incurred a net loss of approximately $68.1 million for the six
months ended November 30, 2021 and has an accumulated deficit
of approximately $603.4 million as of November 30, 2021.
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 candidate, leronlimab, obtain approval to commercialize
leronlimab from regulatory agencies, continue to outsource
manufacturing of leronlimab, and ultimately achieve substantial
revenues and attain profitability. The Company continues to engage
in significant research and development activities related to
leronlimab for multiple indications 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
judgments that affect the reported amounts of assets, liabilities,
the disclosure of contingent assets and liabilities at the date of
Consolidated Financial Statements, and the reported amounts of
revenue and expenses during the reporting period. Estimates are
assessed each period and updated to reflect current information,
such as the economic considerations related to the impact that the
recent coronavirus disease could have on our significant accounting
estimates and assumptions. The Company’s estimates are based on
historical experience and on various market and other relevant,
appropriate assumptions. Significant estimates include, but are not
limited to, those relating to stock-based compensation,
capitalization of pre-launch inventories, reserve for excess and
obsolete inventories, revenue recognition, research and development
expenses, determination of right of use assets under lease
transactions and related lease obligations, commitments and
contingencies, and the assumptions used to value warrants,
warrant modifications and useful lives for property and equipment
and related depreciation calculations. Actual results could differ
from these estimates.
Correction of Immaterial Misstatements
in Prior Period Financial Statements
During the preparation of the quarterly financial statements as of
and for the period ended November 30, 2021, the Company identified
an error in how non-cash inducement interest expense was calculated
in previous reporting periods dating back to fiscal year 2018. The
original inducement expense model was designed to calculate
non-cash inducement interest expense specific to inducements that
modified the warrant term (e.g., extension of the term or
modification of exercise price) without settling the instrument.
However, starting in fiscal year 2018, inducements were primarily
structured to result in a settlement of the warrant, not merely a
modification of a warrant that would remain outstanding for some
period. The error was identified when the model started to
calculate a gain on substantially all inducements, which was
inconsistent with the economics of the arrangements. The error
resulted in an understatement of non-cash inducement interest
expense and additional paid-in capital.
The Company assessed the materiality of the misstatement in
accordance with Accounting Standards Codification (“ASC”) 250,
Accounting Changes and Error
Corrections, as well as SEC Staff Accounting Bulletins No. 99,
Materiality, and No. 108,
Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year
Financial Statements, and concluded that the misstatement was
not material to the Company’s consolidated financial position for
the prior periods and, accordingly, that amendments of previously
filed reports were not required. However, the Company determined
that the impact of the corrections would be too significant to
record in the quarter ended November 30, 2021. As such, the
revisions for the correction are reflected in the accompanying
balance sheet as of May 31, 2021, the statements of operations for
the six months ended November 30, 2021 and the three and six months
ended November 30, 2020, changes in stockholders’ (deficit) equity
for the three months ended August 31, 2021 and 2020 and November
30, 2020, and cash flows for the six months ended November 30, 2021
and 2020. Financial reporting periods that are affected but not
presented herein will be revised, as applicable, in future