA0;are</font> deemed contingent consideration and, therefore, are not currently accruable.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> Payments to the third-party licensor and to Progenics are in addition to payments due under a Development and License Agreement, dated April&#xA0;30, 1999 (the &#x201C;PDL License&#x201D;), between Protein Design Labs (now AbbVie Inc.) (&#x201C;PDL&#x201D;) 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 leronlimab (PRO 140) antibody developed by PDL under the agreement the Company has paid various milestone obligations, with one remaining milestone payment of $0.5&#xA0;million, which will become due upon FDA approval or approval by <font style="white-space:nowrap">another&#xA0;non-U.S.&#xA0;equivalent</font> 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&#x2019;s license of leronlimab (PRO 140) thereunder. As of the date of this filing, it is management&#x2019;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 <font style="white-space:nowrap">its&#xA0;sub-licensors&#xA0;are</font> deemed contingent consideration and, therefore, are not currently accruable.</p> <p style="font-size:1px;margin-top:12px;margin-bottom:0px"> &#xA0;</p> <p style="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> The Company has entered into project work orders, as amended, for each of its clinical research organization (&#x201C;CRO&#x201D;) 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 up to $0.2&#xA0;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&#xA0;million to an approximate high of $1.1&#xA0;million. During the year ended May&#xA0;31, 2017, the Company entered into agreements with contract manufacturing companies. Under the terms of the agreements, the Company incurred approximately $2.1&#xA0;million of execution fees for process validation and manufacturing activities, which have been utilized. 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 $0.3&#xA0;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&#x2019;s financial position.</p> </div> -459084 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Principles of Consolidation</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, CytoDyn Operations Inc., Advanced Genetic Technologies, Inc. (&#x201C;AGTI&#x201D;) and CytoDyn Veterinary Medicine LLC (&#x201C;CVM&#x201D;), of which both AGTI and CVM are dormant entities. All intercompany transactions and balances are eliminated in consolidation.</p> </div> 700000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Offering Costs</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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&#xA0;million for the year ended May&#xA0;31, 2018, and approximately $2.7&#xA0;million and $0.6&#xA0;million for the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively. The offering costs were recorded as a component of equity upon receipt of proceeds.</p> </div> 19589 --05-31 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Note 4 &#x2013; Convertible Instruments</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i>Series B Convertible Preferred Stock</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During fiscal 2010, the Company issued 400,000 shares of Series B, $0.001 par value Convertible Preferred Stock (&#x201C;Series B&#x201D;) at $5.00 per share for cash proceeds totaling $2,009,000, of which 92,100 shares remain outstanding at November&#xA0;30, 2018. Each share of the Series B is convertible into ten shares of the Company&#x2019;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&#x2019;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 <font style="WHITE-SPACE: nowrap">additional&#xA0;paid-in&#xA0;capital</font> 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 November&#xA0;30, 2018 and May&#xA0;31, 2018, the undeclared, accrued dividends were approximately $205,000 and $199,000, respectively, or 410,000 and 387,000 shares of common stock, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Short-term Convertible Notes</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the fiscal year ended May&#xA0;31, 2018, the Company issued approximately $4.89&#xA0;million in aggregate principal of short-term Convertible Notes, with a maturity date of January&#xA0;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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="85%"></td> <td valign="bottom" width="6%"></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" align="center">2018</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected dividend yield</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">0%</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock price volatility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">69.80%</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected term</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">5 year</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Risk-free interest rate</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center"><font style="WHITE-SPACE: nowrap">1.77-1.93%</font></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Grant-date fair value</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center"><font style="WHITE-SPACE: nowrap">$0.30-$0.39</font></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 <font style="WHITE-SPACE: nowrap">additional&#xA0;paid-in&#xA0;capital</font> was amortized over the term of the short-term Convertible Notes. The Company incurred debt discount of approximately $1.5&#xA0;million related to the beneficial conversion feature and detachable warrants issued with the short-term Convertible Notes during the year ended May&#xA0;31, 2018. Accordingly, the Company recognized <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">approximately&#xA0;$-0-&#xA0;and</font></font> $1.2&#xA0;million <font style="WHITE-SPACE: nowrap">of&#xA0;non-cash&#xA0;debt</font> discount during the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017. In connection with the short-term Convertible Notes, the Company incurred direct issuance costs of approximately $0.4&#xA0;million during the year ended May&#xA0;31, 2018. The issuance costs were amortized over the term of the short-term Convertible Notes and accordingly, the Company recognized <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">approximately&#xA0;$-0-&#xA0;and</font></font> $0.3&#xA0;million of debt issuance costs during the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> On January&#xA0;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&#xA0;million. The Company repaid one short-term Convertible Note, including accrued interest in the aggregate of approximately $259,000. During the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, the Company recognized <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">approximately&#xA0;$-0-&#xA0;and</font></font> $75,000, of interest expense related to the short-term Convertible Notes.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Activity related to the short-term Convertible Notes was as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="69%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31, 2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Face amount of short-term Convertible Notes</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,038,500</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unamortized discount</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(5,788,500</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Note repayment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(250,000</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of short-term Convertible Notes</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Long-term Convertible Note</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On June&#xA0;26, 2018, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note (the &#x201C;Note&#x201D;) with <font style="WHITE-SPACE: nowrap">a&#xA0;two-year&#xA0;term</font> to an institutional accredited investor in the initial principal amount of $5.7&#xA0;million. The investor gave consideration of $5.0&#xA0;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&#x2019; 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&#x2019; 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In connection with the Note, the Company recorded debt discount of $0.6&#xA0;million and debt issuance costs of $0.1&#xA0;million. The discount and issuance costs will be amortized over the life of the Note, and accordingly, the Company recognized approximately $20,000 <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">and&#xA0;$-0-&#xA0;amortization</font></font> of debt issuance costs for the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively and approximately $118,000 <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">and&#xA0;$-0-&#xA0;of</font></font> amortization of debt discount for the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Effective November&#xA0;15, 2018, the Note was amended to allow the Investor to redeem the monthly redemption amount of $350,000 in cash or stock, at the lesser of (i) $0.55, or (ii)&#xA0;the lowest closing bid price of the Company&#x2019;s common stock during the 20 days prior to the conversion, multiplied by a conversion factor of 85%. The variable rate redemption provision meets the definition of a derivative instrument and subsequent to the amendment, it no longer meets the criteria to be considered indexed to the Company&#x2019;s own stock. As of November&#xA0;15, 2018, the redemption provision requires bifurcation as a derivative liability at fair value under the guidance in ASC Topic No.&#xA0;815, &#x201C;Derivatives and Hedging.&#x201D;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The amendment of the Note was also evaluated under ASC Topic <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">470-50-40,</font></font> &#x201C;Debt Modifications and Extinguishments.&#x201D; Based on the guidance, the instruments were determined to be substantially different, and debt extinguishment accounting was applied. We recorded approximately $1.5&#xA0;million as an extinguishment loss, which was the difference in the net carrying value of the Note prior to the amendment of approximately $5.4&#xA0;million, and the fair value of the Note and embedded derivatives after the amendment of approximately $6.9&#xA0;million. The extinguishment loss includes a <font style="WHITE-SPACE: nowrap">write-off</font> of unamortized debt issuance costs and the debt discount associated with the original Note. During the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, the Company recognized approximately $248,000 <font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">and&#xA0;$-0-,&#xA0;of</font></font> interest expense related to the Notes.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Activity related to the Note was as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="57%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">November&#xA0;30, 2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Short term</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Long term</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Face amount of convertible promissory note</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#xA0;&#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> June&#xA0;26, 2018 convertible promissory note</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,100,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,600,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,700,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Monthly redemption</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">700,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(700,000</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unamortized discount at August&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(344,614</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(281,628</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(626,242</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of convertible notes at August&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,455,386</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,618,372</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,073,758</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of convertible notes at November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,200,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,396,974</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,596,974</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -2826919 243772 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b>Note 5 &#x2013; Derivative Liabilities</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The investor and placement agent warrants, issued in connection with a registered direct offering in September 2016, contained 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, whereby such other Person or group acquires more than 50% of the outstanding common stock).&#xA0;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.&#xA0;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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date September&#xA0;15, 2016, May&#xA0;31, 2018, August&#xA0;31, 2018 and November&#xA0;30, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="68%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Shares&#xA0;Indexed</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Derivative&#xA0;Liability</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Inception date September&#xA0;15, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,179,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance May&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance August&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,071,199</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Company recognized approximately $466,000 of <font style="WHITE-SPACE: nowrap">non-cash</font> loss and approximately $467,000 of <font style="WHITE-SPACE: nowrap">non-cash</font> gain, due to the changes in the fair value of the liability associated with such classified warrants during the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 (&#x201C;Lattice&#x201D;) valuation model.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Company estimated the fair value of the warrant derivative liability as of inception date September&#xA0;15, 2016, May&#xA0;31, 2018 and November&#xA0;30, 2018, using the following assumptions:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0"> <tr> <td width="67%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">September&#xA0;15,<br /> 2016</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31,<br /> 2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,<br /> 2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value of underlying stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.49</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.58</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Risk free rate</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1.20</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.63</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.83</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected term (in years)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.3</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.79</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock price volatility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">106</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">64</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">62</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected dividend yield</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Probability of Fundamental Transaction</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">95</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Probability of holder requesting cash payment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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&#x2019;s stock price, stock price volatility, changes in interest rates and management&#x2019;s assumptions related to the fundamental transaction provisions.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> As described above in Note 4, the redemption provision embedded in the Note required bifurcation and measurement at fair value as a derivative. The fair value of the convertible note redemption provision derivative liability was calculated using a Monte Carlo Simulation which uses randomly generated stock-price paths obtained through a Geometric Brownian Motion stock price simulation. Various assumptions used in the valuation model included: annual volatility of 58.8%, risk free rate of 2.78%, an exercise factor of 2x and an expected term of 1.61 years.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The fair value of the derivative liability resulting from the redemption provision was approximately $1.28&#xA0;million as of its inception date, November&#xA0;15, 2018 and November&#xA0;30, 2018. The fair value of the redemption provision will be significantly influenced by the fair value of the Company&#x2019;s stock price, stock price volatility, changes in interest rates and management&#x2019;s assumptions related to the redemption factor. The Company recognized approximately $1,100 of <font style="WHITE-SPACE: nowrap">non-cash</font> loss, due to the changes in the fair value of the liability associated with such classified redemption provision between the inception date and November&#xA0;30, 2018.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> The following table summarizes the fair value of the convertible note redemption provision derivative liability as of inception date November&#xA0;15, 2018 and November&#xA0;30, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="74%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Net Proceeds</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Derivative<br /> Liability</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Inception date, November&#xA0;15, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,000,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,284,998</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,000,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,286,076</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Company estimated the fair value of the redemption provision using the following assumptions on the closing date of November&#xA0;15, 2015 and November&#xA0;30, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="74%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;15,<br /> 2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,<br /> 2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value of underlying stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.57</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.58</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Risk free rate</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.78</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.78</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected term (in years)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1.61</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1.61</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock price volatility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58.8</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58.8</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected dividend yield</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Discount factor</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">85</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">85</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> </table> </div> Q2 2019 10-Q CYTODYN INC. true <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Company estimated the fair value of the warrant derivative liability as of inception date September&#xA0;15, 2016, May&#xA0;31, 2018 and November&#xA0;30, 2018, using the following assumptions:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0"> <tr> <td width="67%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">September&#xA0;15,<br /> 2016</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31,<br /> 2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,<br /> 2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value of underlying stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.49</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.58</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Risk free rate</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1.20</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.63</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.83</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected term (in years)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.3</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.79</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock price volatility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">106</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">64</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">62</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected dividend yield</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Probability of Fundamental Transaction</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">95</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Probability of holder requesting cash payment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> </table> </div> -466412 <div> <p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>Loss per Common Share</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> 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 155,836,676 and 87,551,801 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 six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively. Additionally, as of November&#xA0;30, 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.</p> </div> 0001175680 2018-11-30 false Accelerated Filer <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 six months ended November&#xA0;30, 2018 and the year ended May&#xA0;31, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="84%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Investor warrants issued with registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,360,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Placement agent warrants issued with registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">819,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value adjustments</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(3,855,468</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at May&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Inception date value of redemption provision</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,284,998</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value adjustments</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">466,412</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Fair Value of Financial Instruments</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i>Fair Value Hierarchy</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The three levels of inputs that may be used to measure fair value are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Level&#xA0;1. Quoted prices in active markets for identical assets or liabilities.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Level&#xA0;2. Observable inputs other than Level&#xA0;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&#xA0;2 inputs also <font style="WHITE-SPACE: nowrap">include&#xA0;non-binding&#xA0;market</font> consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Level&#xA0;3. Unobservable inputs to the valuation methodology are significant to the measurement of the fair value of assets or liabilities. These Level&#xA0;3 inputs also <font style="WHITE-SPACE: nowrap">include&#xA0;non-binding&#xA0;market</font> consensus prices <font style="WHITE-SPACE: nowrap">or&#xA0;non-binding&#xA0;broker</font> quotes that the Company was unable to corroborate with observable market data.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of November&#xA0;30, 2018 and May&#xA0;31, 2018 is as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="56%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center">Fair Value Measurement at</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center">Fair Value Measurement at</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center">November&#xA0;30, 2018 (1)</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center">May&#xA0;31, 2018 (1)</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center">Using</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center">Using</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level&#xA0;3</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level&#xA0;3</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Liabilities:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Derivative liability - warrants</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Derivative liability - convertible note redemption provision</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,286,076</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,286,076</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total liabilities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td valign="top" width="4%" align="left">(1)</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="left">The Company did not have any assets or liabilities measured at fair value using Level&#xA0;1 or 2 of the fair value hierarchy as of November&#xA0;30, 2018 and May&#xA0;31, 2018.</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> A financial instrument&#x2019;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. The Company uses a Binomial Lattice Model to estimate the value of the warrant derivative liability and a Monte Carlo Simulation to value the derivative liability of the redemption provision within a convertible promissory note. These valuation models were used because management believes they reflect all the assumptions that market participants would likely consider in negotiating the transfer of the instruments. The Company&#x2019;s derivative liabilities are classified within Level&#xA0;3 of the fair value hierarchy because certain unobservable inputs were used in the valuation models. 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 six months ended November&#xA0;30, 2018 and the year ended May&#xA0;31, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="84%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Investor warrants issued with registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,360,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Placement agent warrants issued with registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">819,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value adjustments</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(3,855,468</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at May&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Inception date value of redemption provision</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,284,998</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value adjustments</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">466,412</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -466412 -1519603 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Identified Intangible Assets</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The Company follows the provisions of Financial Accounting Standards Board (&#x201C;FASB&#x201D;) 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 six months ended November&#xA0;30, 2018 and 2017. The value of the Company&#x2019;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.</p> </div> -0.12 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b>Income Taxes</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Company follows the provisions of FASB Accounting Standards Codification (&#x201C;ASC&#x201D;) ASC <font style="WHITE-SPACE: nowrap">740-10</font> &#x201C;Uncertainty in Income Taxes&#x201D;. 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 <font style="WHITE-SPACE: nowrap">740-10.</font> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Tax Cuts and Jobs Act (the &#x201C;Act&#x201D;) was enacted on December&#xA0;22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% effective as of January&#xA0;1, 2018. In accordance with Section&#xA0;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&#xA0;1, 2018 effective date. For the fiscal year ended May&#xA0;31, 2018, we recorded provisional charges for the <font style="WHITE-SPACE: nowrap">re-measurement</font> 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&#xA0;31, 2018, is zero, due to the reduction in the deferred tax valuation allowance.&#xA0;For the year ending May&#xA0;31, 2019 a deferred tax rate of 21% is being utilized and a corresponding valuation allowance adjustment is being recorded for the generation of deferred tax assets reversing in the future. For the three months ending November&#xA0;30, 2018 the Company recorded a $2,826,919&#xA0;deferred income tax benefit from a&#xA0;reduction in the Company&#x2019;s deferred tax valuation allowance resulting from recording a deferred tax liability of $2,826,919 in connection with the acquisition of assets in the ProstaGene LLC transaction (see Note 7) . The deferred tax liability represents the tax effect of the difference in the carrying value of the assets and their tax basis at acquisition. The Company has a full valuation allowance on the Company&#x2019;s net deferred tax assets as of November&#xA0;30, 2018 and May&#xA0;31, 2018, as management does not consider it more than likely than not that the benefits from the deferred taxes will be realized.</p> </div> 3283113 4594804 2002 -31545869 2826919 0 1904973 1807629 248247 -2262 <div> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>Note 1 &#x2013; Organization</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> CytoDyn Inc. (the &#x201C;Company&#x201D;, &#x201C;we&#x201D; or &#x201C;us&#x201D;) was originally incorporated under the laws of Colorado on May&#xA0;2, 2002 under the name RexRay Corporation (its previous name) and, effective August&#xA0;27, 2015, reincorporated under the laws of Delaware. Effective November&#xA0;16, 2018, we implemented a holding company reorganization, as a result of which, we became the successor issuer and reporting company to the former CytoDyn Inc. (now our wholly owned subsidiary, CytoDyn Operations Inc.). We are a clinical-stage biotechnology company focused on the clinical development and potential commercialization of humanized monoclonal antibodies to treat Human Immunodeficiency Virus (&#x201C;HIV&#x201D;) infection. Our lead product candidate, leronlimab (PRO 140), belongs to a class of HIV therapies known as entry inhibitors that block HIV from entering into and infecting certain cells.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> 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 (&#x201C;GvHD&#x201D;). In addition, we are expanding the clinical focus of leronlimab (PRO 140) to include the evaluation of certain cancer and immunological indications where CCR antagonism has shown initial promise.</p> </div> 25736167 29176486 -26192989 -28718950 5000000 2262 -29176486 2727418 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Reclassifications</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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&#x2019; (deficit) equity, net loss or loss per share.</p> </div> <div> <p style="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>Note 13 &#x2013; Related Party Transactions</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On July&#xA0;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.&#xA0;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.&#xA0;Naydenov&#x2019;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.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On July&#xA0;28, 2017, Alpha Venture Capital Partners, LP (&#x201C;AVCP&#x201D;), 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.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On November&#xA0;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.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On January&#xA0;31, 2018 each of Mr.&#xA0;Caracciolo, Mr.&#xA0;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.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> 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.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On July&#xA0;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&#xA0;11, 2018, Denis R. Burger, Ph.D. and A. Bruce Montgomery, M.D., resigned as members of the Company&#x2019;s board of directors. Dr.&#xA0;Burger also resigned as Chief Science Officer of the Company, which was not an executive officer position. On July&#xA0;10, 2018, In connection with the resignations of Dr.&#xA0;Burger and Dr.&#xA0;Montgomery, the Company&#x2019;s board of directors determined to accelerate the vesting of all outstanding and unvested stock options held by Dr.&#xA0;Burger and Dr.&#xA0;Montgomery. Upon the effectiveness of their resignations, stock options covering 500,000 shares 100,000 shares, held by Dr.&#xA0;Burger and Dr.&#xA0;Montgomery, respectively became fully vested. The stock options retained their exercise period through their respective expiration dates and the terms of the stock options remained otherwise unchanged.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On November&#xA0;16, 2018, the Company closed its acquisition of ProstaGene, as described in Note 7. In connection with the closing of the acquisition, the Company hired Dr.&#xA0;Pestell as its Chief Medical Officer. As previously disclosed by the Company, Dr.&#xA0;Pestell is the holder of approximately 77.2% of the outstanding equity interests in ProstaGene and consequently holds an indirect interest in approximately (i) 8,611,427 of 13,258,000 shares of the Company&#x2019;s common stock, currently pending distribution by ProstaGene to its members, and (ii) 4,171,013 of 5,400,000 shares of common stock, currently held in escrow for the benefit of ProstaGene and its members, which are subject to forfeiture to satisfy certain indemnity obligations of ProstaGene and will be released ratably every six months over the eighteen-month period following the closing date. In addition, as specified in a Stock Restriction Agreement with the Company entered into on the closing date, 8,342,000 additional shares of common stock previously distributed to Dr.&#xA0;Pestell in the ProstaGene acquisition are currently subject to transfer restrictions and forfeiture obligations, subject to certain continuing employment obligations of Dr.&#xA0;Pestell, which will vest ratably each year over the three-years period following the closing date.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> As specified in a Confidential Information, Inventions and Noncompetition Agreement between the Company and Dr.&#xA0;Pestell, which was entered into on the closing date of the ProstaGene acquisition, the Company may participate in the development and license of certain intellectual property created by Dr.&#xA0;Pestell, in connection with Dr.&#xA0;Pestell&#x2019;s ongoing research obligations to outside academic institutions. The Company also has the right to work with Dr.&#xA0;Pestell to manage any potential conflict between the Company&#x2019;s clinical development activities and such ongoing research obligations.</p> </div> 24337910 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Research and Development</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Stock-Based Compensation</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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&#x2019;s common stock on monthly intervals. The computation of the expected option term is based on the &#x201C;simplified method,&#x201D; as the Company issuances are considered &#x201C;plain vanilla&#x201D; 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. Periodically, the Company will issue restricted common stock to third parties as compensation for services rendered. Such stock awards are valued at fair market value on the effective date of the Company&#x2019;s obligation.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Activity related to the Note was as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="57%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="10" align="center">November&#xA0;30, 2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Short term</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Long term</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Face amount of convertible promissory note</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#xA0;&#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> June&#xA0;26, 2018 convertible promissory note</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,100,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,600,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,700,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Monthly redemption</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">700,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(700,000</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unamortized discount at August&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(344,614</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(281,628</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(626,242</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of convertible notes at August&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,455,386</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,618,372</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,073,758</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of convertible notes at November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,200,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,396,974</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,596,974</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of November&#xA0;30, 2018 and May&#xA0;31, 2018 is as follows:</p> <p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt"> &#xA0;</p> <table cellspacing="0" cellpadding="0" width="92%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" align="center"> <tr> <td width="56%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center">Fair Value Measurement at</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center">Fair Value Measurement at</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">November&#xA0;30, 2018 (1)</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center" style="border-bottom:1.00pt solid #000000">May&#xA0;31, 2018 (1)</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center">Using</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td colspan="2" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center">Using</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td colspan="2" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:8pt"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">Level&#xA0;3</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">Total</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">Level&#xA0;3</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1.00pt solid #000000">Total</td> <td valign="bottom">&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Liabilities:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Derivative liability - warrants</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Derivative liability - convertible note redemption provision</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,286,076</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,286,076</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Total liabilities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td nowrap="nowrap" valign="bottom">&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt"> &#xA0;</p> <table style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" border="0" cellpadding="0" cellspacing="0" width="100%"> <tr style="page-break-inside:avoid"> <td width="4%" valign="top" align="left">(1)</td> <td align="left" valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman;" align="left">The Company did not have any assets or liabilities measured at fair value using Level&#xA0;1 or 2 of the fair value hierarchy as of November&#xA0;30, 2018 and May&#xA0;31, 2018.</p> </td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> The following presents intangible assets activity:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="68%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Gross carrying amounts</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,500,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,500,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Intangible asset acquisition:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> ProstaGene, LLC</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accumulated amortization</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(2,209,254</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,968,846</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total amortizable intangible assets, net</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,416,962</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,531,154</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Patents currently not amortized</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">35,989</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">35,989</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of intangibles, net</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,452,951</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,567,143</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 1510486 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Note 2 &#x2013; Summary of Significant Accounting Policies</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <b>Basis of Presentation</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (&#x201C;U.S. GAAP&#x201D;) 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 <font style="WHITE-SPACE: nowrap">Form&#xA0;10-Q.&#xA0;Accordingly,</font> 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&#xA0;31, 2018 and 2017 and notes thereto in the Company&#x2019;s Annual Report on <font style="WHITE-SPACE: nowrap">Form&#xA0;10-K&#xA0;and</font> <font style="WHITE-SPACE: nowrap">Form&#xA0;10-K/A&#xA0;for</font> the fiscal year ended May&#xA0;31, 2018, filed with the Securities and Exchange Commission on July&#xA0;27, 2018 and September&#xA0;28, 2018, respectively. Operating results for the three months ended November&#xA0;30, 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)&#xA0;the results of operations for the three and six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, (b)&#xA0;the financial position at November&#xA0;30, 2018 and (c)&#xA0;cash flows for the six month periods ended November&#xA0;30, 2018 and November&#xA0;30, 2017.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Principles of Consolidation</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, CytoDyn Operations Inc., Advanced Genetic Technologies, Inc. (&#x201C;AGTI&#x201D;) and CytoDyn Veterinary Medicine LLC (&#x201C;CVM&#x201D;), of which both AGTI and CVM are dormant entities. All intercompany transactions and balances are eliminated in consolidation.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Reclassifications</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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&#x2019; (deficit) equity, net loss or loss per share.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Going Concern</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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 $28,718,950 for the six months ended November&#xA0;30, 2018 and has an accumulated deficit of $201,858,345 as of November&#xA0;30, 2018. These factors, among others, raise substantial doubt about the Company&#x2019;s ability to continue as a going concern.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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&#x2019;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&#xA0;&amp; Drug Administration (&#x201C;FDA&#x201D;) 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Use of Estimates</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Cash</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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 November&#xA0;30, 2018 and May&#xA0;31, 2018 approximated $0.5&#xA0;million and $1.1&#xA0;million, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Identified Intangible Assets</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The Company follows the provisions of Financial Accounting Standards Board (&#x201C;FASB&#x201D;) 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 six months ended November&#xA0;30, 2018 and 2017. The value of the Company&#x2019;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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Research and Development</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><font style="WHITE-SPACE: nowrap">Pre-launch</font> Inventory</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The Company <font style="WHITE-SPACE: nowrap">may&#xA0;scale-up&#xA0;and</font> make commercial quantities of its product candidate prior to the date it anticipates that such product will receive final FDA approval. <font style="WHITE-SPACE: nowrap">The&#xA0;scale-up&#xA0;and</font> commercial production <font style="WHITE-SPACE: nowrap">of&#xA0;pre-launch&#xA0;inventories</font> 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 <font style="WHITE-SPACE: nowrap">may&#xA0;scale-up&#xA0;and</font> <font style="WHITE-SPACE: nowrap">build&#xA0;pre-launch&#xA0;inventories</font> 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 (&#x201C;BLA&#x201D;) 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 November&#xA0;30, 2018 and May&#xA0;31, 2018, the Company did not <font style="WHITE-SPACE: nowrap">have&#xA0;pre-launch&#xA0;inventory</font> that qualified for capitalization pursuant to U.S. GAAP ASC 330 &#x201C;Inventory.&#x201D;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Fair Value of Financial Instruments</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i>Fair Value Hierarchy</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The three levels of inputs that may be used to measure fair value are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Level&#xA0;1. Quoted prices in active markets for identical assets or liabilities.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Level&#xA0;2. Observable inputs other than Level&#xA0;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&#xA0;2 inputs also <font style="WHITE-SPACE: nowrap">include&#xA0;non-binding&#xA0;market</font> consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Level&#xA0;3. Unobservable inputs to the valuation methodology are significant to the measurement of the fair value of assets or liabilities. These Level&#xA0;3 inputs also <font style="WHITE-SPACE: nowrap">include&#xA0;non-binding&#xA0;market</font> consensus prices <font style="WHITE-SPACE: nowrap">or&#xA0;non-binding&#xA0;broker</font> quotes that the Company was unable to corroborate with observable market data.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of November&#xA0;30, 2018 and May&#xA0;31, 2018 is as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="56%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center">Fair Value Measurement at</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center">Fair Value Measurement at</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center">November&#xA0;30, 2018 (1)</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center">May&#xA0;31, 2018 (1)</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center">Using</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center">Using</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level&#xA0;3</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Level&#xA0;3</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Liabilities:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Derivative liability - warrants</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Derivative liability - convertible note redemption provision</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,286,076</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,286,076</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total liabilities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td valign="top" width="4%" align="left">(1)</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="left">The Company did not have any assets or liabilities measured at fair value using Level&#xA0;1 or 2 of the fair value hierarchy as of November&#xA0;30, 2018 and May&#xA0;31, 2018.</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> A financial instrument&#x2019;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. The Company uses a Binomial Lattice Model to estimate the value of the warrant derivative liability and a Monte Carlo Simulation to value the derivative liability of the redemption provision within a convertible promissory note. These valuation models were used because management believes they reflect all the assumptions that market participants would likely consider in negotiating the transfer of the instruments. The Company&#x2019;s derivative liabilities are classified within Level&#xA0;3 of the fair value hierarchy because certain unobservable inputs were used in the valuation models. 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 six months ended November&#xA0;30, 2018 and the year ended May&#xA0;31, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="84%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Investor warrants issued with registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,360,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Placement agent warrants issued with registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">819,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value adjustments</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(3,855,468</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at May&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Inception date value of redemption provision</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,284,998</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value adjustments</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">466,412</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,075,142</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Stock-Based Compensation</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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&#x2019;s common stock on monthly intervals. The computation of the expected option term is based on the &#x201C;simplified method,&#x201D; as the Company issuances are considered &#x201C;plain vanilla&#x201D; 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. Periodically, the Company will issue restricted common stock to third parties as compensation for services rendered. Such stock awards are valued at fair market value on the effective date of the Company&#x2019;s obligation.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 18pt; MARGIN-TOP: 0pt"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b>Common Stock</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On August&#xA0;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&#xA0;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&#x2019; meeting, an amendment to the Company&#x2019;s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to each authorized share increase.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> On November&#xA0;8, 2018 at the 2018 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 450,000,000 to 600,000,000. Subsequent to the meeting, an amendment to the Company&#x2019;s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to the authorized share increase.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Preferred Stock</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The Company&#x2019;s Board of Directors is authorized to issue up to 5,000,000 shares of preferred stock without stockholder approval. As of November&#xA0;30, 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Treasury Stock</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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&#xA0;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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Debt Discount</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the six months ended November&#xA0;30, 2018 and the year ended May&#xA0;31, 2018, the Company incurred approximately $0.6&#xA0;million and $1.5&#xA0;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 six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, the Company recorded approximately $117,500 and $1.2&#xA0;million of related amortization.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Debt Issuance Cost</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the six months ended November&#xA0;30, 2018 and the year ended May&#xA0;31, 2018, the Company incurred direct costs associated with the issuance of convertible notes, as described in Note 4, and recorded approximately $0.1&#xA0;million and $0.4&#xA0;million, respectively of debt issuance costs. In connection with the debt issuance costs, the Company recognized approximately $20,000 and $0.3&#xA0;million of related amortization for the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Offering Costs</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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&#xA0;million for the year ended May&#xA0;31, 2018, and approximately $2.7&#xA0;million and $0.6&#xA0;million for the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively. The offering costs were recorded as a component of equity upon receipt of proceeds.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Stock for Services</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Loss per Common Share</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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 155,836,676 and 87,551,801 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 six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively. Additionally, as of November&#xA0;30, 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.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b>Income Taxes</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Company follows the provisions of FASB Accounting Standards Codification (&#x201C;ASC&#x201D;) ASC <font style="WHITE-SPACE: nowrap">740-10</font> &#x201C;Uncertainty in Income Taxes&#x201D;. 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 <font style="WHITE-SPACE: nowrap">740-10.</font> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Tax Cuts and Jobs Act (the &#x201C;Act&#x201D;) was enacted on December&#xA0;22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% effective as of January&#xA0;1, 2018. In accordance with Section&#xA0;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&#xA0;1, 2018 effective date. For the fiscal year ended May&#xA0;31, 2018, we recorded provisional charges for the <font style="WHITE-SPACE: nowrap">re-measurement</font> 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&#xA0;31, 2018, is zero, due to the reduction in the deferred tax valuation allowance.&#xA0;For the year ending May&#xA0;31, 2019 a deferred tax rate of 21% is being utilized and a corresponding valuation allowance adjustment is being recorded for the generation of deferred tax assets reversing in the future. For the three months ending November&#xA0;30, 2018 the Company recorded a $2,826,919&#xA0;deferred income tax benefit from a&#xA0;reduction in the Company&#x2019;s deferred tax valuation allowance resulting from recording a deferred tax liability of $2,826,919 in connection with the acquisition of assets in the ProstaGene LLC transaction (see Note 7) . The deferred tax liability represents the tax effect of the difference in the carrying value of the assets and their tax basis at acquisition. The Company has a full valuation allowance on the Company&#x2019;s net deferred tax assets as of November&#xA0;30, 2018 and May&#xA0;31, 2018, as management does not consider it more than likely than not that the benefits from the deferred taxes will be realized.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b>Common Stock</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On August&#xA0;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&#xA0;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&#x2019; meeting, an amendment to the Company&#x2019;s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to each authorized share increase.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> On November&#xA0;8, 2018 at the 2018 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 450,000,000 to 600,000,000. Subsequent to the meeting, an amendment to the Company&#x2019;s Certificate of Incorporation was filed with the Secretary of State of the State of Delaware to give effect to the authorized share increase.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> <b>Note 14 &#x2013; Subsequent Events</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> Between December&#xA0;7, 2018 and December&#xA0;11, 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 2,018,000 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $1.0&#xA0;million and issued to the investors five-year warrants covering 1,009,000 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 $0.1&#xA0;million to the placement agent and issued warrants covering an aggregate of 201,800 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 and a cashless exercise provision.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> On December&#xA0;10, 2018, Anthony D. Caracciolo resigned as the Chairman of the Board, but remains a director and Scott A. Kelly, M.D., was named Chairman of the Board. On December&#xA0;19, 2018, the Compensation Committee of the Board approved an amendment to certain compensation arrangements for Anthony D. Caracciolo, pursuant to which his employment with the Company would be extended through April&#xA0;16, 2019, at a salary reduced from $16,667 to $5,000 per month, with continuing benefits. In addition, the Compensation Committee approved an extension to&#xA0;<font style="WHITE-SPACE: nowrap">10-years</font>&#xA0;of the expiration terms of certain previously awarded stock options covering an aggregate of 150,000 shares of the Company&#x2019;s common stock, provided that such stock options are&#xA0;<font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap"><font style="WHITE-SPACE: nowrap">out-of-the-money</font></font></font>&#xA0;upon the date of such extension. These arrangements were conditioned upon Mr.&#xA0;Caracciolo&#x2019;s agreement to resign from the Board upon identification by the Company of an appropriately qualified candidate to fill the vacancy. Mr.&#xA0;Caracciolo has agreed to the foregoing terms. These arrangements were not the result of any disagreement with the Company on any matter relating to the Company&#x2019;s operations, policies or practices.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> On December&#xA0;22, 2018 the board of directors appointed Nitya G. Ray, Ph.D., as Chief Technology Officer &#x2013; Head of Process Sciences, Manufacturing and Supply Chain. In connection with Dr.&#xA0;Ray&#x2019;s appointment, the Company and Dr.&#xA0;Ray entered into an Employment Agreement that provides for (i)&#xA0;an annual base salary of $335,000, (ii) a target annual bonus equal to 50% of base salary, (iii)&#xA0;an initial signing bonus of $100,000 to be paid in two equal installments of $50,000 over the course of six months from the date of signing and (iv)&#xA0;other customary benefits described in the form of employment agreement. In connection with the appointment of Dr.&#xA0;Ray, the Company also issued Dr.&#xA0;Ray a stock option award under the Company&#x2019;s equity incentive plan, covering 400,000 shares of the Company&#x2019;s common stock, vesting in three equal annual installments from the grant date.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> On December&#xA0;27, 2018, the Company received a redemption notice from the holder of the Company&#x2019;s convertible note issued on June&#xA0;26, 2018, requesting the redemption of $100,000 of the outstanding balance thereof. In satisfaction of the redemption notice, the Company issued 255,532 shares of common stock to the note holder in accordance with the terms of the convertible note. Following the redemption, the outstanding balance of the convertible note, including accrued but unpaid interest, was approximately $5.9&#xA0;million.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> Beginning December&#xA0;28, 2018 through January&#xA0;8, 2019, the Company issued $3.1&#xA0;million (of which $0.5&#xA0;million was purchased by Michael&#xA0;A. Klump, a director, on terms identical to all other investors) in aggregate principal amount of unsecured convertible promissory notes (the &#x201C;Notes&#x201D;) and related warrants (the &#x201C;Warrants&#x201D;) to purchase common stock of the Company (the &#x201C;Common Stock&#x201D;), to accredited investors (the &#x201C;Private Placements&#x201D;) pursuant to subscription agreements entered into with each investor (collectively, the &#x201C;Subscription Agreements&#x201D;), in exchange for cash in an equal amount. The proceeds of the Private Placements are anticipated to be used for general working capital and to fund clinical trials.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> The principal amount of the Notes plus unpaid accrued interest at an annual rate of 10.0% is convertible at the election of the holders into shares of Common Stock at any time prior to maturity, at an initial conversion price of $0.50 per share, with an aggregate of 6,200,000&#xA0;shares of the Company&#x2019;s Common Stock initially underlying the Notes. As part of the investment in the Notes, the Company also issued Warrants exercisable for 50% of the shares into which the Notes are convertible, with Warrants for an aggregate of 3,100,000&#xA0;shares of Common Stock issued in the Private Placements. The Warrants are exercisable at a price of $0.30 per share. The Warrants are currently exercisable in full and will expire five years from the date of issuance. The Subscription Agreements contain certain &#x201C;piggyback&#x201D; registration rights relating to resales of shares of Common Stock underlying the Notes and the Warrants.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: &quot;Times New Roman&quot;; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; FONT-WEIGHT: 400; COLOR: rgb(0,0,0); FONT-STYLE: normal; ORPHANS: 2; WIDOWS: 2; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial"> As a result of the issuance of the Notes, pursuant to the terms of the Placement Agent Agreement, dated July 26, 2018, entered into in connection with a recently completed private securities offering, the placement agent in that offering earned a &#x201C;tail fee&#x201D; comprising warrants exercisable for 620,000 shares of Common Stock (the &#x201C;Placement Agent Warrants&#x201D;) and a cash fee of $372,000. The Placement Agent Warrants are exercisable at a price of $0.50 per share and will expire five years from the date of issuance. The Placement Agent Warrants provide for cashless exercise.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table represents stock option and warrant activity as of and for the six months ended November&#xA0;30, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="54%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Number&#xA0;of<br /> Shares</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br /> Average<br /> Exercise&#xA0;Price</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br /> Average<br /> Remaining<br /> Contractual&#xA0;Life<br /> in Years</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Aggregate<br /> Intrinsic&#xA0;Value</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Options and warrants outstanding - May 31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">132,385,269</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.80</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,673</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">33,483,124</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">0.69</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Exercised</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited/expired/cancelled</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(10,031,717</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">0.75</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Options and warrants outstanding - November 30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">155,836,676</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">0.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.97</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">769,360</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Outstanding exercisable - November 30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">150,960,607</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.80</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">565,356</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> </table> </div> 238731091 CYDY <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Note 6 &#x2013; Stock Options and Warrants</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The Company has one active stock-based equity plan at November&#xA0;30, 2018, the CytoDyn Inc. 2012 Equity Incentive Plan, as amended (the &#x201C;2012 Plan&#x201D;) 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 &#x201C;2004 Plan&#x201D; and, together with the 2012 Plan, the &#x201C;Incentive Plans&#x201D;). The 2012 Plan was approved by stockholders at the Company&#x2019;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&#xA0;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 November&#xA0;30, 2018, the Company had 553,048 shares available for future stock-based grants under the 2012 Plan.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Stock Options</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the six months ended November&#xA0;30, 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 <font style="WHITE-SPACE: nowrap">a&#xA0;ten-year&#xA0;term.</font> 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 <font style="WHITE-SPACE: nowrap">annual&#xA0;non-employee&#xA0;director</font> stock option award from 75,000 to 100,000 shares per year, effective for fiscal year 2019.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the six months ended November&#xA0;30, 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 <font style="WHITE-SPACE: nowrap">a&#xA0;ten-year&#xA0;term</font> and a grant date fair value of $0.41 per share.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the six months ended November&#xA0;30, 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 <font style="WHITE-SPACE: nowrap">a&#xA0;ten-year&#xA0;term</font> and grant date fair values of $0.31 per share. Additionally, the Company granted a stock option covering an aggregate of 1,000,000 shares of common stock, to an officer with an exercise price of $0.565 per share. The stock option award vests 50% upon grant and 50% on April&#xA0;8, 2019; it has a <font style="WHITE-SPACE: nowrap">ten-year</font> term and grant date fair value of $0.30 per share. The Company also granted stock options, covering an aggregate of 500,000 shares of common stock to directors for consulting services with an exercise price of $0.565 per share. The stock option awards vest upon grant, have a <font style="WHITE-SPACE: nowrap">ten-year</font> term and grant date fair value of $0.30 per share.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the six months ended November&#xA0;30, 2018, the Company granted a stock option award covering 350,000 shares of common stock with an exercise price of $0.551 per share to Dr.&#xA0;Richard&#xA0;G. Pestell, M.D., Ph.D., in connection with his employment agreement as Chief Medical Officer and the closing of the ProstaGene transaction described in Note 7. The stock option award vests annually over three years, with a <font style="WHITE-SPACE: nowrap">ten-year</font> term and grant date fair value of $0.30 per share.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <i>Warrants</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On June&#xA0;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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the six months ended November&#xA0;30, 2018, in connection with a private equity offering, as fully described in Note 10, the Company issued common stock warrants covering a total of 22,478,585 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 4,245,117 shares of common stock to the placement agent. The placement agent warrants have a five-year term, an exercise price of $0.50 per share and a cashless exercise provision.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the six months ended November&#xA0;30, 2018, the Company issued compensable warrants covering an aggregate of 300,000 shares of common stock to consultants. The warrants have a five-year term, an exercise price of $0.56 per share and a grant date fair value of $0.30 per share.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the year ended May&#xA0;31, 2018, the Company determined to extend the expiration dates of certain warrants from May&#xA0;31, 2017 to June&#xA0;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&#xA0;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&#xA0;million and, pursuant to U.S. GAAP, the Company <font style="WHITE-SPACE: nowrap">recognized&#xA0;non-cash&#xA0;inducement</font> interest expense of approximately $0.8&#xA0;million, which represented the incremental increase in the fair value of the extended warrants.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Compensation expense related to stock options, compensatory warrants and common stock reserved for advisory services, for the three and six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017 was approximately $1.2&#xA0;million and $275,000 and $1.5&#xA0;million and $530,000, respectively. The grant date fair value of options and compensatory warrants vested during the three and six month periods ended November&#xA0;30, 2018 and November&#xA0;30, 2017 was approximately $485,000 and $127,000 and $1.2&#xA0;million and $574,000, respectively. As of November&#xA0;30, 2018, there was approximately $5.7&#xA0;million of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 2.69 years.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table represents stock option and warrant activity as of and for the six months ended November&#xA0;30, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="54%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Number&#xA0;of<br /> Shares</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br /> Average<br /> Exercise&#xA0;Price</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Weighted<br /> Average<br /> Remaining<br /> Contractual&#xA0;Life<br /> in Years</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Aggregate<br /> Intrinsic&#xA0;Value</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Options and warrants outstanding - May 31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">132,385,269</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.80</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,673</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">33,483,124</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">0.69</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Exercised</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited/expired/cancelled</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(10,031,717</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">0.75</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Options and warrants outstanding - November 30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">155,836,676</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">0.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.97</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">769,360</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Outstanding exercisable - November 30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">150,960,607</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.78</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.80</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">565,356</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Preferred Stock</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The Company&#x2019;s Board of Directors is authorized to issue up to 5,000,000 shares of preferred stock without stockholder approval. As of November&#xA0;30, 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.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Use of Estimates</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> </div> 0 23463585 100000 10031717 33483124 0 P3Y9M18D P3Y11M19D P10Y <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><font style="WHITE-SPACE: nowrap">Pre-launch</font> Inventory</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The Company <font style="WHITE-SPACE: nowrap">may&#xA0;scale-up&#xA0;and</font> make commercial quantities of its product candidate prior to the date it anticipates that such product will receive final FDA approval. <font style="WHITE-SPACE: nowrap">The&#xA0;scale-up&#xA0;and</font> commercial production <font style="WHITE-SPACE: nowrap">of&#xA0;pre-launch&#xA0;inventories</font> 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 <font style="WHITE-SPACE: nowrap">may&#xA0;scale-up&#xA0;and</font> <font style="WHITE-SPACE: nowrap">build&#xA0;pre-launch&#xA0;inventories</font> 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 (&#x201C;BLA&#x201D;) 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 November&#xA0;30, 2018 and May&#xA0;31, 2018, the Company did not <font style="WHITE-SPACE: nowrap">have&#xA0;pre-launch&#xA0;inventory</font> that qualified for capitalization pursuant to U.S. GAAP ASC 330 &#x201C;Inventory.&#x201D;</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Treasury Stock</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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&#xA0;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.</p> </div> <div> <p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>Note 11 &#x2013; Registered Direct Equity Offerings</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On January&#xA0;31, 2018, the Company entered into subscription agreements with certain investors who owned convertible promissory notes of the Company (the &#x201C;Notes&#x201D;) for the sale by the Company of 12,062,728 shares of common stock in a registered direct offering (the &#x201C;January 31 Offering&#x201D;). The investors in the January&#xA0;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&#xA0;million. The Notes matured on January&#xA0;31, 2018, upon which date the Company became obligated to pay the principal amount of approximately $6.0&#xA0;million on the Notes, plus accrued but unpaid interest of approximately $0.3&#xA0;million, for aggregate payment obligations at maturity of approximately $6.3&#xA0;million. The common stock and warrants were issued in full satisfaction of approximately $6.0&#xA0;million of such payment obligations, with one holder of an aggregate principal amount and accrued unpaid interest of approximately $0.3&#xA0;million electing to be repaid in cash instead of participating in the January&#xA0;31, 2018 Offering. As a result, all of the proceeds from the January&#xA0;31 Offering were used to satisfy the Company&#x2019;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)&#xA0;the number of shares of common stock issued to each investor in the January&#xA0;31, 2018 Offering in respect of the payment obligations relating solely to principal amounts on the Notes and (y)&#xA0;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&#xA0;31 Offering, assuming reinvestment of the principal amount on the Notes at $0.50 per share. The warrants in the January&#xA0;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 <font style="white-space:nowrap">a&#xA0;non-cash&#xA0;inducement</font> interest expense of approximately $2.4&#xA0;million due to the modification. In connection with this January&#xA0;31 Offering, the Company paid a commission of $164,425 to the placement agent.</p> <p style="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> On June&#xA0;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 <font style="white-space:nowrap">Form&#xA0;S-3.&#xA0;The</font> 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&#xA0;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.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Stock for Services</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> </div> <div> <p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>Note 10 &#x2013; Private Securities Offerings</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> During the six months ended November&#xA0;30, 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 44,957,170 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $22.5&#xA0;million and issued to the investors five-year warrants covering 22,478,585 shares of common stock with an exercise price of $0.75 per share. The Company received net proceeds from the offering of approximately $19.9&#xA0;million. In addition, the placement agent received warrants covering 4,245,117 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 and include a cashless exercise provision. The Company also paid <font style="white-space:nowrap"><font style="white-space:nowrap">a&#xA0;one-time&#xA0;non-accountable&#xA0;expense</font></font> fee of $25,000 to the placement agent for its services in connection with the offering.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Debt Discount</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the six months ended November&#xA0;30, 2018 and the year ended May&#xA0;31, 2018, the Company incurred approximately $0.6&#xA0;million and $1.5&#xA0;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 six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, the Company recorded approximately $117,500 and $1.2&#xA0;million of related amortization.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Going Concern</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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 $28,718,950 for the six months ended November&#xA0;30, 2018 and has an accumulated deficit of $201,858,345 as of November&#xA0;30, 2018. These factors, among others, raise substantial doubt about the Company&#x2019;s ability to continue as a going concern.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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&#x2019;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&#xA0;&amp; Drug Administration (&#x201C;FDA&#x201D;) 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.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>Debt Issuance Cost</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the six months ended November&#xA0;30, 2018 and the year ended May&#xA0;31, 2018, the Company incurred direct costs associated with the issuance of convertible notes, as described in Note 4, and recorded approximately $0.1&#xA0;million and $0.4&#xA0;million, respectively of debt issuance costs. In connection with the debt issuance costs, the Company recognized approximately $20,000 and $0.3&#xA0;million of related amortization for the six months ended November&#xA0;30, 2018 and November&#xA0;30, 2017, respectively.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> A summary of the net purchase price and allocation to the acquired assets is as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="82%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">ProstaGene,&#xA0;LLC</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> CytoDyn Inc. Equity</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,558,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Acquisition Expenses</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">741,297</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Release of Deferred Tax Asset</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,826,919</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total Cost of Acquisition</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Intangible assets</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Allocation of Acquisition Costs</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,126,216</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 0 0.69 0.75 0.00 0.50 225245 1284998 11558000 11558000 0.001 P3Y 0.30 0.565 P10Y 500000 0.30 0.565 P10Y 0.50 1000000 0.30 0.551 P3Y P10Y 350000 0.41 0.49 P24M P10Y 950000 0.31 0.49 P3Y P10Y 875000 100000 75000 P1Y P10Y 0.49 680822 0.47 80822 0.31 0.30 80822 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="85%"></td> <td valign="bottom" width="6%"></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" align="center">2018</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected dividend yield</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">0%</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock price volatility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">69.80%</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected term</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">5 year</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Risk-free interest rate</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center"><font style="WHITE-SPACE: nowrap">1.77-1.93%</font></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Grant-date fair value</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center"><font style="WHITE-SPACE: nowrap">$0.30-$0.39</font></td> </tr> </table> </div> 117500 0 0.39 0.30 P5Y 0.0193 0.0177 205000 118000 20000 1500000 248000 20000 0 0 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Activity related to the short-term Convertible Notes was as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="69%"></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="9%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,&#xA0;2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">May&#xA0;31, 2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Face amount of short-term Convertible Notes</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,038,500</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unamortized discount</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Registered direct equity offering</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(5,788,500</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Note repayment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(250,000</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Carrying value of short-term Convertible Notes</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date September&#xA0;15, 2016, May&#xA0;31, 2018, August&#xA0;31, 2018 and November&#xA0;30, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="68%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Shares&#xA0;Indexed</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">Derivative&#xA0;Liability</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Inception date September&#xA0;15, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,179,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance May&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,323,732</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance August&#xA0;31, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,071,199</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance November&#xA0;30, 2018</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,733,334</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,789,066</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Company estimated the fair value of the redemption provision using the following assumptions on the closing date of November&#xA0;15, 2015 and November&#xA0;30, 2018:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="74%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;15,<br /> 2018</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">November&#xA0;30,<br /> 2018</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Fair value of underlying stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.57</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.58</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Risk free rate</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.78</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.78</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected term (in years)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1.61</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1.61</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock price volatility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58.8</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58.8</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Expected dividend yield</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Discount factor</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">85</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">85</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> </tr> </table> </div> 5000000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> The following table summarizes the fair value of the convertible note redemption provision derivative liability as of inception date November&#xA0;15, 2018 and 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Document and Entity Information - shares
6 Months Ended
Nov. 30, 2018
Dec. 31, 2018
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Nov. 30, 2018  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
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   292,923,481
Entity Emerging Growth Company false  
Entity Small Business true  
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Consolidated Balance Sheets
Nov. 30, 2018
USD ($)
May 31, 2018
USD ($)
Current assets:    
Cash $ 772,361 $ 1,231,445
Prepaid expenses 200,890 227,173
Prepaid service fees 2,954,624 1,862,009
Total current assets 3,927,875 3,320,627
Furniture and equipment, net 10,127 11,228
Intangibles, net 16,452,951 1,567,143
Total assets 20,390,953 4,898,998
Current liabilities:    
Accounts payable 18,852,414 15,841,859
Accrued liabilities and compensation 560,013 757,778
Accrued license fees 347,333 133,600
Accrued interest on convertible notes 23,001  
Convertible note payable, net 4,200,000  
Total current liabilities 23,982,761 16,733,237
Long-term liabilities:    
Convertible note payable, net 1,396,974  
Derivative liabilities 3,075,142 1,323,732
Total long-term liabilities 4,472,116 1,323,732
Total liabilities 28,454,877 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 November 30, 2018 and May 31, 2018, respectively 92 92
Common stock, $0.001 par value; 600,000,000 and 375,000,000 shares authorized, 290,808,960 and 216,881,790 issued and 290,649,949 and 216,722,779 outstanding at November 30, 2018 and May 31, 2018, respectively 290,810 216,881
Additional paid-in capital 193,503,678 159,764,611
Accumulated (deficit) (201,858,345) (173,139,396)
Less: treasury stock, at par (159,011 shares at $0.001) (159) (159)
Total stockholders' (deficit) (8,063,924) (13,157,971)
Total liabilities and stockholders' (deficit) equity $ 20,390,953 $ 4,898,998
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Consolidated Balance Sheets (Parenthetical) - $ / shares
Nov. 30, 2018
May 31, 2018
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 600,000,000 375,000,000
Common stock, shares issued 290,808,960 216,881,790
Common stock, shares outstanding 290,649,949 216,722,779
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 6 Months Ended
Nov. 30, 2018
Nov. 30, 2017
Nov. 30, 2018
Nov. 30, 2017
Operating expenses:        
General and administrative $ 2,663,745 $ 1,608,743 $ 4,594,804 $ 3,178,420
Research and development 12,869,244 9,077,172 24,337,910 17,225,348
Amortization and depreciation 154,801 89,136 243,772 178,282
Total operating expenses 15,687,790 10,775,051 29,176,486 20,582,050
Operating loss (15,687,790) (10,775,051) (29,176,486) (20,582,050)
Interest income 1,021 422 2,002 1,206
Change in fair value of derivative liabilities 281,055 829,600 (466,412) 466,934
Interest expense:        
Amortization of discount on convertible notes (52,954) (728,843) (117,534) (1,172,995)
Amortization of debt issuance costs (10,411) (168,429) (19,589) (282,129)
Loss on extinguishment of convertible note (1,519,603)   (1,519,603)  
Inducement interest related to warrant exercise       (826,252)
Interest on convertible note payable (143,617) (105,384) (248,247) (180,673)
Total interest expense (1,726,585) (1,002,656) (1,904,973) (2,462,049)
Loss before income taxes (17,132,299) (10,947,685) (31,545,869) (22,575,959)
Income tax benefit 2,826,919   2,826,919  
Net loss $ (14,305,380) $ (10,947,685) $ (28,718,950) $ (22,575,959)
Basic and diluted loss per share $ (0.06) $ (0.07) $ (0.12) $ (0.15)
Basic and diluted weighted average common shares outstanding 259,088,835 157,843,773 238,731,091 154,774,327
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Consolidated Statements of Cash Flows - USD ($)
6 Months Ended
Nov. 30, 2018
Nov. 30, 2017
Cash flows from operating activities:    
Net loss $ (28,718,950) $ (22,575,959)
Adjustments to reconcile net loss to net cash used by operating activities:    
Amortization and depreciation 243,772 178,282
Amortization of debt issuance costs 19,589 282,129
Amortization of discount on convertible notes 117,534 1,172,995
Inducement interest related to warrant exercise   826,252
Interest expense associated with derivative liabilities 0 0
Change in fair value of derivative liabilities 466,412 (466,934)
Stock-based compensation 1,510,486 529,617
Loss on extinguishment of convertible note 1,519,603  
Deferred income tax benefit (2,826,919)  
Changes in current assets and liabilities:    
(Increase) decrease in prepaid expenses (1,807,629) 907,606
Increase in accounts payable and accrued expenses 3,283,113 6,256,192
Net cash used in operating activities (26,192,989) (12,889,820)
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 23,463,585 7,050,651
Proceeds from warrant exercises   1,647,500
Proceeds from convertible note payable 5,000,000 4,888,500
Payment of offering costs (2,727,418) (1,175,575)
Net cash provided by financing activities 25,736,167 12,411,076
Net change in cash (459,084) (478,744)
Cash, beginning of period 1,231,445 1,775,583
Cash, end of period 772,361 1,296,839
Non-cash investing and financing transactions:    
Financing costs associated with placement agent warrants   70,383
Accrued interest converted into note payable 225,245  
Debt discount associated with convertible notes payable 700,000 $ 1,574,628
Derivative liability associated a convertible note payable 1,284,998  
ProstaGene, LLC    
Non-cash investing and financing transactions:    
Common stock issued for acquisition $ 11,558,000  
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Consolidated Statements of Changes in Stockholders' (Deficit) Equity - USD ($)
Total
ProstaGene, LLC
Preferred Stock
Common Stock
Common Stock
ProstaGene, LLC
Treasury Stock
Additional Paid-in Capital
Additional Paid-in Capital
ProstaGene, LLC
Accumulated Deficit
Beginning balance (Fiscal Year To Date) at May. 31, 2017 $ (1,103,234)                
Beginning balance at May. 31, 2017 (1,103,234)   $ 92 $ 149,468     $ 121,736,921   $ (122,989,715)
Beginning balance, shares at May. 31, 2017     92,100 149,468,244          
Proceeds from warrant exercise | Fiscal Year To Date 1,647,500                
Proceeds from warrant exercise 1,647,500     $ 3,295     1,644,205    
Proceeds from warrant exercise, shares       3,295,000          
Offering costs related to registered direct offering, shares     0 0   0      
Interest expense related to warrant extension | Fiscal Year To Date 826,252                
Interest expense related to warrant extension 826,252           826,252    
Debt discount related to convertible notes payable | Fiscal Year To Date 1,645,010                
Debt discount related to convertible notes payable 1,645,010           1,645,010    
Stock-based compensation | Fiscal Year To Date 254,952                
Stock-based compensation 254,952           254,952    
Net loss | Fiscal Year To Date (11,628,273)                
Net loss (11,628,273)               (11,628,273)
Ending balance (Fiscal Year To Date) at Aug. 31, 2017 (8,357,793)                
Ending balance at Aug. 31, 2017 (8,357,793)   $ 92 $ 152,763     126,107,340   (134,617,988)
Ending balance, shares at Aug. 31, 2017     92,100 152,763,244          
Beginning balance (Fiscal Year To Date) at May. 31, 2017 (1,103,234)                
Beginning balance at May. 31, 2017 (1,103,234)   $ 92 $ 149,468     121,736,921   (122,989,715)
Beginning balance, shares at May. 31, 2017     92,100 149,468,244          
Net loss (22,575,959)                
Ending balance (Fiscal Year To Date) at Nov. 30, 2017 (12,790,510)                
Ending balance at Nov. 30, 2017 (12,790,510)   $ 92 $ 165,135     132,609,936   (145,565,673)
Ending balance, shares at Nov. 30, 2017     92,100 165,135,155          
Beginning balance (Fiscal Year To Date) at Aug. 31, 2017 (8,357,793)                
Beginning balance at Aug. 31, 2017 (8,357,793)   $ 92 $ 152,763     126,107,340   (134,617,988)
Beginning balance, shares at Aug. 31, 2017     92,100 152,763,244          
Proceeds from warrant exercise | Fiscal Year To Date 1,647,500                
Proceeds from private equity offering, value | Fiscal Year To Date 3,325,397                
Proceeds from private equity offering, value 3,325,397     $ 6,652     3,318,745    
Offering costs related to private equity offering | Fiscal Year To Date (312,456)                
Offering costs related to private equity offering (312,456)           (312,456)    
Proceeds from private equity offering, shares       6,651,800          
Offering costs related to registered direct offering | Fiscal Year To Date (319,228)                
Offering costs related to registered direct offering (319,228)           (319,228)    
Proceeds from registered direct offering, shares       5,720,111          
Proceeds from registered direct offering | Fiscal Year To Date 3,725,254                
Proceeds from registered direct offering 3,725,254     $ 5,720     3,719,534    
Offering costs related to registered direct offering, shares     0 0   0      
Legal fees in connection with equity offerings | Fiscal Year To Date (178,664)                
Legal fees in connection with equity offerings (178,664)           (178,664)    
Interest expense related to warrant extension | Fiscal Year To Date 826,252                
Debt discount related to convertible notes payable | Fiscal Year To Date 1,645,010                
Stock-based compensation | Fiscal Year To Date 529,617                
Stock-based compensation 274,665           274,665    
Net loss | Fiscal Year To Date (22,575,958)                
Net loss (10,947,685)               (10,947,685)
Ending balance (Fiscal Year To Date) at Nov. 30, 2017 (12,790,510)                
Ending balance at Nov. 30, 2017 (12,790,510)   $ 92 $ 165,135     132,609,936   (145,565,673)
Ending balance, shares at Nov. 30, 2017     92,100 165,135,155          
Proceeds from warrant exercise | Fiscal Year To Date 1,647,500                
Proceeds from private equity offering, value | Fiscal Year To Date 17,642,948                
Proceeds from private equity offering, value 14,317,551     $ 28,635     14,288,916    
Offering costs related to private equity offering | Fiscal Year To Date (1,729,242)                
Offering costs related to private equity offering (1,416,786)           (1,416,786)    
Proceeds from private equity offering, shares       28,635,104          
Offering costs related to registered direct offering | Fiscal Year To Date (650,849)                
Offering costs related to registered direct offering (331,621)           (331,621)    
Proceeds from registered direct offering, shares       15,133,742          
Proceeds from registered direct offering | Fiscal Year To Date 11,291,419                
Proceeds from registered direct offering 7,566,165     $ 15,134     7,551,031    
Offering costs related to registered direct offering, shares     0 0   0      
Interest expense related to warrant tender offer | Fiscal Year To Date 2,352,045                
Interest expense related to warrant tender offer 2,352,045           2,352,045    
Legal fees in connection with equity offerings | Fiscal Year To Date (344,886)                
Legal fees in connection with equity offerings (166,222)           (166,222)    
Stock issued for board compensation | Fiscal Year To Date 260,190                
Stock issued for board compensation 260,190           260,190    
Interest expense related to warrant extension | Fiscal Year To Date 826,252                
Debt discount related to convertible notes payable | Fiscal Year To Date 1,645,010                
Stock-based compensation | Fiscal Year To Date 1,096,226                
Stock-based compensation 566,609           566,609    
Net loss | Fiscal Year To Date (40,526,058)                
Net loss (17,950,100)               (17,950,100)
Ending balance (Fiscal Year To Date) at Feb. 28, 2018 (7,592,679)                
Ending balance at Feb. 28, 2018 (7,592,679)   $ 92 $ 208,904     155,714,098   (163,515,773)
Ending balance, shares at Feb. 28, 2018     92,100 208,904,001          
Proceeds from warrant exercise | Fiscal Year To Date 3,161,131                
Proceeds from warrant exercise 1,513,631     $ 3,027     1,510,604    
Proceeds from warrant exercise, shares       3,027,263          
Offering costs related to warrant tender offer | Fiscal Year To Date (73,234)                
Offering costs related to warrant tender offer (73,234)           (73,234)    
Proceeds from private equity offering, value | Fiscal Year To Date 17,642,948                
Offering costs related to private equity offering | Fiscal Year To Date (1,729,242)                
Offering costs related to registered direct offering | Fiscal Year To Date (857,149)                
Offering costs related to registered direct offering (206,300)           (206,300)    
Interest expense related to conversion of notes payable | Fiscal Year To Date 393,686                
Interest expense related to conversion of notes payable 393,686           393,686    
Proceeds from registered direct offering, shares       4,640,000          
Proceeds from registered direct offering | Fiscal Year To Date 13,611,419                
Proceeds from registered direct offering 2,320,000     $ 4,640     2,315,360    
Offering costs related to registered direct offering, shares     0 0   0      
Stock issued for bonuses and tendered for income tax, shares       310,526   159,011      
Interest expense related to warrant tender offer | Fiscal Year To Date 2,352,045                
Stock issued for bonuses and tendered for income tax, value | Fiscal Year To Date 104,545                
Stock issued for bonuses and tendered for income tax, value 104,545     $ 310   $ (159) 104,394    
Legal fees in connection with equity offerings | Fiscal Year To Date (533,434)                
Legal fees in connection with equity offerings (188,548)           (188,548)    
Stock issued for board compensation | Fiscal Year To Date 260,190                
Interest expense related to warrant extension | Fiscal Year To Date 826,252                
Debt discount related to convertible notes payable | Fiscal Year To Date 1,645,010                
Stock-based compensation | Fiscal Year To Date 1,290,777                
Stock-based compensation 194,551           194,551    
Net loss | Fiscal Year To Date (50,149,681)                
Net loss (9,623,623)               (9,623,623)
Ending balance (Fiscal Year To Date) at May. 31, 2018 (13,157,971)                
Ending balance at May. 31, 2018 (13,157,971)   $ 92 $ 216,881   $ (159) 159,764,611   (173,139,396)
Ending balance, shares at May. 31, 2018     92,100 216,881,790   159,011      
Proceeds from private equity offering, value | Fiscal Year To Date 7,514,300                
Proceeds from private equity offering, value 7,514,300     $ 15,029     7,499,271    
Proceeds from private equity offering, shares       15,028,600          
Offering costs related to private equity offering | Fiscal Year To Date (882,716)                
Offering costs related to private equity offering (882,716)           (882,716)    
Proceeds from registered direct offering, shares       1,970,000          
Proceeds from registered direct offering | Fiscal Year To Date 985,000                
Proceeds from registered direct offering 985,000     $ 1,970     983,030    
Offering costs related to registered direct offering | Fiscal Year To Date (75,151)                
Offering costs related to registered direct offering (75,151)           (75,151)    
Offering costs related to registered direct offering, shares     0 0   0      
Legal fees in connection with equity offerings | Fiscal Year To Date (50,544)                
Legal fees in connection with equity offerings (50,544)           (50,544)    
Stock-based compensation | Fiscal Year To Date 283,346                
Stock-based compensation 283,346           283,346    
Net loss | Fiscal Year To Date (14,413,569)                
Net loss (14,413,569)               (14,413,569)
Ending balance (Fiscal Year To Date) at Aug. 31, 2018 (19,797,305)                
Ending balance at Aug. 31, 2018 (19,797,305)   $ 92 $ 233,880   $ (159) 167,521,847   (187,552,965)
Ending balance, shares at Aug. 31, 2018     92,100 233,880,390   159,011      
Beginning balance (Fiscal Year To Date) at May. 31, 2018 (13,157,971)                
Beginning balance at May. 31, 2018 (13,157,971)   $ 92 $ 216,881   $ (159) 159,764,611   (173,139,396)
Beginning balance, shares at May. 31, 2018     92,100 216,881,790   159,011      
Acquisition   $ 11,558,000              
Net loss (28,718,950)                
Ending balance (Fiscal Year To Date) at Nov. 30, 2018 (8,063,924)                
Ending balance at Nov. 30, 2018 (8,063,924)   $ 92 $ 290,810   $ (159) 193,503,678   (201,858,345)
Ending balance, shares at Nov. 30, 2018     92,100 290,808,960   159,011      
Beginning balance (Fiscal Year To Date) at Aug. 31, 2018 (19,797,305)                
Beginning balance at Aug. 31, 2018 (19,797,305)   $ 92 $ 233,880   $ (159) 167,521,847   (187,552,965)
Beginning balance, shares at Aug. 31, 2018     92,100 233,880,390   159,011      
Acquisition | Fiscal Year To Date   11,558,000              
Acquisition   $ 11,558,000     $ 18,658     $ 11,539,342  
Acquisition, share         18,658,000        
Issuance of stock payment shares | Fiscal Year To Date 8,342                
Issuance of stock payment shares 8,342     $ 8,342          
Proceeds from private equity offering, value | Fiscal Year To Date 22,478,585                
Proceeds from private equity offering, value 14,964,285     $ 29,930     14,934,355    
Issuance of stock payment shares, shares       8,342,000          
Proceeds from private equity offering, shares       29,928,570          
Offering costs related to private equity offering | Fiscal Year To Date (2,576,070)                
Offering costs related to private equity offering (1,693,354)           (1,693,354)    
Proceeds from registered direct offering | Fiscal Year To Date 985,000                
Offering costs related to registered direct offering | Fiscal Year To Date (75,151)                
Offering costs related to registered direct offering, shares     0 0   0      
Legal fees in connection with equity offerings | Fiscal Year To Date (76,195)                
Legal fees in connection with equity offerings (25,652)           (25,652)    
Stock-based compensation | Fiscal Year To Date 1,510,486                
Stock-based compensation 1,227,140           1,227,140    
Net loss | Fiscal Year To Date (28,718,950)                
Net loss (14,305,380)               (14,305,380)
Ending balance (Fiscal Year To Date) at Nov. 30, 2018 (8,063,924)                
Ending balance at Nov. 30, 2018 $ (8,063,924)   $ 92 $ 290,810   $ (159) $ 193,503,678   $ (201,858,345)
Ending balance, shares at Nov. 30, 2018     92,100 290,808,960   159,011      
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Consolidated Statements of Changes in Stockholders' (Deficit) Equity (Parenthetical) - $ / shares
3 Months Ended
Nov. 30, 2018
Aug. 31, 2018
May 31, 2018
Feb. 28, 2018
Nov. 30, 2017
Aug. 31, 2017
Warrants granted per share     $ 0.50 $ 0.50 $ 0.50 $ 0.50
Proceeds from private equity offering, per share $ 0.50 $ 0.50 0.50 0.50 0.50 0.50
Proceeds from registered direct offering, per share 0.50 0.50 0.50 0.50 0.50 0.50
Common Stock            
Warrants granted per share     0.50     0.5
Proceeds from private equity offering, per share $ 0.50 0.50 0.50 0.50 0.50 0.5
Proceeds from registered direct offering, per share   $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.5
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Organization
6 Months Ended
Nov. 30, 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. Effective November 16, 2018, we implemented a holding company reorganization, as a result of which, we became the successor issuer and reporting company to the former CytoDyn Inc. (now our wholly owned subsidiary, CytoDyn Operations Inc.). 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, leronlimab (PRO 140), belongs to a class of HIV therapies known as entry inhibitors that 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 leronlimab (PRO 140) to include the evaluation of certain cancer and immunological indications where CCR antagonism has shown initial promise.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies
6 Months Ended
Nov. 30, 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 November 30, 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 and six months ended November 30, 2018 and November 30, 2017, (b) the financial position at November 30, 2018 and (c) cash flows for the six month periods ended November 30, 2018 and November 30, 2017.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, CytoDyn Operations Inc., Advanced Genetic Technologies, Inc. (“AGTI”) and CytoDyn Veterinary Medicine LLC (“CVM”), of which both AGTI and CVM 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 $28,718,950 for the six months ended November 30, 2018 and has an accumulated deficit of $201,858,345 as of November 30, 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 November 30, 2018 and May 31, 2018 approximated $0.5 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 six months ended November 30, 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 November 30, 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 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.

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of November 30, 2018 and May 31, 2018 is as follows:

 

     Fair Value Measurement at      Fair Value Measurement at  
     November 30, 2018 (1)      May 31, 2018 (1)  
     Using             Using         
     Level 3      Total      Level 3      Total  

Liabilities:

           

Derivative liability - warrants

   $ 1,789,066      $ 1,789,066      $ 1,323,732      $ 1,323,732  

Derivative liability - convertible note redemption provision

     1,286,076        1,286,076        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 3,075,142      $ 3,075,142      $ 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 November 30, 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. The Company uses a Binomial Lattice Model to estimate the value of the warrant derivative liability and a Monte Carlo Simulation to value the derivative liability of the redemption provision within a convertible promissory note. These valuation models were used because management believes they reflect all the assumptions that market participants would likely consider in negotiating the transfer of the instruments. The Company’s derivative liabilities are classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation models. 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 six months ended November 30, 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  

Inception date value of redemption provision

     1,284,998  

Fair value adjustments

     466,412  
  

 

 

 

Balance at November 30, 2018

   $ 3,075,142  
  

 

 

 

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. Periodically, the Company will issue restricted common stock to third parties as compensation for services rendered. Such stock awards are valued at fair market value on the effective date of the Company’s obligation.

 

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 8, 2018 at the 2018 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 450,000,000 to 600,000,000. Subsequent to the 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 the authorized share increase.

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 November 30, 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 six months ended November 30, 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 six months ended November 30, 2018 and November 30, 2017, the Company recorded approximately $117,500 and $1.2 million of related amortization.

Debt Issuance Cost

During the six months ended November 30, 2018 and the year ended May 31, 2018, the Company incurred direct costs associated with the issuance of 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 $20,000 and $0.3 million of related amortization for the six months ended November 30, 2018 and November 30, 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 $2.7 million and $0.6 million for the six months ended November 30, 2018 and November 30, 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 155,836,676 and 87,551,801 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 six months ended November 30, 2018 and November 30, 2017, respectively. Additionally, as of November 30, 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 Accounting Standards Codification (“ASC”) ASC 740-10 “Uncertainty in Income Taxes”. 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. For the year ending May 31, 2019 a deferred tax rate of 21% is being utilized and a corresponding valuation allowance adjustment is being recorded for the generation of deferred tax assets reversing in the future. For the three months ending November 30, 2018 the Company recorded a $2,826,919 deferred income tax benefit from a reduction in the Company’s deferred tax valuation allowance resulting from recording a deferred tax liability of $2,826,919 in connection with the acquisition of assets in the ProstaGene LLC transaction (see Note 7) . The deferred tax liability represents the tax effect of the difference in the carrying value of the assets and their tax basis at acquisition. The Company has a full valuation allowance on the Company’s net deferred tax assets as of November 30, 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.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Recent Accounting Pronouncements
6 Months Ended
Nov. 30, 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 August 2018, FASB issued Accounting Standards Update (“ASU”) No. 2018-13 Fair Value Measurement (Topic 820) Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update provides guidance that remove, modify and add to the disclosure requirements related to fair value measurements. The guidance removes the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 assets, the policy for timing and transfers between levels and the valuation process for Level 3 fair value measurements. The guidance modifies disclosure requirements for investments in certain entities that calculate net asset value and clarifies the purpose of the measurement uncertainty disclosure. The guidance adds requirements to disclose changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements and to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

In June 2018, FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share Based Payment Accounting. The amendments in this Update expand the scope of stock compensation to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance in this Update does not apply to transactions involving equity instruments granted to a lender or investor that provides financing to the issuer. The guidance is effective for fiscal years beginning after December 31, 2018 including interim periods within the fiscal year. The Company is currently assessing the impact this Update may have on its consolidated financial statements.

In March 2018, FASB issued 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 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. The adoption of ASU 2017-09 did not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which narrows the definition of a business and clarifies that to be considered a business, the fair value of gross assets acquired (or disposed of) should not be concentrated in a single identifiable asset or a group of similar identifiable assets. In addition, to be considered a business, an acquisition would have to include an input and a substantive process that together will significantly contribute to the ability to create an output. Also, the amendments narrow the definition of the term “output” so that it is consistent with how outputs are defined in ASC Topic 606, Revenue from Contracts with Customers. This ASU was effective for the Company on June 1, 2018. Adoption of this new guidance must be applied on a prospective basis. The adoption of this ASU did not have a significant impact on the Company’s consolidated financial statements.

Business combinations are accounted for by applying the acquisition method in accordance with ASC 805, Business Combinations. Under the acquisition method, identifiable assets acquired and liabilities assumed are measured at their fair values as of the date of acquisition and are recognized separately from goodwill. The results of operations of the acquired entity are included in the consolidated statement of income from the date of acquisition. Customers recognize goodwill when the acquisition price exceeds the estimated fair value of the net assets acquired.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible Instruments
6 Months Ended
Nov. 30, 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 November 30, 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 November 30, 2018 and May 31, 2018, the undeclared, accrued dividends were approximately $205,000 and $199,000, respectively, or 410,000 and 387,000 shares of common stock, respectively.

Short-term Convertible Notes

During the fiscal 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 $1.2 million of non-cash debt discount during the six months ended November 30, 2018 and November 30, 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 $0.3 million of debt issuance costs during the six months ended November 30, 2018 and November 30, 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 six months ended November 30, 2018 and November 30, 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:

 

     November 30, 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 $20,000 and $-0- amortization of debt issuance costs for the six months ended November 30, 2018 and November 30, 2017, respectively and approximately $118,000 and $-0- of amortization of debt discount for the six months ended November 30, 2018 and November 30, 2017, respectively.

Effective November 15, 2018, the Note was amended to allow the Investor to redeem the monthly redemption amount of $350,000 in cash or stock, at the lesser of (i) $0.55, or (ii) the lowest closing bid price of the Company’s common stock during the 20 days prior to the conversion, multiplied by a conversion factor of 85%. The variable rate redemption provision meets the definition of a derivative instrument and subsequent to the amendment, it no longer meets the criteria to be considered indexed to the Company’s own stock. As of November 15, 2018, the redemption provision requires bifurcation as a derivative liability at fair value under the guidance in ASC Topic No. 815, “Derivatives and Hedging.”

The amendment of the Note was also evaluated under ASC Topic 470-50-40, “Debt Modifications and Extinguishments.” Based on the guidance, the instruments were determined to be substantially different, and debt extinguishment accounting was applied. We recorded approximately $1.5 million as an extinguishment loss, which was the difference in the net carrying value of the Note prior to the amendment of approximately $5.4 million, and the fair value of the Note and embedded derivatives after the amendment of approximately $6.9 million. The extinguishment loss includes a write-off of unamortized debt issuance costs and the debt discount associated with the original Note. During the six months ended November 30, 2018 and November 30, 2017, the Company recognized approximately $248,000 and $-0-, of interest expense related to the Notes.

Activity related to the Note was as follows:

 

     November 30, 2018         
     Short term      Long term      Total      May 31, 2018  

Face amount of convertible promissory note

   $ —        $ —        $ —        $  —    

June 26, 2018 convertible promissory note

     2,100,000        3,600,000        5,700,000        —    

Monthly redemption

     700,000        (700,000      —          —    

Unamortized discount at August 31, 2018

     (344,614      (281,628      (626,242      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Carrying value of convertible notes at August 31, 2018

   $ 2,455,386      $ 2,618,372      $ 5,073,758      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Carrying value of convertible notes at November 30, 2018

   $ 4,200,000      $ 1,396,974      $ 5,596,974      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Derivative Liabilities
6 Months Ended
Nov. 30, 2018
Derivative Liabilities

Note 5 – Derivative Liabilities

The investor and placement agent warrants, issued in connection with a registered direct offering in September 2016, contained 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, whereby such other Person or group acquires more than 50% of the outstanding common stock). 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, August 31, 2018 and November 30, 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  

Balance November 30, 2018

     7,733,334      $ 1,789,066  

The Company recognized approximately $466,000 of non-cash loss and approximately $467,000 of non-cash gain, due to the changes in the fair value of the liability associated with such classified warrants during the six months ended November 30, 2018 and November 30, 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 November 30, 2018, using the following assumptions:

 

     September 15,
2016
    May 31,
2018
    November 30,
2018
 

Fair value of underlying stock

   $ 0.78     $ 0.49     $ 0.58  

Risk free rate

     1.20     2.63     2.83

Expected term (in years)

     5       3.3       2.79  

Stock price volatility

     106     64     62

Expected dividend yield

     —         —         —    

Probability of Fundamental Transaction

     50     50     95

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 rates and management’s assumptions related to the fundamental transaction provisions.

As described above in Note 4, the redemption provision embedded in the Note required bifurcation and measurement at fair value as a derivative. The fair value of the convertible note redemption provision derivative liability was calculated using a Monte Carlo Simulation which uses randomly generated stock-price paths obtained through a Geometric Brownian Motion stock price simulation. Various assumptions used in the valuation model included: annual volatility of 58.8%, risk free rate of 2.78%, an exercise factor of 2x and an expected term of 1.61 years.

The fair value of the derivative liability resulting from the redemption provision was approximately $1.28 million as of its inception date, November 15, 2018 and November 30, 2018. The fair value of the redemption provision will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes in interest rates and management’s assumptions related to the redemption factor. The Company recognized approximately $1,100 of non-cash loss, due to the changes in the fair value of the liability associated with such classified redemption provision between the inception date and November 30, 2018.

 

The following table summarizes the fair value of the convertible note redemption provision derivative liability as of inception date November 15, 2018 and November 30, 2018:

 

     Net Proceeds      Derivative
Liability
 

Inception date, November 15, 2018

   $ 5,000,000      $ 1,284,998  

Balance November 30, 2018

   $ 5,000,000      $ 1,286,076  

The Company estimated the fair value of the redemption provision using the following assumptions on the closing date of November 15, 2015 and November 30, 2018:

 

     November 15,
2018
    November 30,
2018
 

Fair value of underlying stock

   $ 0.57     $ 0.58  

Risk free rate

     2.78     2.78

Expected term (in years)

     1.61       1.61  

Stock price volatility

     58.8     58.8

Expected dividend yield

     —         —    

Discount factor

     85     85
XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants
6 Months Ended
Nov. 30, 2018
Stock Options and Warrants

Note 6 – Stock Options and Warrants

The Company has one active stock-based equity plan at November 30, 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 November 30, 2018, the Company had 553,048 shares available for future stock-based grants under the 2012 Plan.

Stock Options

During the six months ended November 30, 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 six months ended November 30, 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 six months ended November 30, 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. Additionally, the Company granted a stock option covering an aggregate of 1,000,000 shares of common stock, to an officer with an exercise price of $0.565 per share. The stock option award vests 50% upon grant and 50% on April 8, 2019; it has a ten-year term and grant date fair value of $0.30 per share. The Company also granted stock options, covering an aggregate of 500,000 shares of common stock to directors for consulting services with an exercise price of $0.565 per share. The stock option awards vest upon grant, have a ten-year term and grant date fair value of $0.30 per share.

During the six months ended November 30, 2018, the Company granted a stock option award covering 350,000 shares of common stock with an exercise price of $0.551 per share to Dr. Richard G. Pestell, M.D., Ph.D., in connection with his employment agreement as Chief Medical Officer and the closing of the ProstaGene transaction described in Note 7. The stock option award vests annually over three years, with a ten-year term and grant date fair value of $0.30 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 six months ended November 30, 2018, in connection with a private equity offering, as fully described in Note 10, the Company issued common stock warrants covering a total of 22,478,585 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 4,245,117 shares of common stock to the placement agent. The placement agent warrants have a five-year term, an exercise price of $0.50 per share and a cashless exercise provision.

During the six months ended November 30, 2018, the Company issued compensable warrants covering an aggregate of 300,000 shares of common stock to consultants. The warrants have a five-year term, an exercise price of $0.56 per share and a grant date fair value of $0.30 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, compensatory warrants and common stock reserved for advisory services, for the three and six months ended November 30, 2018 and November 30, 2017 was approximately $1.2 million and $275,000 and $1.5 million and $530,000, respectively. The grant date fair value of options and compensatory warrants vested during the three and six month periods ended November 30, 2018 and November 30, 2017 was approximately $485,000 and $127,000 and $1.2 million and $574,000, respectively. As of November 30, 2018, there was approximately $5.7 million of unrecognized compensation expense related to share-based payments for unvested options, which is expected to be recognized over a weighted average period of 2.69 years.

The following table represents stock option and warrant activity as of and for the six months ended November 30, 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

     33,483,124        0.69        —          —    

Exercised

     —          —          —          —    

Forfeited/expired/cancelled

     (10,031,717      0.75        —          —    
  

 

 

          

Options and warrants outstanding - November 30, 2018

     155,836,676        0.78        3.97        769,360  
  

 

 

          

Outstanding exercisable - November 30, 2018

     150,960,607      $ 0.78        3.80      $ 565,356  
  

 

 

          
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisition of Patents and Intangibles
6 Months Ended
Nov. 30, 2018
Acquisition of Patents and Intangibles

Note 7 – Acquisition of Patents and Intangibles

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 leronlimab (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 November 30, 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 leronlimab (PRO 140) and formulations comprising leronlimab (PRO 140) out through at least 2031 and 2038, respectively, in various countries.

On November 16, 2018, the Company completed the acquisition of substantially all of the assets of ProstaGene, LLC (“ProstaGene”), a biotechnology start-up company, which included patents related to clinical research, a proprietary CCR5 technology for early cancer diagnosis, and a noncompetition agreement with ProstaGene’s founder and Chief Executive Officer, Richard G. Pestell, M.D., Ph.D. The acquisition of ProstaGene’s assets expands the Company’s clinical development of leronlimab (PRO 140) into cancer indications and commercialization of certain cancer diagnostic tests.

The aggregate purchase price paid for the ProstaGene acquisition was $11,558,000 based on the issuance of 20,278,000 shares of common stock of CytoDyn at $0.57 per share, including 1,620,000 shares earned, but not yet issued, by the investment bank for advisory services. In connection with the purchase, the Company entered into a Stock Restriction Agreement (“Agreement”), restricting the transfer of 8,342,000 shares of common stock payable to Dr. Pestell for a three-year period from the closing date of the transaction. In the event Dr. Pestell’s employment with the Company is terminated, 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 shares. The Restricted Shares will vest and be released from the Agreement in three equal annual installments commencing one year after the closing date of the acquisition of ProstaGene.

A summary of the net purchase price and allocation to the acquired assets is as follows:

 

     ProstaGene, LLC  

CytoDyn Inc. Equity

   $ 11,558,000  

Acquisition Expenses

     741,297  

Release of Deferred Tax Asset

     2,826,919  
  

 

 

 

Total Cost of Acquisition

   $ 15,126,216  
  

 

 

 

Intangible assets

   $ 15,126,216  

Other

     —    
  

 

 

 

Allocation of Acquisition Costs

   $ 15,126,216  
  

 

 

 

Assets acquired from ProstaGene include (1) patents issued in the United States and Australia related to “Prostate Cancer Cell Lines, Gene Signatures and Uses Thereof” and “Use of Modulators of CCR5 in the Treatment of Cancer and Cancer Metastasis,” (2) an algorithm used to identify a 14-gene signature to predict the likelihood and severity of cancer diagnoses, and (3) a noncompetition agreement in connection with an employment agreement with Dr. Pestell as Chief Medical Officer of the Company. The fair value of the assets acquired approximates the consideration paid. The Company did not assume any liabilities. The Company accounted for the ProstaGene acquisition as an asset acquisition under ASC 805-10-55 “Business Combinations” because the assets retained from ProstaGene do not include an assembled workforce, and the gross value of the assets acquired meets the screen test in ASC 805-10-55-5A related to substantially all of the fair value being concentrated in a single asset or group of assets (i.e., the proprietary technology and patents) and, thus, is not considered a business. Thus, management concluded that the acquisition did not include both an input and substantive processes that together significantly contribute to the ability to create outputs.

The fair value of the technology acquired is identified using the Income Approach. The fair value of the patents acquired is identified using the Cost to Reproduce Method. The fair value of noncompetition agreement acquired is identified using the Residual Value Method. Goodwill is not recorded as the transaction represents an asset acquisition in accordance with ASU 2017-01. Acquisition costs for asset acquisitions are capitalized and included in the total cost of the transaction. In addition, pursuant to ASC 805, the net tax effect of the deferred tax liability arising from the book to tax basis differences is recorded as a cost of the acquisition.

 

The following presents intangible assets activity:

 

     November 30, 2018      May 31, 2018  

Gross carrying amounts

   $ 3,500,000      $ 3,500,000  

Intangible asset acquisition:

     

ProstaGene, LLC

     15,126,216        —    

Accumulated amortization

     (2,209,254      (1,968,846
  

 

 

    

 

 

 

Total amortizable intangible assets, net

     16,416,962        1,531,154  

Patents currently not amortized

     35,989        35,989  
  

 

 

    

 

 

 

Carrying value of intangibles, net

   $ 16,452,951      $ 1,567,143  
  

 

 

    

 

 

 

Amortization expense related to intangible assets patents was approximately $152,900 and $240,400 and $87,500 and $175,000 for the three and six months ended November 30, 2018 and 2017, respectively. The estimated aggregate future amortization expense related to the Company’s intangible assets with finite lives is estimated, on average, to be approximately $1.6 million per year for the next five years.

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License Agreements
6 Months Ended
Nov. 30, 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 leronlimab (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 and 2018 payments, which were extended to March 15, 2018 and March 15, 2019, respectively. Future annual license fees and royalty rate will vary depending on whether the Company manufactures leronlimab (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
6 Months Ended
Nov. 30, 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 leronlimab (PRO 140), a humanized anti-CCR5 monoclonal antibody, as well as certain other related assets, including the existing inventory of bulk leronlimab (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 leronlimab (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 leronlimab (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 leronlimab (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 leronlimab (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 up to $0.2 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 $1.1 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, which have been utilized. 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 $0.3 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
6 Months Ended
Nov. 30, 2018
Private Securities Offerings

Note 10 – Private Securities Offerings

During the six months ended November 30, 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 44,957,170 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $22.5 million and issued to the investors five-year warrants covering 22,478,585 shares of common stock with an exercise price of $0.75 per share. The Company received net proceeds from the offering of approximately $19.9 million. In addition, the placement agent received warrants covering 4,245,117 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 and include a cashless exercise provision. 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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Registered Direct Equity Offerings
6 Months Ended
Nov. 30, 2018
Registered Direct Equity Offerings

Note 11 – Registered Direct Equity Offerings

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
6 Months Ended
Nov. 30, 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 and six months ended November 30, 2018 and 2017, the Company incurred an expense of approximately $15,200 and $31,000 and $10,800 and $21,500, respectively, for qualified non-elective contributions.

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Related Party Transactions
6 Months Ended
Nov. 30, 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. Dr. Burger also resigned as Chief Science Officer of the Company, which was not an executive officer position. On July 10, 2018, In connection with the resignations of Dr. Burger and Dr. Montgomery, the Company’s board of directors determined to accelerate the vesting of all outstanding and unvested stock options held by Dr. Burger and Dr. Montgomery. Upon the effectiveness of their resignations, stock options covering 500,000 shares 100,000 shares, held by Dr. Burger and Dr. Montgomery, respectively became fully vested. The stock options retained their exercise period through their respective expiration dates and the terms of the stock options remained otherwise unchanged.

On November 16, 2018, the Company closed its acquisition of ProstaGene, as described in Note 7. In connection with the closing of the acquisition, the Company hired Dr. Pestell as its Chief Medical Officer. As previously disclosed by the Company, Dr. Pestell is the holder of approximately 77.2% of the outstanding equity interests in ProstaGene and consequently holds an indirect interest in approximately (i) 8,611,427 of 13,258,000 shares of the Company’s common stock, currently pending distribution by ProstaGene to its members, and (ii) 4,171,013 of 5,400,000 shares of common stock, currently held in escrow for the benefit of ProstaGene and its members, which are subject to forfeiture to satisfy certain indemnity obligations of ProstaGene and will be released ratably every six months over the eighteen-month period following the closing date. In addition, as specified in a Stock Restriction Agreement with the Company entered into on the closing date, 8,342,000 additional shares of common stock previously distributed to Dr. Pestell in the ProstaGene acquisition are currently subject to transfer restrictions and forfeiture obligations, subject to certain continuing employment obligations of Dr. Pestell, which will vest ratably each year over the three-years period following the closing date.

As specified in a Confidential Information, Inventions and Noncompetition Agreement between the Company and Dr. Pestell, which was entered into on the closing date of the ProstaGene acquisition, the Company may participate in the development and license of certain intellectual property created by Dr. Pestell, in connection with Dr. Pestell’s ongoing research obligations to outside academic institutions. The Company also has the right to work with Dr. Pestell to manage any potential conflict between the Company’s clinical development activities and such ongoing research obligations.

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Subsequent Events
6 Months Ended
Nov. 30, 2018
Subsequent Events

Note 14 – Subsequent Events

Between December 7, 2018 and December 11, 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 2,018,000 shares of common stock, $0.001 par value, for aggregate gross proceeds of approximately $1.0 million and issued to the investors five-year warrants covering 1,009,000 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 $0.1 million to the placement agent and issued warrants covering an aggregate of 201,800 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 and a cashless exercise provision.

On December 10, 2018, Anthony D. Caracciolo resigned as the Chairman of the Board, but remains a director and Scott A. Kelly, M.D., was named Chairman of the Board. On December 19, 2018, the Compensation Committee of the Board approved an amendment to certain compensation arrangements for Anthony D. Caracciolo, pursuant to which his employment with the Company would be extended through April 16, 2019, at a salary reduced from $16,667 to $5,000 per month, with continuing benefits. In addition, the Compensation Committee approved an extension to 10-years of the expiration terms of certain previously awarded stock options covering an aggregate of 150,000 shares of the Company’s common stock, provided that such stock options are out-of-the-money upon the date of such extension. These arrangements were conditioned upon Mr. Caracciolo’s agreement to resign from the Board upon identification by the Company of an appropriately qualified candidate to fill the vacancy. Mr. Caracciolo has agreed to the foregoing terms. These arrangements were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On December 22, 2018 the board of directors appointed Nitya G. Ray, Ph.D., as Chief Technology Officer – Head of Process Sciences, Manufacturing and Supply Chain. In connection with Dr. Ray’s appointment, the Company and Dr. Ray entered into an Employment Agreement that provides for (i) an annual base salary of $335,000, (ii) a target annual bonus equal to 50% of base salary, (iii) an initial signing bonus of $100,000 to be paid in two equal installments of $50,000 over the course of six months from the date of signing and (iv) other customary benefits described in the form of employment agreement. In connection with the appointment of Dr. Ray, the Company also issued Dr. Ray a stock option award under the Company’s equity incentive plan, covering 400,000 shares of the Company’s common stock, vesting in three equal annual installments from the grant date.

On December 27, 2018, the Company received a redemption notice from the holder of the Company’s convertible note issued on June 26, 2018, requesting the redemption of $100,000 of the outstanding balance thereof. In satisfaction of the redemption notice, the Company issued 255,532 shares of common stock to the note holder in accordance with the terms of the convertible note. Following the redemption, the outstanding balance of the convertible note, including accrued but unpaid interest, was approximately $5.9 million.

Beginning December 28, 2018 through January 8, 2019, the Company issued $3.1 million (of which $0.5 million was purchased by Michael A. Klump, a director, on terms identical to all other investors) in aggregate principal amount of unsecured convertible promissory notes (the “Notes”) and related warrants (the “Warrants”) to purchase common stock of the Company (the “Common Stock”), to accredited investors (the “Private Placements”) pursuant to subscription agreements entered into with each investor (collectively, the “Subscription Agreements”), in exchange for cash in an equal amount. The proceeds of the Private Placements are anticipated to be used for general working capital and to fund clinical trials.

The principal amount of the Notes plus unpaid accrued interest at an annual rate of 10.0% is convertible at the election of the holders into shares of Common Stock at any time prior to maturity, at an initial conversion price of $0.50 per share, with an aggregate of 6,200,000 shares of the Company’s Common Stock initially underlying the Notes. As part of the investment in the Notes, the Company also issued Warrants exercisable for 50% of the shares into which the Notes are convertible, with Warrants for an aggregate of 3,100,000 shares of Common Stock issued in the Private Placements. The Warrants are exercisable at a price of $0.30 per share. The Warrants are currently exercisable in full and will expire five years from the date of issuance. The Subscription Agreements contain certain “piggyback” registration rights relating to resales of shares of Common Stock underlying the Notes and the Warrants.

As a result of the issuance of the Notes, pursuant to the terms of the Placement Agent Agreement, dated July 26, 2018, entered into in connection with a recently completed private securities offering, the placement agent in that offering earned a “tail fee” comprising warrants exercisable for 620,000 shares of Common Stock (the “Placement Agent Warrants”) and a cash fee of $372,000. The Placement Agent Warrants are exercisable at a price of $0.50 per share and will expire five years from the date of issuance. The Placement Agent Warrants provide for cashless exercise.

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Summary of Significant Accounting Policies (Policies)
6 Months Ended
Nov. 30, 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 November 30, 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 and six months ended November 30, 2018 and November 30, 2017, (b) the financial position at November 30, 2018 and (c) cash flows for the six month periods ended November 30, 2018 and November 30, 2017.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, CytoDyn Operations Inc., Advanced Genetic Technologies, Inc. (“AGTI”) and CytoDyn Veterinary Medicine LLC (“CVM”), of which both AGTI and CVM 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 $28,718,950 for the six months ended November 30, 2018 and has an accumulated deficit of $201,858,345 as of November 30, 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 November 30, 2018 and May 31, 2018 approximated $0.5 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 six months ended November 30, 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 November 30, 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

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.

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of November 30, 2018 and May 31, 2018 is as follows:

 

     Fair Value Measurement at      Fair Value Measurement at  
     November 30, 2018 (1)      May 31, 2018 (1)  
     Using             Using         
     Level 3      Total      Level 3      Total  

Liabilities:

           

Derivative liability - warrants

   $ 1,789,066      $ 1,789,066      $ 1,323,732      $ 1,323,732  

Derivative liability - convertible note redemption provision

     1,286,076        1,286,076        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 3,075,142      $ 3,075,142      $ 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 November 30, 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. The Company uses a Binomial Lattice Model to estimate the value of the warrant derivative liability and a Monte Carlo Simulation to value the derivative liability of the redemption provision within a convertible promissory note. These valuation models were used because management believes they reflect all the assumptions that market participants would likely consider in negotiating the transfer of the instruments. The Company’s derivative liabilities are classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation models. 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 six months ended November 30, 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  

Inception date value of redemption provision

     1,284,998  

Fair value adjustments

     466,412  
  

 

 

 

Balance at November 30, 2018

   $ 3,075,142  
  

 

 

 
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. Periodically, the Company will issue restricted common stock to third parties as compensation for services rendered. Such stock awards are valued at fair market value on the effective date of the Company’s obligation.

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 8, 2018 at the 2018 Annual Meeting of Stockholders, a proposal was approved to increase the total number of authorized shares of common stock from 450,000,000 to 600,000,000. Subsequent to the 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 the authorized share increase.

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 November 30, 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 six months ended November 30, 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 six months ended November 30, 2018 and November 30, 2017, the Company recorded approximately $117,500 and $1.2 million of related amortization.

Debt Issuance Cost

Debt Issuance Cost

During the six months ended November 30, 2018 and the year ended May 31, 2018, the Company incurred direct costs associated with the issuance of 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 $20,000 and $0.3 million of related amortization for the six months ended November 30, 2018 and November 30, 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 $2.7 million and $0.6 million for the six months ended November 30, 2018 and November 30, 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 155,836,676 and 87,551,801 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 six months ended November 30, 2018 and November 30, 2017, respectively. Additionally, as of November 30, 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 Accounting Standards Codification (“ASC”) ASC 740-10 “Uncertainty in Income Taxes”. 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. For the year ending May 31, 2019 a deferred tax rate of 21% is being utilized and a corresponding valuation allowance adjustment is being recorded for the generation of deferred tax assets reversing in the future. For the three months ending November 30, 2018 the Company recorded a $2,826,919 deferred income tax benefit from a reduction in the Company’s deferred tax valuation allowance resulting from recording a deferred tax liability of $2,826,919 in connection with the acquisition of assets in the ProstaGene LLC transaction (see Note 7) . The deferred tax liability represents the tax effect of the difference in the carrying value of the assets and their tax basis at acquisition. The Company has a full valuation allowance on the Company’s net deferred tax assets as of November 30, 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.

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Nov. 30, 2018
Liabilities Measured at Fair Value on Recurring Basis by Level within Fair Value Hierarchy

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of November 30, 2018 and May 31, 2018 is as follows:

 

     Fair Value Measurement at      Fair Value Measurement at  
     November 30, 2018 (1)      May 31, 2018 (1)  
     Using             Using         
     Level 3      Total      Level 3      Total  

Liabilities:

           

Derivative liability - warrants

   $ 1,789,066      $ 1,789,066      $ 1,323,732      $ 1,323,732  

Derivative liability - convertible note redemption provision

     1,286,076        1,286,076        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 3,075,142      $ 3,075,142      $ 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 November 30, 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 six months ended November 30, 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  

Inception date value of redemption provision

     1,284,998  

Fair value adjustments

     466,412  
  

 

 

 

Balance at November 30, 2018

   $ 3,075,142  
  

 

 

 
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible Instruments (Tables)
6 Months Ended
Nov. 30, 2018
Activity Related to Notes

Activity related to the Note was as follows:

 

     November 30, 2018         
     Short term      Long term      Total      May 31, 2018  

Face amount of convertible promissory note

   $ —        $ —        $ —        $  —    

June 26, 2018 convertible promissory note

     2,100,000        3,600,000        5,700,000        —    

Monthly redemption

     700,000        (700,000      —          —    

Unamortized discount at August 31, 2018

     (344,614      (281,628      (626,242      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Carrying value of convertible notes at August 31, 2018

   $ 2,455,386      $ 2,618,372      $ 5,073,758      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Carrying value of convertible notes at November 30, 2018

   $ 4,200,000      $ 1,396,974      $ 5,596,974      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 
Convertible Note Redemption Provision Derivative Liability [Member]  
Summary of Fair Value Valuation Technique

The Company estimated the fair value of the redemption provision using the following assumptions on the closing date of November 15, 2015 and November 30, 2018:

 

     November 15,
2018
    November 30,
2018
 

Fair value of underlying stock

   $ 0.57     $ 0.58  

Risk free rate

     2.78     2.78

Expected term (in years)

     1.61       1.61  

Stock price volatility

     58.8     58.8

Expected dividend yield

     —         —    

Discount factor

     85     85
Short-Term Convertible Notes  
Activity Related to Notes

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

 

     November 30, 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  
Summary of Fair Value Valuation Technique

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
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Derivative Liabilities (Tables)
6 Months Ended
Nov. 30, 2018
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 November 30, 2018, using the following assumptions:

 

     September 15,
2016
    May 31,
2018
    November 30,
2018
 

Fair value of underlying stock

   $ 0.78     $ 0.49     $ 0.58  

Risk free rate

     1.20     2.63     2.83

Expected term (in years)

     5       3.3       2.79  

Stock price volatility

     106     64     62

Expected dividend yield

     —         —         —    

Probability of Fundamental Transaction

     50     50     95

Probability of holder requesting cash payment

     50     50     50
Convertible Note Redemption Provision Derivative Liability [Member]  
Summary of Derivative Liabilities at Fair Value

The following table summarizes the fair value of the convertible note redemption provision derivative liability as of inception date November 15, 2018 and November 30, 2018:

 

     Net Proceeds      Derivative
Liability
 

Inception date, November 15, 2018

   $ 5,000,000      $ 1,284,998  

Balance November 30, 2018

   $ 5,000,000      $ 1,286,076  
Registered Direct Equity Offering | Investor Warrants Issued with Registered Direct Equity Offering  
Summary of Derivative Liabilities 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, August 31, 2018 and November 30, 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  

Balance November 30, 2018

     7,733,334      $ 1,789,066  
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Tables)
6 Months Ended
Nov. 30, 2018
Stock Option and Warrant Activity

The following table represents stock option and warrant activity as of and for the six months ended November 30, 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

     33,483,124        0.69        —          —    

Exercised

     —          —          —          —    

Forfeited/expired/cancelled

     (10,031,717      0.75        —          —    
  

 

 

          

Options and warrants outstanding - November 30, 2018

     155,836,676        0.78        3.97        769,360  
  

 

 

          

Outstanding exercisable - November 30, 2018

     150,960,607      $ 0.78        3.80      $ 565,356  
  

 

 

          
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisition of Patents and Intangibles (Tables)
6 Months Ended
Nov. 30, 2018
Summary of the Net Purchase Price and Allocation to the Acquired Assets

A summary of the net purchase price and allocation to the acquired assets is as follows:

 

     ProstaGene, LLC  

CytoDyn Inc. Equity

   $ 11,558,000  

Acquisition Expenses

     741,297  

Release of Deferred Tax Asset

     2,826,919  
  

 

 

 

Total Cost of Acquisition

   $ 15,126,216  
  

 

 

 

Intangible assets

   $ 15,126,216  

Other

     —    
  

 

 

 

Allocation of Acquisition Costs

   $ 15,126,216  
  

 

 

 
Intangible Assets Activity

The following presents intangible assets activity:

 

     November 30, 2018      May 31, 2018  

Gross carrying amounts

   $ 3,500,000      $ 3,500,000  

Intangible asset acquisition:

     

ProstaGene, LLC

     15,126,216        —    

Accumulated amortization

     (2,209,254      (1,968,846
  

 

 

    

 

 

 

Total amortizable intangible assets, net

     16,416,962        1,531,154  

Patents currently not amortized

     35,989        35,989  
  

 

 

    

 

 

 

Carrying value of intangibles, net

   $ 16,452,951      $ 1,567,143  
  

 

 

    

 

 

 
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($)
3 Months Ended 6 Months Ended 11 Months Ended 12 Months Ended
Nov. 30, 2018
Aug. 31, 2018
May 31, 2018
Feb. 28, 2018
Nov. 30, 2017
Aug. 31, 2017
Nov. 30, 2018
Nov. 30, 2017
Nov. 30, 2018
May 31, 2019
May 31, 2018
Dec. 31, 2017
Nov. 08, 2018
Jun. 07, 2018
Aug. 24, 2017
Aug. 23, 2017
Apr. 30, 2010
Summary Of Significant Accounting Policies [Line Items]                                  
Net loss $ (14,305,380) $ (14,413,569) $ (9,623,623) $ (17,950,100) $ (10,947,685) $ (11,628,273) $ (28,718,950) $ (22,575,959)                  
Accumulated (deficit) (201,858,345)   (173,139,396)       (201,858,345)   $ (201,858,345)   $ (173,139,396)            
Balance in excess of federally insured limits 500,000   1,100,000       500,000   500,000   1,100,000            
Impairment charges             0 0                  
Pre-launch inventory qualified for capitalization $ 0   $ 0       $ 0   $ 0   $ 0            
Estimated future unvested forfeitures             0.00%                    
Common stock, shares authorized 600,000,000   375,000,000       600,000,000   600,000,000   375,000,000     450,000,000 375,000,000 350,000,000 100,000,000
Treasury stock, par value     $ 0.001               $ 0.001            
Treasury stock, shares                     159,011            
Debt discount   $ 626,242 $ 0               $ 0            
Amortization of discount on convertible notes $ 52,954       728,843   $ 117,534 1,172,995                  
Direct costs associated with the convertible notes             100,000       400,000            
Amortization of debt issuance costs             $ 19,589 $ 282,129                  
Common stock options and warrants to purchase             155,836,676 87,551,801                  
Unrecognized benefits 0           $ 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 2,826,919           2,826,919       0            
Deferred Income Tax Expense Benefit 2,826,919           (2,826,919)                    
Derivative liability 2,826,919           2,826,919   $ 2,826,919                
Equity Securities                                  
Summary Of Significant Accounting Policies [Line Items]                                  
Deferred offering costs 2,700,000   3,500,000   $ 600,000   2,700,000 $ 600,000 2,700,000   3,500,000            
Scenario, Forecast | ProstaGene, LLC                                  
Summary Of Significant Accounting Policies [Line Items]                                  
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Percent                   21.00%              
Short-Term Convertible Notes                                  
Summary Of Significant Accounting Policies [Line Items]                                  
Debt discount 0   0       0   0   0            
Amortization of debt issuance costs             20,000 300,000                  
Short-Term Convertible Notes | Detachable Common Stock Warrants                                  
Summary Of Significant Accounting Policies [Line Items]                                  
Debt discount $ 600,000   $ 1,500,000       600,000   $ 600,000   $ 1,500,000            
Amortization of discount on convertible notes             $ 117,500 $ 1,200,000                  
Series B Convertible Preferred Stock                                  
Summary Of Significant Accounting Policies [Line Items]                                  
Preferred Stock Shares authorized to be issued 400,000   400,000       400,000   400,000   400,000            
Common stock options and warrants to purchase 92,100   92,100       92,100   92,100   92,100            
Common shares issued upon conversion of preferred stock             921,000                    
Maximum                                  
Summary Of Significant Accounting Policies [Line Items]                                  
Common stock, shares authorized                         600,000,000        
Preferred Stock Shares authorized to be issued 5,000,000           5,000,000   5,000,000                
Minimum                                  
Summary Of Significant Accounting Policies [Line Items]                                  
Common stock, shares authorized                         450,000,000        
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Liabilities Measured At Fair Value on Recurring Basis by Level within Fair Value Hierarchy (Detail) - USD ($)
Nov. 30, 2018
May 31, 2018
Liabilities:    
Derivative liability $ 2,826,919  
Total liabilities [1] 3,075,142 $ 1,323,732
Convertible Note Redemption Provision    
Liabilities:    
Derivative liability [1] 1,286,076  
Warrants    
Liabilities:    
Derivative liability [1] 1,789,066 1,323,732
Level 3    
Liabilities:    
Total liabilities [1] 3,075,142 1,323,732
Level 3 | Convertible Note Redemption Provision    
Liabilities:    
Derivative liability [1] 1,286,076  
Level 3 | Warrants    
Liabilities:    
Derivative liability [1] $ 1,789,066 $ 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 November 30, 2018 and May 31, 2018.
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Liabilities Measured At Fair Value on Recurring Basis by Level within Fair Value Hierarchy (Parenthetical) (Detail) - USD ($)
Nov. 30, 2018
May 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities fair value [1] $ 3,075,142 $ 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 November 30, 2018 and May 31, 2018.
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Reconciliation of Liability Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3) (Detail) - USD ($)
6 Months Ended 12 Months Ended
Nov. 30, 2018
May 31, 2018
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Fair value adjustments $ 466,412 $ (3,855,468)
Ending Balance 3,075,142 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
Inception Date Value of Redemption Provision    
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Warrants issued $ 1,284,998  
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Convertible Instruments - Additional Information (Detail)
1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Nov. 15, 2018
USD ($)
$ / shares
Jun. 26, 2018
USD ($)
$ / shares
Jan. 31, 2018
USD ($)
$ / shares
shares
Nov. 30, 2018
USD ($)
$ / shares
shares
Nov. 30, 2018
USD ($)
$ / shares
shares
Nov. 30, 2017
USD ($)
Nov. 30, 2018
USD ($)
$ / shares
shares
Nov. 30, 2017
USD ($)
May 31, 2018
USD ($)
$ / shares
shares
May 31, 2010
USD ($)
$ / shares
shares
Aug. 31, 2018
USD ($)
Jun. 07, 2018
shares
Aug. 24, 2017
shares
Aug. 23, 2017
shares
Apr. 30, 2010
shares
Class of Stock [Line Items]                              
Common stock, shares authorized | shares       600,000,000 600,000,000   600,000,000   375,000,000     450,000,000 375,000,000 350,000,000 100,000,000
Common stock, par value | $ / shares       $ 0.001 $ 0.001   $ 0.001   $ 0.001            
Debt discount                 $ 0   $ 626,242        
Amortization of debt discount         $ 52,954 $ 728,843 $ 117,534 $ 1,172,995              
Amortization of debt issuance costs         10,411 168,429 19,589 282,129              
Proceeds from sale of common stock and warrant             23,463,585 7,050,651              
Interest expense         143,617 $ 105,384 248,247 180,673              
Extinguishment loss         (1,519,603)   (1,519,603)                
Net carrying value of note       $ 5,596,974 5,596,974   5,596,974   0   $ 5,073,758        
Conversion of Preferred Stock to Common Stock                              
Class of Stock [Line Items]                              
Undeclared dividend             205,000   199,000            
Accrued dividend       410,000 410,000   410,000   $ 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                        
Debt discount       0 0   0   $ 0            
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       0   250,000            
Interest expense             0 75,000              
Net carrying value of note       $ 0 $ 0   $ 0   0            
Short-Term Convertible Notes | Investor Warrants                              
Class of Stock [Line Items]                              
Common stock warrants to purchase shares | shares       4,025,656 4,025,656   4,025,656                
Exercise price of warrants, per share | $ / shares       $ 1.00 $ 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   $ 600,000   1,500,000            
Amortization of debt discount             117,500 1,200,000              
Unamortized issuance costs                 $ 400,000            
Amortization of debt issuance costs             0 300,000              
Note                              
Class of Stock [Line Items]                              
Convertible notes, interest rate   10.00%                          
Debt discount       600,000 600,000   600,000                
Amortization of debt discount             118,000 0              
Unamortized issuance costs       100,000 100,000   100,000                
Amortization of debt issuance costs             20,000 0              
Interest expense             248,000 $ 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 $ 0.55                          
Convertible promissory note maximum redemption amount $ 350,000 $ 350,000                          
Convertible promissory note redemption description Effective November 15, 2018, the Note was amended to allow the Investor to redeem the monthly redemption amount of $350,000 in cash or stock, at the lesser of (i) $0.55, or (ii) the lowest closing bid price of the Company’s common stock during the 20 days prior to the conversion, multiplied by a conversion factor of 85%. 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                          
Conversion Factor 85.00%                            
Common stock conversion closing bid price period 20 days                            
Extinguishment loss             1,500,000                
Net carrying value of note       5,400,000 5,400,000   5,400,000                
Fair value of Note       $ 6,900,000 $ 6,900,000   $ 6,900,000                
Common Stock                              
Class of Stock [Line Items]                              
Number of common shares issued upon conversion of preferred stock | shares       10 10   10                
Conversion price | $ / shares       $ 0.50 $ 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   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   92,100            
Constructive dividend to Preferred stock holders             $ 6,000,000                
Liquidation preference on common shares | $ / shares       $ 5.00 $ 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 $ 0.001          
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Weighted Average Assumptions to Value Investor Warrants (Detail) - $ / shares
6 Months Ended 12 Months Ended
Sep. 15, 2016
Nov. 30, 2018
May 31, 2018
Expected Term (In Years)      
Fair Value Measurement Inputs and Valuation Techniques [Line Items]      
Expected term 5 years 2 years 9 months 14 days 3 years 3 months 18 days
Risk free rate      
Fair Value Measurement Inputs and Valuation Techniques [Line Items]      
Risk-free interest rate 1.20% 2.83% 2.63%
Fair value of underlying stock      
Fair Value Measurement Inputs and Valuation Techniques [Line Items]      
Grant-date fair value $ 0.78 $ 0.58 $ 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 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 | Fair value of underlying stock      
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 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 | Fair value of underlying stock      
Fair Value Measurement Inputs and Valuation Techniques [Line Items]      
Grant-date fair value   $ 0.39  
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Activity Related to Notes (Detail) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Jan. 31, 2018
Aug. 31, 2018
Nov. 30, 2018
May 31, 2018
Debt Instrument [Line Items]        
Face amount of convertible promissory note   $ 5,700,000   $ 0
Monthly redemption   0   0
Unamortized discount   (626,242)   0
Carrying value of convertible notes   5,073,758 $ 5,596,974 0
Short-Term Debt        
Debt Instrument [Line Items]        
Face amount of convertible promissory note   2,100,000    
Monthly redemption   700,000    
Unamortized discount   (344,614)    
Carrying value of convertible notes   2,455,386 4,200,000  
Long-Term Debt        
Debt Instrument [Line Items]        
Face amount of convertible promissory note   3,600,000    
Monthly redemption   (700,000)    
Unamortized discount   (281,628)    
Carrying value of convertible notes   $ 2,618,372 1,396,974  
Short-Term Convertible Notes        
Debt Instrument [Line Items]        
Face amount of convertible promissory note $ 6,300,000   0 6,038,500
Unamortized discount     0 0
Registered direct equity offering     0 (5,788,500)
Note repayment $ (259,000)   0 (250,000)
Carrying value of convertible notes     $ 0 $ 0
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Derivative Liability - Additional Information (Detail)
3 Months Ended 6 Months Ended
Nov. 15, 2018
USD ($)
Nov. 30, 2018
USD ($)
Nov. 30, 2017
USD ($)
Nov. 30, 2018
USD ($)
Nov. 30, 2017
USD ($)
Derivative [Line Items]          
Percentage Of Outstanding Common Stock To Be Acquired       50.00%  
Change in fair value of derivative liability   $ 281,055 $ 829,600 $ (466,412) $ 466,934
Embedded derivative liability $ 1,280,000 $ 1,280,000   $ 1,280,000  
Stock price volatility          
Derivative [Line Items]          
Embedded Derivative Liability, Measurement Input 0.588 0.588   0.588  
Risk free rate          
Derivative [Line Items]          
Embedded Derivative Liability, Measurement Input 0.0278 0.0278   0.0278  
Fair value of underlying stock          
Derivative [Line Items]          
Embedded Derivative Liability, Exercise Price       $ 2  
Expected Term (In Years)          
Derivative [Line Items]          
Embedded Derivative Liability Expected Term 1 year 7 months 9 days     1 year 7 months 9 days  
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Fair Value Warrant Derivative Liability and Related Common Shares (Detail) - USD ($)
Nov. 30, 2018
Aug. 31, 2018
May 31, 2018
Sep. 15, 2016
Derivative [Line Items]        
Derivative liability $ 2,826,919      
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 7,733,334
Derivative liability $ 1,789,066 $ 2,071,199 $ 1,323,732 $ 5,179,200
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Assumptions used in Estimating Fair Value of Warrant Derivative Liability (Detail) - $ / shares
6 Months Ended 12 Months Ended
Sep. 15, 2016
Nov. 30, 2018
May 31, 2018
Fair value of underlying stock      
Derivative [Line Items]      
Fair value of underlying stock $ 0.78 $ 0.58 $ 0.49
Risk free rate      
Derivative [Line Items]      
Risk free rate 1.20% 2.83% 2.63%
Expected Term (In Years)      
Derivative [Line Items]      
Expected term (in years) 5 years 2 years 9 months 14 days 3 years 3 months 18 days
Stock price volatility      
Derivative [Line Items]      
Stock price volatility 106.00% 62.00% 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% 95.00% 50.00%
Probability of Holder Requesting Cash Payment      
Derivative [Line Items]      
Probability of holder requesting cash payment 50.00% 50.00% 50.00%
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Fair Value of Convertible Note Redemption Provision Derivative Liability (Detail) - USD ($)
6 Months Ended
Nov. 15, 2018
Nov. 30, 2018
Nov. 30, 2017
Derivative [Line Items]      
Net Proceeds   $ 5,000,000 $ 4,888,500
Derivative Liability $ 1,280,000 1,280,000  
Convertible Note Redemption Provision Derivative Liability [Member]      
Derivative [Line Items]      
Net Proceeds 5,000,000 5,000,000  
Derivative Liability $ 1,284,998 $ 1,286,076  
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Assumptions used in Estimating Fair Value of Convertible Note Redemption Provision Derivative Liability (Detail)
6 Months Ended
Nov. 15, 2018
$ / shares
Nov. 30, 2018
$ / shares
Fair value of underlying stock    
Fair Value Measurement Inputs and Valuation Techniques [Line Items]    
Embedded derivative liability, price per share $ 0.57 $ 0.58
Risk free rate    
Fair Value Measurement Inputs and Valuation Techniques [Line Items]    
Embedded Derivative Liability, Measurement Input 0.0278 0.0278
Expected Term (In Years)    
Fair Value Measurement Inputs and Valuation Techniques [Line Items]    
Embedded derivative liability, expected term 1 year 7 months 9 days 1 year 7 months 9 days
Stock price volatility    
Fair Value Measurement Inputs and Valuation Techniques [Line Items]    
Embedded Derivative Liability, Measurement Input 0.588 0.588
Expected dividend yield    
Fair Value Measurement Inputs and Valuation Techniques [Line Items]    
Embedded derivative liability, dividend yield 0.00% 0.00%
Discount factor    
Fair Value Measurement Inputs and Valuation Techniques [Line Items]    
Embedded Derivative Liability, Measurement Input 0.85 0.85
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants - Additional Information (Detail) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Apr. 08, 2019
Nov. 30, 2018
Nov. 30, 2017
Nov. 30, 2018
Nov. 30, 2017
May 31, 2018
Jun. 15, 2018
Aug. 24, 2017
Mar. 31, 2016
Feb. 28, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Common Stock issued   290,808,960   290,808,960   216,881,790        
Inducement interest related to warrant extensions         $ 826,252 $ 800,000        
Compensation expense       $ 1,510,486 529,617          
Placement Agent                    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Warrants to purchase common shares, shares             133,600      
Term of warrants             5 years      
Exercise price of warrants, per share             $ 0.55      
Consultant                    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Warrants to purchase common shares, shares   300,000   300,000            
Term of warrants   5 years   5 years            
Exercise price of warrants, per share   $ 0.56   $ 0.56            
Warrants grant date fair value   $ 0.30   $ 0.30            
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   22,478,585   22,478,585            
Term of warrants   5 years   5 years            
Exercise price of warrants, per share   $ 0.75   $ 0.75            
Proceeds from Issuance of Common Stock       $ 19,900,000            
Private Equity Offering | Placement Agent                    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Warrants to purchase common shares, shares   4,245,117   4,245,117            
Term of warrants   5 years   5 years            
Exercise price of warrants, per share   $ 0.50   $ 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   $ 1,200,000 $ 1,500,000 $ 275,000 530,000          
Grant date fair value of options and warrants   485,000 $ 1,200,000 127,000 $ 574,000          
Unrecognized compensation expense   $ 5,700,000   $ 5,700,000            
Weighted average period over which unrecognized compensation expense is expected to be recognized       2 years 8 months 8 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   553,048   553,048            
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 | Managing Director                    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Stock option granted, Shares       500,000            
Stock option granted, exerices price       $ 0.565            
Stock options, term       10 years            
Stock options grant date fair value       $ 0.30            
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            
2012 Equity Incentive Plan | Stock Options | Officer                    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Stock option granted, Shares       1,000,000            
Stock option granted, exerices price       $ 0.565            
Stock options, term       10 years            
Stock options grant date fair value       $ 0.30            
Stock option award vesting percentage       50.00%            
2012 Equity Incentive Plan | Stock Options | Officer | Scenario, Forecast                    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Stock option award vesting percentage 50.00%                  
2012 Equity Incentive Plan | Stock Options | Chief Medical Officer                    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                    
Stock option granted, Shares       350,000            
Stock option granted, exerices price       $ 0.551            
Vesting period       3 years            
Stock options, term       10 years            
Stock options grant date fair value       $ 0.30            
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock Options and Warrants (Detail) - USD ($)
6 Months Ended 12 Months Ended
Nov. 30, 2018
May 31, 2018
Stock option and warrant activity    
Options and warrants outstanding, Number of Shares 132,385,269  
Granted, Number of Shares 33,483,124  
Exercised, Number of Shares 0  
Forfeited/expired/cancelled, Number of Shares (10,031,717)  
Options and warrants outstanding, Number of Shares 155,836,676 132,385,269
Outstanding exercisable, Number of Shares 150,960,607  
Options and warrants outstanding, Weighted Average Exercise Price $ 0.80  
Granted, Weighted Average Exercise Price 0.69  
Exercised, Weighted Average Exercise Price 0  
Forfeited/expired/cancelled, Weighted Average Exercise Price 0.75  
Options and warrants outstanding, Weighted Average Exercise Price 0.78 $ 0.80
Outstanding exercisable, Weighted Average Exercise Price $ 0.78  
Options and warrants outstanding, Weighted Average Remaining Contractual Life in Years 3 years 11 months 19 days 3 years 9 months 10 days
Outstanding exercisable, Weighted Average Remaining Contractual Life in Years 3 years 9 months 18 days  
Options and warrants outstanding, Aggregate Intrinsic Value $ 769,360 $ 3,673
Outstanding exercisable, Aggregate Intrinsic Value $ 565,356  
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Acquisition of patents and Intangibles - Additional Information (Detail) - USD ($)
3 Months Ended 6 Months Ended
Oct. 16, 2012
Nov. 30, 2018
Nov. 30, 2017
Nov. 30, 2018
Nov. 30, 2017
May 31, 2018
Acquired Finite-Lived Intangible Assets [Line Items]            
Intangible asset acquired gross   $ 3,500,000   $ 3,500,000    
Issuance of common stock shares   290,808,960   290,808,960   216,881,790
Common stock per shares   $ 0.001   $ 0.001   $ 0.001
Estimated aggregate future amortization expense in next twelve months   $ 1,600,000   $ 1,600,000    
Estimated aggregate future amortization expense in year two   1,600,000   1,600,000    
Estimated aggregate future amortization expense in year three   1,600,000   1,600,000    
Estimated aggregate future amortization expense in year four   1,600,000   1,600,000    
Estimated aggregate future amortization expense in year five   1,600,000   1,600,000    
ProstaGene, LLC            
Acquired Finite-Lived Intangible Assets [Line Items]            
Acquisition of ProstaGene LLC, value   $ 11,558,000   $ 11,558,000    
Issuance of common stock shares   20,278,000   20,278,000    
Common stock per shares   $ 0.57   $ 0.57    
ProstaGene, LLC | Dr .Pestell | Stock Restriction Agreement            
Acquired Finite-Lived Intangible Assets [Line Items]            
Restricted common stock, shares   8,342,000   8,342,000    
Common stock shares restriction period       3 years    
Stock repurchase price, per share       $ 0.001    
Investment Advisory, Management and Administrative Service [Member] | ProstaGene, LLC            
Acquired Finite-Lived Intangible Assets [Line Items]            
Investment earned shares   1,620,000   1,620,000    
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   $ 152,900 $ 87,500 $ 240,400 $ 175,000  
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of the Net Purchase Price and Allocation to the Acquired Assets (Detail) - ProstaGene, LLC - USD ($)
Nov. 16, 2018
Nov. 30, 2018
Business Acquisition, Contingent Consideration [Line Items]    
CytoDyn Inc. Equity $ 11,558,000  
Acquisition Expenses 741,297  
Release of Deferred Tax Asset 2,826,919  
Total Cost of Acquisition 15,126,216  
Intangible assets 15,126,216 $ 15,126,216
Other 0  
Allocation of Acquisition Costs $ 15,126,216  
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Intangible Assets Activity (Detail) - USD ($)
Nov. 30, 2018
Nov. 16, 2018
May 31, 2018
Acquired Finite-Lived Intangible Assets [Line Items]      
Gross carrying amounts $ 3,500,000   $ 3,500,000
Accumulated amortization (2,209,254)   (1,968,846)
Total amortizable intangible assets, net 16,416,962   1,531,154
Patents currently not amortized 35,989   35,989
Carrying value of intangibles, net 16,452,951   $ 1,567,143
ProstaGene, LLC      
Acquired Finite-Lived Intangible Assets [Line Items]      
Intangible asset acquisition $ 15,126,216 $ 15,126,216  
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
License Agreements - Additional Information (Detail)
Mar. 15, 2019
USD ($)
Mar. 15, 2019
GBP (£)
Nov. 30, 2018
USD ($)
May 31, 2018
USD ($)
Mar. 15, 2018
USD ($)
Mar. 15, 2018
GBP (£)
Licenses Agreements [Line Items]            
Accrued license fee     $ 347,333 $ 133,600 $ 400,000 £ 300,000
Scenario, Forecast            
Licenses Agreements [Line Items]            
Accrued license fee $ 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%      
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies - Additional Information (Detail) - USD ($)
6 Months Ended 12 Months Ended
Nov. 30, 2018
May 31, 2016
Commitments and Contingencies [Line Items]    
Asset Purchase Agreement Aggregate Consideration Paying Period 10 years  
Payment to acquire other assets   $ 1,500,000
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 | Maximum    
Commitments and Contingencies [Line Items]    
Financial penalties 200,000  
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 1,100,000  
Contract Manufacturing Companies    
Commitments and Contingencies [Line Items]    
Execution fees for process validation and manufacturing activities 2,100,000  
Contract Manufacturing Companies | Termination of Any One Clinical Trial | Maximum    
Commitments and Contingencies [Line Items]    
Financial penalties 300,000  
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%  
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.10.0.1
Private Securities Offerings - Additional Information (Detail) - USD ($)
6 Months Ended
Jun. 15, 2018
Nov. 30, 2018
May 31, 2018
Equity and Equity Units Offering Disclosure [Line Items]      
Common stock, par value   $ 0.001 $ 0.001
Placement Agent      
Equity and Equity Units Offering Disclosure [Line Items]      
Exercise price of warrants, per share $ 0.55    
Warrants to purchase common shares, shares 133,600    
Percentage of shares, issued as warrants 8.00%    
Term of warrants 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   44,957,170  
Common stock, par value   $ 0.001  
Proceeds from private equity offering   $ 22,500,000  
Term of warrants   5 years  
Warrants to purchase common shares, shares   22,478,585  
Proceeds from issuance of common shares   $ 19,900,000  
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   4,245,117  
Percentage of shares, issued as warrants   10.00%  
Term of warrants   5 years  
Payment of one time non-accountable fees   $ 25,000  
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   22,478,585  
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.10.0.1
Registered Direct Equity Offerings - Additional Information (Detail) - USD ($)
6 Months Ended 12 Months Ended
Jun. 15, 2018
Feb. 01, 2018
Jan. 31, 2018
Jan. 30, 2018
Nov. 30, 2018
Nov. 30, 2017
May 31, 2018
Aug. 31, 2018
Stockholders Equity Note [Line Items]                
Gross proceeds from issuance of common stock         $ 23,463,585 $ 7,050,651    
Long-term debt and capital lease obligations including current maturities             $ 0 $ 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]                
Number of shares to be sold     12,062,728          
Warrants to purchase common shares, shares     7,718,010          
Purchase price, per share     $ 0.50          
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   0   6,038,500  
Stock repurchased during period, value     $ 259,000   $ 0   $ 250,000  
Term of warrants     5 years          
Class of warrants, exercise price     $ 0.75          
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              
Term of warrants 5 years              
Class of warrants, exercise price $ 0.55              
Percentage of shares, issued as warrants 8.00%              
Placement Agent | Short-Term Convertible Notes                
Stockholders Equity Note [Line Items]                
Cash commission paid     $ 164,425          
Subscription Agreements                
Stockholders Equity Note [Line Items]                
Warrants to purchase common shares, shares 1,970,000              
Purchase price, per share $ 0.50              
Term of warrants 5 years              
Class of warrants, exercise price $ 0.75              
Number of shares to be sold 1,970,000              
Proceeds from issuance of common shares $ 900,000              
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.10.0.1
Employee Benefit Plan - Additional Information (Detail) - Employee Savings Plan - USD ($)
3 Months Ended 6 Months Ended
Nov. 30, 2018
Nov. 30, 2017
Nov. 30, 2018
Nov. 30, 2017
Defined Contribution Plan Disclosure [Line Items]        
Qualified non-elective contribution     3.00%  
Qualified non-elective contribution expense $ 15,200 $ 10,800 $ 31,000 $ 21,500
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions - Additional Information (Detail) - USD ($)
6 Months Ended
Nov. 16, 2018
Nov. 08, 2017
Jul. 28, 2017
Jul. 26, 2017
Nov. 30, 2018
Jul. 10, 2018
May 31, 2018
Related Party Transaction [Line Items]              
Common stock, outstanding         290,649,949   216,722,779
Private Equity Offering              
Related Party Transaction [Line Items]              
Proceeds from private equity offering         $ 22,500,000    
Warrants to purchase common shares, shares         22,478,585    
Exercise price of warrants, per share         $ 0.75    
Chief Science Officer              
Related Party Transaction [Line Items]              
Stock options vested           500,000  
Managing Director              
Related Party Transaction [Line Items]              
Stock options vested           100,000  
Dr Richard G Pestell | ProstaGene, LLC              
Related Party Transaction [Line Items]              
Percentage of outstanding equity interest 77.20%            
Common stock held for future issuance 8,611,427            
Common stock, outstanding 13,258,000            
Dr Richard G Pestell | ProstaGene, LLC | Stock Restriction Agreement              
Related Party Transaction [Line Items]              
Common stock held for future issuance 8,342,000            
Common stock shares restriction period 3 years            
Dr Richard G Pestell | ProstaGene, LLC | Escrow Account Deposit              
Related Party Transaction [Line Items]              
Common stock held for future issuance 4,171,013            
Common stock, outstanding 5,400,000            
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          
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events - Additional Information (Detail)
1 Months Ended 6 Months Ended
Jan. 08, 2019
USD ($)
$ / shares
shares
Dec. 27, 2018
USD ($)
shares
Dec. 22, 2018
USD ($)
Installment
shares
Dec. 19, 2018
USD ($)
shares
Dec. 10, 2018
USD ($)
Dec. 11, 2018
USD ($)
$ / shares
shares
Nov. 30, 2018
USD ($)
$ / shares
shares
Jun. 15, 2018
$ / shares
shares
May 31, 2018
$ / shares
Subsequent Event [Line Items]                  
Common stock, par value | $ / shares             $ 0.001   $ 0.001
Placement Agent                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares               $ 0.55  
Term of warrants               5 years  
Warrants to purchase common shares, shares               133,600  
Private Equity Offering                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares             $ 0.75    
Warrant covering common stock shares purchased, percentage             50.00%    
Common stock sold at private equity offering             44,957,170    
Common stock, par value | $ / shares             $ 0.001    
Proceeds from private equity offering | $             $ 22,500,000    
Term of warrants             5 years    
Warrants to purchase common shares, shares             22,478,585    
Private Equity Offering | Warrants                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares             $ 0.75    
Warrants to purchase common shares, shares             22,478,585    
Private Equity Offering | Placement Agent                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares             $ 0.50    
Term of warrants             5 years    
Warrants to purchase common shares, shares             4,245,117    
Subsequent Event                  
Subsequent Event [Line Items]                  
Convertible promissory note principle amount | $ $ 3,100,000                
Subsequent Event | Convertible Note                  
Subsequent Event [Line Items]                  
Common stock sold at private equity offering 6,200,000                
Convertible note, redeemed amount | $   $ 100,000              
Common stock issuance for redemption of covertible note   255,532              
Outstanding balance of convertible note including accrued unpaid interest | $   $ 5,900,000              
Debt stated percentage 10.00%                
Effective fixed conversion price for Common stock | $ / shares $ 0.50                
Subsequent Event | Placement Agent Agreement                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares $ 0.50                
Acquisition fees received subject to acquisition warrants exercisable 620,000                
Acquisition fees received subject to acquisition fee tail agreement | $ $ 372,000                
Tail fee period 5 years                
Subsequent Event | Chairman of the board                  
Subsequent Event [Line Items]                  
Annual base salary | $       $ 5,000 $ 16,667        
Extended service period       Apr. 16, 2019          
Extension in expiration terms       10 years          
Previously awarded stock options       150,000          
Subsequent Event | Chief Technology Officer                  
Subsequent Event [Line Items]                  
Annual base salary | $     $ 335,000            
Annual target bonus as percentage of base salary     50.00%            
Initial signing bonus amount | $     $ 100,000            
Number of equal installment for signing bonus | Installment     2            
Initial signing bonus, installment amount | $     $ 50,000            
Frequency of installsment period     6 months            
Stock options granted     400,000            
Stock options vesting     3 years            
Subsequent Event | Michael A. Klump [Member]                  
Subsequent Event [Line Items]                  
Convertible promissory note principle amount | $ $ 500,000                
Subsequent Event | Private Equity Offering                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares           $ 0.50      
Warrant covering common stock shares purchased, percentage           50.00%      
Common stock sold at private equity offering           2,018,000      
Common stock, par value | $ / shares           $ 0.001      
Proceeds from private equity offering | $           $ 1,000,000      
Term of warrants           5 years      
Subsequent Event | Private Equity Offering | Convertible Note                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares $ 0.30                
Term of warrants 5 years                
Warrants to purchase common shares, shares 3,100,000                
Warrants exercisable 50.00%                
Subsequent Event | Private Equity Offering | Warrants                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares           $ 0.75      
Warrants to purchase common shares, shares           1,009,000      
Subsequent Event | Private Equity Offering | Placement Agent                  
Subsequent Event [Line Items]                  
Exercise price of warrants, per share | $ / shares           $ 0.50      
Term of warrants           5 years      
Warrants to purchase common shares, shares           201,800      
Aggregate cash fee | $           $ 100,000      
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