Note 5. Convertible Instruments

Convertible Preferred Stock

Series D Convertible Preferred Stock

As of May 31, 2021, the Company had authorized 11,737 shares of Series D Convertible Preferred Stock, $0.001 par value per share (“Series D Preferred Stock”), of which 8,452 shares were outstanding. The Series D Certificate of Designation provides, among other things, that holders of Series D Preferred Stock shall be entitled to receive, when and as declared by the Company’s Board of Directors (the “Board”) and out of any assets at the time legally available therefor, cumulative dividends at the rate of ten percent (10%) per share per annum of the stated value of the Series D Preferred Stock, which is $1,000 per share (the “Series D Stated Value”). Any dividends paid by the Company will first be paid to the holders of Series D Preferred Stock prior and in preference to any payment or distribution to holders of common stock. Dividends on the Series D Preferred Stock are cumulative, and will accrue and be compounded annually, whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally available therefor. There are no sinking fund provisions applicable to the Series D Preferred Stock. The Series D Preferred Stock does not have redemption rights. Dividends, if declared by the Board, are payable to holders in arrears on December 31 of each year. Subject to the provisions of applicable Delaware law, the holder may elect to be paid in cash or in restricted shares of common stock at the rate of $0.50 per share. As of May 31, 2021, and May 31, 2020, the accrued dividends were approximately $1.1 million, or approximately 2.2 million shares of common stock, and approximately $0.3 million, or approximately 0.5 million shares of common stock, respectively.

In the event of any liquidation, dissolution or winding up of the Company, the holders of Series D Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the Series C Convertible Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”), and in preference to any payment or distribution to any holders of the Series B Convertible Preferred Stock, $0.001 par value per share (“Series B Preferred Stock”), or common stock, an amount per share equal to the Series D Stated Value plus the amount of any accrued and unpaid dividends. If, at any time while the Series D Preferred Stock is outstanding, the Company effects any reorganization, merger or consolidation of the Company, sale of substantially all of its assets, or other specified transaction (each, as defined in the Series D Certificate of Designation, a “Fundamental Transaction”), a holder of the Series D Preferred Stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series D Preferred Stock immediately prior to the Fundamental Transaction. Each share of Series D Preferred Stock is convertible at any time at the holder’s option into that number of fully paid and nonassessable shares of common stock determined by dividing the Series D Stated Value by the conversion price of $0.50 (subject to adjustment as set forth in the Series D Certificate of Designation). No fractional shares will be issued upon the conversion of the Series D Preferred Stock. Except as otherwise provided in the Series D Certificate of Designation or as otherwise required by law, the Series D Preferred Stock has no voting rights.

Series C Convertible Preferred Stock

As of May 31, 2021, the Company had authorized 8,203 shares of Series C Convertible Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”), of which 8,203 shares were outstanding. The Series C Certificate of Designation provides, among other things, that holders of Series C Preferred Stock shall be entitled to receive, when and

as declared by the Board and out of any assets at the time legally available therefor, cumulative dividends at the rate of ten percent (10%) per share per annum of the stated value of the Series C Preferred Stock, which is $1,000 per share (the “Series C Stated Value”). Any dividends paid by the Company will be paid to the holders of Series C Preferred Stock prior and in preference to any payment or distribution to holders of common stock. Dividends on the Series C Preferred Stock are cumulative, and will accrue and be compounded annually, whether or not declared and whether or not there are any profits, surplus or other funds or assets of the Company legally available therefor. There are no sinking fund provisions applicable to the Series C Preferred Stock. The Series C Preferred Stock does not have redemption rights. Dividends, if declared by the Board, are payable to holders in arrears on December 31 of each year. Subject to the provisions of applicable Delaware law, the holder may elect to be paid in cash or in restricted shares of common stock at the rate of $0.50 per share. As of May 31, 2021 and May 31, 2020, the accrued dividends were approximately $1.5 million or, approximately 3.0 million shares of common stock, and approximately $0.7 million or approximately 1.4 million shares of common stock, respectively.

In the event of any liquidation, dissolution or winding up of the Company, the holders of Series C Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the Series D Preferred Stock and in preference to any payment or distribution to any holders of the Series B Preferred Stock or common stock, an amount per share equal to the Series C Stated Value plus the amount of any accrued and unpaid dividends. If, at any time while the Series C Preferred Stock is outstanding, the Company effects a reorganization, merger or consolidation of the Company, sale of substantially all of its assets, or other specified transaction (each, as defined in the Series C Certificate of Designation, a “Fundamental Transaction”), a holder of the Series C Preferred Stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series C Preferred Stock immediately prior to the Fundamental Transaction. Each share of Series C Preferred Stock is convertible at any time at the holder’s option into that number of fully paid and nonassessable shares of common stock determined by dividing the Series C Stated Value by the conversion price of $0.50 (subject to adjustment as set forth in the Series C Certificate of Designation). No fractional shares will be issued upon the conversion of the Series C Preferred Stock. Except as otherwise provided in the Series C Certificate of Designation or as otherwise required by law, the Series C Preferred Stock has no voting rights.

Series B Convertible Preferred Stock

As of May 31, 2021, the Company had authorized 400,000 shares of Series B Preferred Stock, of which 79,000 shares remain outstanding. Each share of the Series B Preferred Stock is convertible into ten (10) shares of the Company’s common stock. Dividends are payable to the Series B Preferred stockholders when and as declared by the Board 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 therefor. At the option of the Company, dividends on the Series B Preferred Stock may be paid in cash or shares of the Company’s common stock, valued at $0.50 per share. The holders of the Series B Preferred Stock can only convert their shares to shares of common stock if the Company has sufficient authorized shares of common stock at the time of conversion. The Series B Preferred Stock has liquidation preferences over the common shares at $5.00 per share, plus any accrued and unpaid dividends. Except as provided by law, the Series B holders have no voting rights. On July 30, 2020, the Board declared a dividend and elected to pay such dividend in the form of cash in the aggregate amount of approximately $0.2 million to all Series B Preferred stockholders. As of May 31, 2021, and May 31, 2020, the undeclared dividends were approximately $17,800 or 35,500 shares of common stock, and approximately $0.2 million, or 0.5 million shares of common stock, respectively.

Convertible Notes

The following schedule sets forth the outstanding balance of convertible notes as of May 31, 2021 and May 31, 2020 (in thousands).

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2019 Short-term Convertible Notes

During the year ended May 31, 2019, the Company issued approximately $5.5 million of nine-month unsecured Convertible Notes (the “2019 Short-term Convertible Notes”) and related warrants to investors for cash. The principal amount of the 2019 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 stock at any time prior to maturity at a conversion price of $0.50 per share. The 2019 Short-term Convertible Notes accrued simple interest at the annual rate of 10%. Principal and accrued interest, to the extent not previously paid or converted, was due and payable on the maturity date. At the commitment dates, the Company determined that the conversion feature related to these 2019 Short-term Convertible Notes was 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 2019 Short-term Convertible Notes for the fair value of the related warrants. In connection with the sale of the 2019 Short-term Convertible Notes, detachable common stock warrants to purchase a total of 5.46 million common shares, with an exercise price of $0.30 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.

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The fair value of the warrants, coupled with the beneficial conversion features, was recorded as a debt discount to the 2019 Short-term Convertible Notes and a corresponding increase to additional paid-in capital and will be amortized over the life of the 2019 Short-term Convertible Notes. In connection with the 2019 Short-term Convertible Notes, the placement agent earned a “tail fee” comprising warrants covering approximately 0.97 million shares of common stock and a cash fee of approximately $0.6 million. The placement agent warrants were exercisable at a price of $0.50 per share, expire five years from the date of issuance and include a cashless exercise provision. During the year ended May 31, 2019, in connection with the 2019 Short-term Convertible Notes, the Company incurred debt discount of approximately $3.1 million, related to the beneficial conversion feature and detachable warrants issued with the 2019 Short-term Convertible Notes and approximately $0.8 million in issuance costs. The debt discount and issuance costs will be amortized over the term of the 2019 Short-term Convertible Notes. Accordingly, the Company recognized

approximately $1.7 million and $0.5 million of debt discount and issuance costs, respectively, during the year ended May 31, 2019. See Note 17.

Beginning on September 30, 2019 and through November 14, 2019, principal and interest totaling approximately $5.9 million became due. Holders of notes totaling approximately $1.1 million in principal and accrued interest agreed to extend their notes for another three months, and holders of notes totaling approximately $4.1 million in principal and accrued interest agreed to extend their notes for another six months. One noteholder with principal and accrued interest totaling approximately $0.2 million converted to shares of common stock. During the quarter ended November 30, 2019, a total of approximately $0.7 million of principal and accrued interest was repaid in cash. In addition, detachable stock warrants to purchase a total of 4.75 million warrants with a five-year term and an exercise price of $0.30 per share were issued to investors who extended their notes. One investor received 0.2 million warrants with a five-year term and an exercise price of $0.45 per share for converting the entire principal and accrued interest on its note. In connection with the 2019 Short-term Convertible Note extensions and conversion, the Company recorded a non-cash inducement interest expense of approximately $0.3 million during the quarter ended November 30, 2019. The new principal amount of the 2019 Short-term Convertible Notes, including any accrued but unpaid interest thereon, was convertible at the election of the holders at any time into shares of common stock at any time prior to maturity at a conversion price of $0.50 per share. At the new commitment dates, the Company determined that there was a decrease in the fair value of the embedded conversion option resulting from the modification, the value of which is not required to be recognized under U.S. GAAP.

During the fiscal year ended May 31, 2020, holders of the 2019 Short-term Convertible Notes in the aggregate principal amount of $5.2 million, including accrued but unpaid interest, tendered notices of conversion at the stated conversion rate of $0.50 per share. The Company issued approximately 10.4 million shares of common stock in satisfaction of the conversion notices. Following the redemptions, the 2019 Short-term Convertible Notes have been fully satisfied and there is no outstanding balance at May 31, 2021.

Activity related to the 2019 Short-term Convertible Notes was as follows (in thousands):

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The Company recognized approximately $0.4 million and $0.2 million of interest expense for the fiscal years ended May 31, 2020 and May 31, 2019, respectively.

Long-term Convertible Note - June 2018 Note

On June 26, 2018, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note (the “June 2018 Note”) with a two-year term to an institutional accredited investor in the initial principal amount of $5.7 million. The investor paid consideration of $5.0 million to the Company. The June 2018 Note accrued interest at an annual rate of 10% and was convertible into common stock, at a conversion rate of $0.55 per share. The June 2018 Note provided for conversion in whole, or in part, of the outstanding balance, into common stock at any time beginning six months following the issue date upon five trading days’ notice, subject to certain adjustments and ownership limitations specified in the June 2018 Note, and allowed for redemption, at any time beginning six months following the issue date upon five trading days’ notice, subject to a maximum monthly redemption amount of $0.35 million. The securities purchase agreement required 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. As a result of the entry into the January 2019 Note (as defined below), the Company’s obligations under the June 2018 Note were secured by all of the assets of the Company, excluding the Company’s intellectual property.

Effective November 15, 2018, the June 2018 Note was amended to allow the investor to redeem the monthly redemption amount of $0.35 million 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 common stock. As of November 15, 2018, the redemption provision required bifurcation as a derivative liability at fair value under the guidance in ASC 815, Derivatives and Hedging.

The amendment of the June 2018 Note was also evaluated under ASC 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. The Company recorded approximately $1.5 million as an extinguishment loss, which was the difference in the net carrying value of the June 2018 Note prior to the amendment of approximately $5.4 million, and the fair value of the June 2018 Note and embedded derivatives after the amendment of approximately $6.9 million. The extinguishment loss included a write-off of unamortized debt issuance costs and the debt discount associated with the original June 2018 Note.

The Company recognized approximately $0.4 million of interest expense related to the June 2018 Note during each of the fiscal years ended May 31, 2020 and May 31, 2019. During the year ended May 31, 2019, the Company received redemption notices from the holder of the Company’s June 2018 Note, requesting an aggregate redemption of approximately $1.5 million of the outstanding balance thereof. In satisfaction of the redemption notices, the Company issued a total of approximately 3.8 million shares of common stock to the June 2018 Note holder in accordance with the terms of the June 2018 Note. During the year ended May 31, 2020, the Company received redemption notices requesting an aggregate redemption of approximately $4.5 million settling the remaining outstanding balance in full, including accrued but unpaid interest. In satisfaction of the redemption notice, the Company issued approximately 8.5 million shares of common stock and paid cash totaling approximately $0.5 million to the June 2018 Note holder in accordance with the terms of the June 2018 Note. Following the redemptions, the June 2018 Note was fully satisfied and there was no outstanding balance at May 31, 2020.

Long-term Convertible Note - January 2019 Note

On January 30, 2019, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note with a two-year term to the holder of the June 2018 Note in the initial principal amount of $5.7 million (the “January 2019 Note”). In connection with the issuance of the January 2019 Note, the Company granted a lien against all the assets of the Company, excluding the Company’s intellectual property, to secure all obligations owed to the investor by the Company (including those under both the January 2019 Note and the June 2018 Note). The investor paid consideration of $5.0 million to the Company, reflecting original issue discount of $0.6 million and issuance costs of $0.1 million. The January 2019 Note accrued interest at an annual rate of 10% and was convertible into common stock, at a conversion rate of $0.50 per share. The January 2019 Note provided for conversion in whole, or in part, of the outstanding balance, at any time beginning six months following the issue date upon five trading days’ notice, subject to certain adjustments and ownership limitations specified in the January 2019 Note. The Company analyzed the conversion option for derivative accounting treatment under ASC 815, Derivatives and Hedging, and determined that the embedded conversion option did not qualify for derivative accounting.

The January 2019 Note provided the investor with the right to redeem any portion of the January 2019 Note, at any time beginning six months following the issue date upon five trading days’ notice, subject to a maximum monthly redemption amount of $0.35 million. The monthly redemption amount may be paid in cash or common stock, at the Company’s election, at the lesser of (i) $0.50, 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 redemption provision met the definition of a derivative instrument and did not meet the criteria to be considered indexed to the Company’s common stock. Therefore, the redemption provision required bifurcation as a derivative liability at fair value under the guidance in ASC 815,

Derivatives and Hedging. The securities purchase agreement required the Company to reserve 20 million shares of common stock for future conversions or redemptions.

In conjunction with the January 2019 Note, the investor received a warrant to purchase 5.0 million shares of common stock with an exercise price of $0.30 which is exercisable until the 5-year anniversary of the date of issuance. All the warrants were exercised during the fiscal year ended May 31, 2020. The warrant achieved equity classification at inception. The net proceeds of $5.0 million were allocated first to the redemption provision at its fair value, then to the warrants at their relative fair value and the beneficial conversion feature at its intrinsic value as follows (in thousands):

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Under the guidance of ASC 815, Derivatives and Hedging, after allocation of proceeds to the redemption provision, relative fair value of equity classified warrants and the beneficial conversion feature, there were no proceeds remaining to allocate to the convertible note payable. Therefore, principal, accrued interest, debt discount and offering costs will be recognized as interest expense, which represents the accretion of the convertible note payable and related debt discount and issuance costs. During the fiscal years ended May 31, 2020 and May 31, 2019, the Company recognized approximately $6.1 million and approximately $0.1 million, respectively, of interest expense related to the January 2019 Note. Interest expense recorded during the year ended May 31, 2020 included approximately $5.8 million representing accretion of the remaining unamortized discount on the January 2019 Note that was recognized immediately upon conversion of the debt in accordance with ASC 470-20-40-1. During the year ended May 31, 2020, the Company received a redemption notice from the holder of the January 2019 Note, requesting an aggregate redemption of approximately $6.3 million settling the remaining outstanding balance in full, including accrued interest. In satisfaction of the redemption notice, the Company issued approximately 10.8 million shares of common stock and paid cash totaling $0.85 million to the January 2019 Note holder in accordance with the terms of the January 2019 Note. Following the redemption, the January 2019 Note has been fully satisfied and there is no outstanding balance at May 31, 2020.

Activity related to the June 2018 Note and the January 2019 Note is as follows (in thousands):

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Long-term Convertible Note - March 2020 Note

On March 31, 2020, the Company entered into a securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a two-year term to an institutional accredited investor in the initial principal amount of $17.1 million (the “March 2020 Note”). The Company received consideration of $15.0 million, reflecting an original issue discount of $2.1 million. The March 2020 Note is secured by all the assets of the Company, excluding the Company’s intellectual property. The March 2020 Note accrued interest at an annual rate of 10% and was convertible into common stock at $4.50 per share. The March 2020 Note provided for conversion in total, or in part, of the outstanding balance, at any time beginning six months following the issue date upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the note. The Company analyzed the conversion

option for derivative accounting treatment under ASC 815, Derivatives and Hedging, and determined that the embedded conversion option did not qualify for derivative accounting. Certain default put provisions were considered not to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was de minimis.

The March 2020 Note provided the investor with the right to redeem any portion of the March 2020 Note, at any time beginning six months following the issue date, upon three trading days’ notice, subject to a Maximum Monthly Redemption Amount of $0.95 million. During the quarter ended November 30, 2020, the Company issued an additional secured convertible promissory note to an affiliate of the holder of the March 2020 Note (the “November 2020 Note,” as described below), which obligates the Company to reduce the aggregate outstanding note balances held by the investor by $7.5 million per month (the “Debt Reduction Amount,” as described under Long-term Convertible Note – November 2020 Note below), beginning in the month of November 2020.

The original issue discount of $2.1 million related to the March 2020 Note was recorded as a discount on the March 2020 Note and the discount has been amortized over the term of the March 2020 Note. Amortization of the March 2020 debt discount during the fiscal years ended May 31, 2021 and May 31, 2020 amounted to $1.9 million and $0.2 million, respectively, and is recorded as interest expense in the accompanying consolidated statements of operations. Interest expense for the year ended May 31, 2021 amounted to approximately $0.5 million. From June 26, 2020 to July 27, 2020, the investor converted an aggregate of approximately $9.5 million of combined principal and accrued interest into approximately 2.1 million shares of common stock at the $4.50 per share conversion price. During the quarter ended November 30, 2020, the Company received a redemption notice from the holder of the March 2020 Note, requesting a redemption of $0.95 million. In satisfaction of the redemption notice, the Company paid cash of $0.95 million to the March 2020 Note holder. Additionally, the Company elected to satisfy the Debt Reduction Amount for November 2020 by making repayments on the March 2020 Note, resulting in the note being fully satisfied during the quarter ended November 30, 2020. To settle this Debt Reduction Amount, the Company and the investor entered into three separately negotiated exchange agreements, pursuant to which the remaining balance of the March 2020 Note was partitioned into three new notes (the “Partitioned Notes”). The Company and the investor exchanged the Partitioned Notes for approximately 4.3 million shares of common stock. As a result of these exchanges, there was no outstanding balance on the March 2020 Note at May 31, 2021.

In connection with extinguishment of the March 2020 Note, the Company analyzed the restructured note for potential requirement of debt extinguishment accounting under ASC 470, Debt Modifications and Extinguishments. The Company concluded debt extinguishment accounting treatment to be necessary and accordingly recorded aggregate debt extinguishment loss of approximately $4.2 million during the fiscal year ended May 31, 2021, as the difference between the fair market value of the shares issued and the carrying value of the debt retired, which included the amortization of the relative debt discount and issuance costs.

Long-term Convertible Note—July 2020 Note

On July 29, 2020, the Company entered into a securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a two-year term to an institutional accredited investor in the initial principal amount of $28.5 million (the “July 2020 Note”). The Company received consideration of $25.0 million, reflecting an original issue discount of $3.4 million and issuance costs of $0.1 million. The July 2020 Note was secured by all the assets of the Company, excluding the Company’s intellectual property. The July 2020 Note accrued interest at an annual rate of 10% and was convertible into shares of common stock at a conversion rate of $10.00 per share. The July 2020 Note provided for conversion in whole, or in part, of the outstanding balance, at any time beginning six months following the issue date upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the note. The Company analyzed the conversion option for derivative accounting treatment under ASC 815, Derivatives and Hedging, and determined that the embedded conversion option did not qualify for derivative accounting. Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was de minimis.

The investor had the right to redeem any portion of the July 2020 Note, at any time beginning six months following the issue date, upon three trading days’ notice, subject to a Maximum Monthly Redemption Amount of $1.6 million. As

noted above, during the quarter ended November 30, 2020, the Company issued the November 2020 Note to an affiliate of the holder of the March 2020 and July 2020 Notes, which obligates the Company to reduce the aggregate outstanding note balances held by the investor by the Debt Reduction Amount beginning in the month of November 2020.

The Company agreed to use commercially reasonable efforts to file a Registration Statement on Form S-3 with the SEC by September 15, 2020, to register approximately 2.9 million shares of common stock, the number of shares estimated to be required to convert the entire principal and interest balance of the July 2020 Note. The Form S-3 (Registration No. 333-248823) was declared effective on September 25, 2020.

The original issue discount of $3.4 million related to the July 2020 Note was recorded as a discount on the July 2020 Note and the discount has been amortized over the term of the July 2020 Note. Amortization of debt discounts and issuance costs during the fiscal year ended May 31, 2021 amounted to approximately $3.5 million, recorded as interest expense and loss on extinguishment in the accompanying consolidated statement of operations. Interest expense for the year ended May 31, 2021 approximately $1.9 million. From January 29, 2021 to April 30, 2021 the Company applied the monthly Debt Reduction Amounts of $7.5 million for each month and approximately $7.9 million for the April Debt Reduction Amount toward the July 2020 Note for an aggregate redemption amount of $30.4 million of principal and accrued interest. In satisfaction of the monthly Debt Reduction Amounts, the Company and the investor entered into separately negotiated exchange agreements, pursuant to which the July 2020 Note was partitioned into new notes (the “July 2020 Note Partitioned Notes”). The outstanding balance of the July 2020 Note was reduced by the July 2020 Partitioned Notes, and the Company and the investor exchanged the Partitioned Note for approximately 11.3 million shares of common stock. Following these exchanges, there is no outstanding balance on the July 2020 Note at May 31, 2021.

The embedded conversion feature in the July 2020 Note was analyzed under ASC 815, Derivatives and Hedging, to determine if it achieved equity classification or required bifurcation as a derivative instrument. The embedded conversion feature was considered indexed to the Company’s common stock and met the conditions for equity classification. Accordingly, the embedded conversion feature did not require bifurcation from the host instrument. The Company determined there was no beneficial conversion feature since the effective conversion rate was greater than the market value of the Company’s common stock upon issuance. Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was de minimis. The Company reconsidered the value of the default put provisions each reporting period to determine if the value was material to the financial statements.

In connection with the extinguishment of the July 2020 Note, the Company analyzed the restructured note for potential requirement of debt extinguishment accounting under ASC 470, Debt Modifications and Extinguishments. The Company concluded debt extinguishment accounting treatment to be necessary and accordingly recorded aggregate debt extinguishment loss of approximately $9.3 million during the fiscal year ended May 31, 2021 as the difference between the fair market value of the shares issued and the carrying value of the debt retired, which included the amortization of the relative debt discount and issuance costs.

Long-term Convertible Note—November 2020 Note

On November 10, 2020, the Company entered into a securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a two-year term to an institutional accredited investor affiliated with the holder of the March 2020 and July 2020 Notes in the initial principal amount of $28.5 million (the “November 2020 Note”). The Company received consideration of $25.0 million, reflecting an original issue discount of $3.4 million and issuance costs of $0.1 million. The November 2020 Note is secured by all the assets of the Company, excluding the Company’s intellectual property.

Interest accrues on the outstanding balance of the November 2020 Note at an annual rate of 10%. Upon the occurrence of an event of default, interest will accrue at the lesser of 22% per annum or the maximum rate permitted by applicable law. In addition, upon any event of default, the investor may accelerate the outstanding balance payable under the November 2020 Note; upon such acceleration, the outstanding balance will increase automatically by 15%, 10% or 5%,

depending on the nature of the event of default. The events of default are listed in Section 4 of the November 2020 Note, which can be accessed through the Exhibit Index in this Form 10-K.

The investor may convert all or any part the outstanding balance of the November 2020 Note into shares of common stock at an initial conversion price of $10.00 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the November 2020 Note. In addition to standard anti-dilution adjustments, the conversion price of the November 2020 Note is subject to full-ratchet anti-dilution protection, pursuant to which the conversion price will be automatically reduced to equal the effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered under the Securities Act of 1933, as amended. The November 2020 Note provides for liquidated damages upon failure to deliver common stock within specified timeframes and requires the Company to maintain a share reservation of 6.0 million shares of common stock.

The investor may redeem any portion of the November 2020 Note, at any time beginning six months after the issue date, upon three trading days’ notice, subject to a maximum monthly redemption amount of $3.5 million. The November 2020 Note requires the Company to satisfy its redemption obligations in cash within three trading days of the Company’s receipt of such notice. The Company may prepay the outstanding balance of the November 2020 Note, in part or in full, plus a 15% premium, at any time upon 15 trading days’ notice. In addition, beginning in the month of November 2020 and for each of the following five months, the Company was obligated to reduce the outstanding balance of the November 2020 Note by $7.5 million per month (the “Debt Reduction Amount”). Payments the Company made under the March 2020 and July 2020 Notes were applied toward the payment of each monthly Debt Reduction Amount. These payments were not subject to the 15% prepayment premium, which would otherwise be triggered if the Company were to make payments against such notes exceeding the allowed maximum monthly redemption amount. Consistent with ASC 470-50-40-10, Debt Modifications and Extinguishments, the Company assessed the restructuring of the outstanding agreements with the investor as either a debt modification or debt extinguishment through performance of the 10% cash flow test. The Company noted the change in present value of future cash flows to be less than 10% for all modifications, and therefore, accounted for the restructuring as a debt modification.

Pursuant to the terms of the securities purchase agreement and the November 2020 Note, the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $25.0 million. In the event of any such approval, the outstanding principal balance of the November 2020 Note will increase automatically by 5% upon the issuance of such additional debt.

The Company filed a Registration Statement on Form S-3 (Registration No. 333-252154) with the SEC on January 15, 2021, which was declared effective on January 22, 2021, registering a number of shares of common stock sufficient to convert the entire principal balance of the November 2020 Note.

The embedded conversion feature in the November 2020 Note was analyzed under ASC 815, Derivatives and Hedging, to determine if it achieved equity classification or required bifurcation as a derivative instrument. The embedded conversion feature was considered indexed to the Company’s own stock and met the conditions for equity classification. Accordingly, the embedded conversion feature does not require bifurcation from the host instrument. The Company determined there was no beneficial conversion feature since the effective conversion rate was greater than the market value of the Company’s common stock upon issuance. Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was de minimis. The Company reconsiders the value of the default put provisions each reporting period to determine if the value becomes material to the financial statements.

During the fiscal year ended May 31, 2021, in satisfaction of the December 2020 Debt Reduction Amount, the Company and the investor entered into a separately negotiated exchange agreement, pursuant to which the November 2020 Note was partitioned into a new note (the “December 2020 Partitioned Note”) with a principal balance equal to $7.5 million. The outstanding balance of the November 2020 Note was reduced by the December 2020 Partitioned Note, and the Company and the investor exchanged the December 2020 Partitioned Note for approximately 2.2 million shares of the Company’s common stock. In satisfaction of the May 2021 Debt Reduction Amount, the Company and the investor entered into two separately negotiated exchange agreements, pursuant to which the November 2020 Note was partitioned

into two new notes (the “May 2021 Partitioned Notes”) with a principal balance equal to an aggregate of $7.5 million. The outstanding balance of the November 2020 Note was reduced by the May 2021 Partitioned Notes, and the Company and the investor exchanged the May 2021 Partitioned Notes for approximately 4.2 million shares of the Company’s common stock.

In connection with the December 2020 Partitioned Note and the May 2021 Partitioned Notes, the Company analyzed the restructured note for potential requirement of debt extinguishment accounting under ASC 470, Debt Modifications and Extinguishments. The Company concluded debt extinguishment accounting treatment to be necessary and accordingly recorded aggregate debt extinguishment loss of approximately $6.4 million during the fiscal year ended May 31, 2021 as the difference between the fair market value of the shares issued and the carrying value of the debt retired, which included the amortization of the relative debt discount and issuance costs.

Amortization of debt discounts and issuance costs associated with the November 2020 Note during the fiscal year ended May 31, 2021 amounted to approximately $2.3 million recorded as interest expense and loss on extinguishment in the consolidated statement of operations. The unamortized discount and issuance costs balance for the November 2020 Note is approximately $1.2 million as of May 31, 2021. The accrued interest balance for the November 2020 Note is approximately $1.3 million as of May 31, 2021 resulting from approximately $1.3 million of interest expense for the fiscal year ended May 31, 2021. The outstanding balance on the November 2020 Note, including accrued interest, was approximately $13.6 million as of May 31, 2021.

On June 11, 2021, June 21, 2021 and June 30, 2021, in satisfaction of the June 2021 Debt Redemption Amount, the Company and the investor entered into separately negotiated exchange agreements, pursuant to which the November 2020 Note was partitioned into new notes (the “June 2021 Partitioned Notes”) with a principal balance equal to $6.0 million. The Company and the holder of the November 2020 Note agreed to defer the remaining $1.5 million June 2021 Debt Redemption Amount. The outstanding balance of the November 2020 Note was reduced by the June 2021 Partitioned Notes, and the Company and the investor exchanged the June 2021 Partitioned Notes for approximately 4.2 million shares of the Company’s common stock. Following these payments, the outstanding balance on the November 2020 Note, including accrued interest, was approximately $7.9 million.

On July 14, 2021 and July 27, 2021, in satisfaction of the July 2021 Debt Reduction Amount, the Company and the November 2020 Note holder entered into exchange agreements, pursuant to which the November 2020 Note was partitioned into new notes (the “July 2021 Partitioned Notes”) with a principal amount equal to $4.0 million. The Company and the holder of the November 2020 Note agreed to defer the remaining $3.5 million July 2021 Debt Redemption Amount. The outstanding balance of the November 2020 Note was reduced by the July 2021 Partitioned Notes. The Company and the investor exchanged the July 2021 Partitioned Notes for approximately 3.3 million shares of common stock. Following the June and July 2021 payments, the outstanding balance of the November 2020 Note, including accrued interest, was approximately $4.5 million.

Long-term Convertible Note—April 2, 2021 Note

On April 2, 2021, the Company entered into a securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a two-year term to an institutional accredited investor affiliated with the holder of the November 2020 Note in the initial principal amount of $28.5 million (the “April 2, 2021 Note”). The Company received consideration of $25.0 million, reflecting an original issue discount of $3.4 million and issuance costs of $0.1 million. The April 2, 2021 Note is secured by all the assets of the Company, excluding the Company’s intellectual property.

Interest accrues on the outstanding balance of the April 2, 2021 Note at an annual rate of 10%. Upon the occurrence of an event of default, interest will accrue at the lesser of 22% per annum or the maximum rate permitted by applicable law. In addition, upon any event of default, the investor may accelerate the outstanding balance payable under the April 2, 2021 Note; upon such acceleration, the outstanding balance will increase automatically by 15%, 10% or 5%, depending on the nature of the event of default. The events of default are listed in Section 4 of the April 2, 2021 Note, which can be accessed through the Exhibit Index in this Form 10-K.

The investor may convert all or any part the outstanding balance of the April 2, 2021 Note into shares of common stock at an initial conversion price of $10.00 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the April 2, 2021 Note. In addition to standard anti-dilution adjustments, the conversion price of the April 2, 2021 Note is subject to full-ratchet anti-dilution protection, pursuant to which the conversion price will be automatically reduced to equal the effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered under the Securities Act of 1933, as amended. The April 2, 2021 Note provides for liquidated damages upon failure to deliver common stock within specified timeframes and requires the Company to maintain a share reservation of 6.0 million shares of common stock.

The investor may redeem any portion of the April 2, 2021 Note, at any time beginning six months after the issue date, upon three trading days’ notice, subject to a maximum monthly redemption amount of $3.5 million. The April 2, 2021 Note requires the Company to satisfy its redemption obligations in cash within three trading days of the Company’s receipt of such notice. The Company may prepay the outstanding balance of the April 2, 2021 Note, in part or in full, plus a 15% premium, at any time upon 15 trading days’ notice. In addition, beginning in the month of May 2021 and for each of the following five months, the Company is obligated to reduce the outstanding balance of the April 2, 2021 Note by $7.5 million per month (the “Debt Reduction Amount”). Payments the Company makes under the November 2020 and April 23, 2021 Notes may be applied toward the payment of each Debt Reduction Amount. These payments were not subject to the 15% prepayment premium, which would otherwise be triggered if the Company were to make payments against such notes exceeding the allowed maximum monthly redemption amount. Consistent with ASC 470-50-40-10, Debt Modifications and Extinguishments, the Company will assess the restructuring of the outstanding agreements with the investor as either a debt modification or debt extinguishment through performance of the 10% cash flow test. The Company will assess if the change in present value of future cash flows is less than 10% for all modifications, and therefore, accounted for the restructuring as a debt modification.

Pursuant to the terms of the securities purchase agreement and the April 2, 2021 Note, the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $50.0 million. In the event of any such approval, the outstanding principal balance of the April 2, 2021 Note will increase automatically by 5% upon the issuance of such additional debt.

The Company is required to file a Registration Statement on Form S-3 with the SEC within 120 days of the April 2, 2021 Note’s issuance, registering a number of shares of common stock sufficient to convert the entire principal balance of the April 2, 2021 Note. Subsequent to May 31, 2021, the Company obtained a 30 day extension.

The embedded conversion feature in the April 2, 2021 Note was analyzed under ASC 815, Derivatives and Hedging, to determine if it achieved equity classification or required bifurcation as a derivative instrument. The embedded conversion feature was considered indexed to the Company’s own stock and met the conditions for equity classification. Accordingly, the embedded conversion feature does not require bifurcation from the host instrument. The Company determined there was no beneficial conversion feature since the effective conversion rate was greater than the market value of the Company’s common stock upon issuance. Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was de minimis. The Company reconsiders the value of the default put provisions each reporting period to determine if the value becomes material to the financial statements.

Amortization of debt discounts and issuance costs associated with the April 2, 2021 Note during the fiscal year ended May 31, 2021 amounted to approximately $0.3 million. The unamortized discount and issuance costs balance for the April 2, 2021 Note is approximately $3.2 million as of May 31, 2021. The accrued interest balance for the April 2, 2021 Note is approximately $0.4 million as of May 31, 2021 resulting from approximately $0.4 million of interest expense for the fiscal year ended May 31, 2021. The outstanding balance on the April 2, 2021 Note, including accrued interest, was approximately $25.7 million as of May 31, 2021.

Long-term Convertible Note—April 23, 2021 Note

On April 23, 2021, the Company entered into a securities purchase agreement pursuant to which the Company issued a secured convertible promissory note with a two-year term to an institutional accredited investor affiliated with the holder

of the April 2, 2021 Note in the initial principal amount of $28.5 million (the “April 23, 2021 Note”). The Company received consideration of $25.0 million, reflecting an original issue discount of $3.4 million and issuance costs of $0.1 million. The April 23, 2021 Note is secured by all the assets of the Company, excluding the Company’s intellectual property.

Interest accrues on the outstanding balance of the April 23, 2021 Note at an annual rate of 10%. Upon the occurrence of an event of default, interest will accrue at the lesser of 22% per annum or the maximum rate permitted by applicable law. In addition, upon any event of default, the investor may accelerate the outstanding balance payable under the April 23, 2021 Note; upon such acceleration, the outstanding balance will increase automatically by 15%, 10% or 5%, depending on the nature of the event of default. The events of default are listed in Section 4 of the April 23, 2021 Note, which can be accessed through the Exhibit Index in this Form 10-K.

The investor may convert all or any part the outstanding balance of the April 23, 2021 Note into shares of common stock at an initial conversion price of $10.00 per share upon five trading days’ notice, subject to certain adjustments and volume and ownership limitations specified in the April 23, 2021 Note. In addition to standard anti-dilution adjustments, the conversion price of the April 23, 2021 Note is subject to full-ratchet anti-dilution protection, pursuant to which the conversion price will be automatically reduced to equal the effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered under the Securities Act of 1933, as amended. The April 23, 2021 Note provides for liquidated damages upon failure to deliver common stock within specified timeframes and requires the Company to maintain a share reservation of 6.0 million shares of common stock.

The investor may redeem any portion of the April 23, 2021 Note, at any time beginning six months after the issue date, upon three trading days’ notice, subject to a maximum monthly redemption amount of $7.0 million. The April 23, 2021 Note requires the Company to satisfy its redemption obligations in cash within three trading days of the Company’s receipt of such notice. The Company may prepay the outstanding balance of the April 23, 2021 Note, in part or in full, plus a 15% premium, at any time upon 15 trading days’ notice.

Pursuant to the terms of the securities purchase agreement and the April 23, 2021 Note, the Company must obtain the investor’s consent before assuming additional debt with aggregate net proceeds to the Company of less than $75.0 million. In the event of any such approval, the outstanding principal balance of the April 23, 2021 Note will increase automatically by 5% upon the issuance of such additional debt.

The Company is required to file a Registration Statement on Form S-3 with the SEC withing 120 days of the Notes’ issuance, registering a number of shares of common stock sufficient to convert the entire principal balance of the April 23, 2021 Note.

The embedded conversion feature in the April 23, 2021 Note was analyzed under ASC 815, Derivatives and Hedging, to determine if it achieved equity classification or required bifurcation as a derivative instrument. The embedded conversion feature was considered indexed to the Company’s own stock and met the conditions for equity classification. Accordingly, the embedded conversion feature does not require bifurcation from the host instrument. The Company determined there was no beneficial conversion feature since the effective conversion rate was greater than the market value of the Company’s common stock upon issuance. Certain default put provisions were not considered to be clearly and closely related to the host instrument, but the Company concluded that the value of these default put provisions was de minimis. The Company reconsiders the value of the default put provisions each reporting period to determine if the value becomes material to the financial statements.

Amortization of debt discounts and issuance costs associated with the April 23, 2021 Note during the fiscal year ended May 31, 2021 amounted to approximately $0.2 million. The unamortized discount and issuance costs balance for the April 23, 2021 Note is approximately $3.3 million as of May 31, 2021. The accrued interest balance for the April 23, 2021 Note is approximately $0.3 million as of May 31, 2021 resulting from approximately $0.3 million of interest expense for the fiscal year ended May 31, 2021. The outstanding balance on the April 23, 2021 Note, including accrued interest, was approximately $25.5 million as of May 31, 2021.