Note 10. Commitments and Contingencies

Commitments with Samsung BioLogics Co., Ltd. (“Samsung”)

In April 2019, the Company entered into an agreement with Samsung, pursuant to which Samsung will perform technology transfer, process validation, manufacturing and supply services for the commercial supply of leronlimab effective through calendar year 2027. In 2020, the Company entered into an additional agreement, pursuant to which Samsung will perform technology transfer, process validation, vial filling and storage services for clinical, pre-approval inspection, and commercial supply of leronlimab. Samsung is obligated to procure necessary raw materials for the Company and manufacture a specified minimum number of batches, and the Company is required to provide a rolling three-year forecast of future estimated manufacturing requirements to Samsung that are binding. The future commitments pursuant to these agreements are estimated as follows (in thousands):

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Commitments with Contract Research Organization (“CRO”)

The Company has entered into project work orders, as amended, for each of our clinical trials with our 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 that would become payable to the CRO. Conditioned upon the form of termination of any one trial, the financial penalties may range up to approximately $3.4 million. In the remote circumstance that the Company would

terminate all clinical trials, the collective financial penalties may range from a low of approximately $2.0 million to an approximate high of approximately $3.7 million.

Operating Leases

We lease our principal office location in Vancouver, Washington and office in Fort Lauderdale, Florida. The Vancouver and Fort Lauderdale leases expire on April 30, 2026 and on March 31, 2022, respectively. The Fort Lauderdale office is currently being sublet to a tenant. Consistent with the guidance in ASC 842, we have recorded the leases in our consolidated balance sheet as operating leases. For the purpose of determining the ROU asset and associated lease liability, we determined that the renewal of the Vancouver lease was reasonably probable. The leases of our Vancouver and Fort Lauderdale offices do not include any restrictions or covenants requiring special treatment under ASC 842. During the fiscal years ended May 31, 2021 and 2020, we recognized $0.3 million and $0.2 million of operating lease costs.

The following table summarizes the presentation of the operating leases in our consolidated balance sheet at May 31, 2021 and 2020 (in thousands):

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The minimum (base rental) lease payments reconciled to the carrying value of the operating lease liabilities as of May 31, 2021 are expected to be as follows (in thousands):

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Legal Proceedings

The Company is a party to various legal proceedings. The Company recognizes accruals for such proceedings to the extent a loss is determined to be both probable and reasonably estimable. The best estimate of a loss within a possible range is accrued; however, if no estimate in the range is more probable than another, then the minimum amount in the range is accrued. If it is determined that a material loss is not probable but reasonably possible and the loss or range of loss can be estimated, the possible loss is disclosed. It is not possible to determine the outcome of proceedings that have not been concluded, including the defense and other litigation-related costs and expenses that may be incurred by the Company, as the outcomes of legal proceedings are inherently uncertain, and the outcomes could differ significantly from recognized accruals. Therefore, it is possible that the ultimate outcome of any proceeding, if in excess of a recognized accrual, or if an accrual had not been made, could be material to the Company’s consolidated financial statements.

As of May 31, 2021, the Company recorded legal accruals of approximately $10.6 million related to the outcomes of the matters described below. The Company did not record any accruals as of May 31, 2020.

Delaware Shareholder Derivative Lawsuit

On April 24, 2020, certain stockholders of the Company (the “Plaintiffs”) filed a derivative action in the Delaware Court of Chancery (the “Delaware Court”), alleging claims for breach of fiduciary duty and unjust enrichment against the Company’s CEO, former CFOs, CMO, and certain current and former members of the Board (the “Defendants”), in connection with certain equity awards to these individuals granted in December 2019 and January 2020 (the “December 2019 Awards”). The Company was named a nominal defendant in the lawsuit. The Plaintiffs demanded the rescission of the December 19 Awards, a finding that the named directors breached their fiduciary duty to the Company, and an unspecified amount of damages. The Company appointed a Special Litigation Committee (the “SLC”), consisting solely of independent directors not named in the complaint, to investigate the allegations in the complaint.

On December 15, 2020, the Defendants reached an agreement in principle with the SLC (collectively, “Parties”) to resolve the lawsuit. On December 18, 2020, the Parties executed a memorandum of understanding outlining the key terms of their agreement. On January 27, 2021, the Parties entered into a proposed Stipulation and Agreement of Compromise, Settlement, and Release (the “Stipulation”) to settle the derivative action. Pursuant to the Stipulation, the current directors agreed to implement a series of corporate governance reforms related to director and executive officer compensation and certain Defendants agreed to forfeit a substantial portion of the December 2019 Awards following approval of the settlement by the Delaware Court, in exchange for a release of claims and the dismissal of the derivative action with prejudice.

The corporate governance reforms to be implemented pursuant to the Stipulation comprised:

The Board appointed a new director, expanded the membership of the Compensation Committee, and approved the executive officer and director compensation policy as described above effective prior to the deadline set forth in the Stipulation.

The December 2019 Awards were forfeited effective June 4, 2021 as follows: 100% of the December 19 Awards to Michael A. Klump, Jordan G. Naydenov, and David F. Welch, Ph.D., covering 2.25 million shares, 60% of the December 2019 Award to Scott A. Kelly, M.D., covering 0.75 million shares; and 100% of the warrant to acquire 2.0 million shares issued to Nader Z. Pourhassan, Ph.D. In addition, Dr. Pourhassan forfeited vested options to purchase approximately 0.4 million shares from the December 2019 Awards. The Delaware Court held hearings on April 19 and June 4, 2021, and approved the Stipulation at the hearing on June 4, 2021.

On March 19, 2021, the Plaintiffs filed a brief agreeing to the proposed settlement and seeking an award of approximately $4.1 million for bringing the lawsuit. Plaintiff’s demand was based on the claimed value or benefit to the Company and its stockholders from the value of the forfeited equity awards, in addition to the time incurred by the Plaintiffs’ attorneys with regard to this action. On April 8, 2021, the SLC filed a brief opposing the Plaintiffs’ motion

contending that the amount of the award demanded was not legally supported. Following a hearing on June 4, 2021, the Delaware Court issued a ruling granting the Plaintiffs’ fee application in the amount of $3.0 million, inclusive of expenses, for which the Company fully accrued as of May 31, 2021.

September 2020 Washington Shareholder Derivative Lawsuit

On September 10, 2020, the same Plaintiffs as in the Delaware Shareholder Derivative Lawsuit filed another derivative action against CEO Nader Z. Pourhassan, Ph.D. claiming that he had violated Section 16(b) of the Securities Exchange Act of 1934 with respect to certain personal stock transactions in the Company’s stock. The parties filed cross-motions to dismiss. On March 12, 2021, the U.S. District Court for the Western District of Washington (the “U.S. District Court”) granted Dr. Pourhassan’s motion to dismiss with prejudice. On April 9, 2021, the Plaintiffs filed a Notice of Appeal to the Ninth Circuit Court of Appeals appealing the decision of the U.S. District Court. The Plaintiffs filed their opening brief with the Ninth Circuit on July 8, 2021.

Placement Agent Arbitration Claim

On April 29, 2020, Torreya Capital LLC (“Torreya”) filed an arbitration claim against the Company demanding payment of a transaction fee in the amount of $0.6 million plus attorney fees, for the Company’s alleged failure to pay a transaction fee to Torreya under the terms of its engagement letter with the Company, and amended its claim on September 17, 2020 to add an additional transaction fee claim, increasing its demand to approximately $1.8 million. The Company denied Torreya’s contractual right to any fee under the terms of the engagement letter. The parties filed dispositive motions in August 2020 and September 2020, which the arbitrator denied on October 5, 2020. On February 18, 2021, a one-day arbitration hearing was held to determine Torreya’s right to approximately $1.8 million in transaction fees plus attorney fees. Closing briefs were filed on April 1, 2021. On April 22, 2021, the arbitrator ruled in favor of the Company, denied Torreya’s claim for any fees or legal costs and awarded the Company legal fees and costs of approximately $0.1 million.

Pestell Employment Dispute

On July 25, 2019, the Company’s Board terminated the employment of Dr. Pestell, the Company’s former Chief Medical Officer, for cause pursuant to the terms of Dr. Pestell’s employment agreement. On August 22, 2019, Dr. Pestell filed a lawsuit in the U.S. District Court for the District of Delaware (Pestell v. CytoDyn Inc., et al.), against the Company, its Chief Executive Officer and the Chairman of the Board, alleging breach of the employment agreement, a failure to pay wages and defamation, among other claims, and seeking damages related to severance entitlements for a non-cause termination under the employment agreement and a stock restriction agreement, among other relief. The treatment of those entitlements, including severance and approximately 0.4 million unvested stock options and 8.3 shares of unvested restricted common stock, in each case granted or issued on November 16, 2018 and which vest ratably over three years or upon a non-cause termination, are expected to be determined by the outcome of this litigation. It is possible that if a court ruled in favor of Dr. Pestell on the equity entitlements, it would award damages based on a decline in the value of the shares. On November 2, 2020, the Court dismissed Dr. Pestell’s wage claims with prejudice and the Company’s Chief Executive Officer and the Chairman of the Board were dismissed from the proceeding. The Company filed its answer and counterclaims thereafter. A bench trial is currently set for April 2022. The Company disputes all of Dr. Pestell’s claims and intends to vigorously defend the action. The Company cannot predict the ultimate outcome and cannot reasonably estimate the potential loss or range of loss that the Company may incur.

ProstaGene Arbitration

On March 19, 2021, the Company concluded a five-day arbitration hearing concerning a claim by ProstaGene and counterclaims by the Company for approximately 3.1 million shares of the Company’s common stock held in escrow as holdback stock pursuant to the transaction agreement for the acquisition of certain intangible assets from ProstaGene in November 2018. The Company recognized a full impairment charge against the net carrying value of a certain acquired intangible asset in the quarter ended February 28, 2021. See Note 8 of the Notes to Consolidated Financial Statements included herein above. Notwithstanding the foregoing, ProstaGene also sought monetary damages, in an amount to be determined by the arbitration panel, including any lost value in stock price and its attorney fees and costs. Post-hearing

briefing concluded mid-May 2021. The Company disputed ProstaGene’s claim and has vigorously defended against that claim, and the Company believes its counterclaims are meritorious and had vigorously prosecuted its counterclaims. Nonetheless, on July 2, 2021, an arbitration panel determined that ProstaGene is entitled to release of the Shares, as well as a cash monetary award in the amount of approximately $6.2 million, plus interest, fees and costs estimated to total approximately $1.4 million. The Company satisfied the arbitration award obligations in July 2021.

Securities Class Action Lawsuits

On March 17, 2021, a stockholder filed a putative class-action lawsuit in the U.S. District Court against the Company and certain current and former officers. The complaint generally alleges that the defendants made false and misleading statements regarding the viability of leronlimab as a potential treatment for COVID-19. The plaintiff seeks a ruling that this case may proceed as a class action, and seeks unspecified damages and attorneys’ fees and costs. On April 9, 2021, a second stockholder filed a similar putative class-action lawsuit in the same court, which the plaintiff voluntarily dismissed without prejudice on July 23, 2021. Motions to appoint a lead plaintiff for the lawsuit are pending. The Company and the individual defendants deny any allegations of wrongdoing in the complaint and intend to vigorously defend the matter. In light of the fact that this case is in its early stage, the number of plaintiffs are not known, and the claims do not specify an amount of damages, the Company cannot predict the ultimate outcome of the lawsuit and cannot reasonably estimate the potential loss or range of loss that the Company may incur.

June 2021 Washington Shareholder Derivative Lawsuits

On June 4, 2021, a purported shareholder derivative lawsuit was filed against certain of the Company’s current and former officers, certain board members, and the Company as a nominal defendant, in the U.S. District Court (“First Derivative Suit”). The complaint generally alleges that the director defendants breached fiduciary duties owed to the Company by allowing the Company to make false and misleading statements regarding the viability of leronlimab as a potential treatment for COVID-19 and by failing to maintain an adequate system of oversight and internal controls. The complaint asserts claims against one or more individual defendants for breach of fiduciary duty, waste of corporate assets, and unjust enrichment, and seeks to recover on behalf of the Company for any liability the Company incurs as a result of the individual defendants’ alleged misconduct. The complaint also seeks contribution on behalf of the Company from certain individual defendants for their alleged violations of federal securities laws. The complaint seeks declaratory and equitable relief, an unspecified amount of damages, and attorneys’ fees and costs. On June 25, 2021, a second shareholder derivative lawsuit was filed against the same defendants in the same court (“Second Derivative Suit”, and together with the First Derivative Suit, “Derivative Suits”), which includes allegations and claims similar to those made in the First Derivative Suit, adds claims against certain individual defendants based on allegedly false and misleading proxy statement disclosures and for breach of fiduciary duty arising from alleged insider trading, and seeks similar relief as the First Derivative Suit. The Company and the individual defendants deny any allegations of wrongdoing in the complaints and intend to vigorously defend the litigation. In light of the fact that these cases are in their early stages and the claims do not specify an amount of damages, the Company cannot predict the ultimate outcome of the Derivative Suits and cannot reasonably estimate the potential loss or range of loss that the Company may incur.

Securities and Exchange Commission and Department of Justice Investigations

The Company has received subpoenas from the United States Securities and Exchange Commission requesting documents and information concerning, among other matters, leronlimab, the Company’s public statements regarding the use of leronlimab as a potential treatment for COVID-19 and related communications with the FDA, investors, and others, and trading in the securities of CytoDyn. The SEC has informed the Company that this inquiry should not be construed as an indication that any violations of law have occurred or that the SEC has any negative opinion of any person, entity or securities trading activity.

In addition, the Company and certain of its executives have received subpoenas in connection with an investigation being conducted by the United States Department of Justice. The subpoenas seek testimony and/or records concerning, among other matters, leronlimab, the Company’s public statements regarding the use of leronlimab as a potential treatment for COVID-19 and related communications with the FDA, investors, and others, and trading in the securities of CytoDyn.

The Company is cooperating fully with these non-public, fact-finding investigations, and as of the date of this filing, the Company is unable to predict the ultimate outcome and cannot reasonably estimate the potential possible loss or range of loss, if any.