SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CYTODYN, INC.
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(Name of Small Business Issuer in its Charter)
COLORADO 75-3056237
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 West De Vargas St., Suite 1
Santa Fe, NM 87501
-------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(505) 988-5520
-------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Ronald J. Tropp
20222 Oxnard Street
Woodland Hills, CA 91367
Telephone No. (818) 999-3623
Facsimile No. (818) 348-1367
Approximate Date of Proposed Sale to the Public: As soon as practicable after
this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CYTODYN, INC.
CROSS REFERENCE SHEET
Form SB-2 Item Nos. and Caption Prospectus Caption
------------------------------- ------------------
1. Front of Registration Statement and Outside Front Cover
of Prospectus .................................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus ...................................... Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors ............ Prospectus Summary; Risk Factors
4. Use of Proceeds ................................. Use of Proceeds
5. Determination of Offering Price ................. Underwriting
6. Dilution ........................................ Dilution
7. Selling Security-Holders ........................ *
8. Plan of Distribution ............................ Outside Front Cover Page; Underwriting
9. Legal Proceedings ............................... *
10. Directors, Executive Officers, Promoters and Control
Persons ......................................... Management
11. Security Ownership of Certain Beneficial Owners and
Management ....................................... Principal Shareholders
12. Description of Securities ....................... Description of Common Stock; Shares
Eligible for Future Sale
13. Interest of Named Experts and Counsel ........... Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities .................. *
15. Organization Within Last Five Years ............. *
16. Description of Business ......................... Prospectus Summary; Business
17. Management's Discussion and Analysis or Plan of
Operation ........................................ Management's Discussion and Analysis of
Financial Condition and Results of Operations
18. Description of Property ......................... Business
19. Certain Relationships and Related Transactions .. Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters *
21. Executive Compensation .......................... Management
22. Financial Statements ............................ Financial statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............ *
-------------
* Not applicable.
THE REGISTRANT AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
CALCULATION OF REGISTRATION FEE
-------------------------------
TITLE OF EACH CLASS OF DOLLAR OFFERING AGGREGATE REGISTRATION
SECURITIES AMOUNT PRICE AMOUNT FEE
---------------------- -------- -------- ---------- ------------
Common stock, .001 par $187,500 $0.75 $187,500 $ 23.76*
Total $187,500 $0.75 $187,500 $ 23.76*
-----------------
*This fee is calculated pursuant to Rule 457(o).
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PROSPECTUS
CYTODYN, INC.
250,000 SHARES OF COMMON STOCK
$0.75 PER SHARE
Up to 250,000 of the shares of common stock offered are being sold by CytoDyn,
Inc. This is CytoDyn, Inc.'s initial public offering. There is no minimum amount
of shares that must be sold and no escrow or trust or deposit account for
investor funds, and the proceeds may be utilized by CytoDyn in its discretion.
CytoDyn is a developmental stage biotechnology research company pursuing the
discovery and development of a treatment for human immuno-deficiency virus
(HIV.) The technology licensed by the company is a patented and novel treatment
approach to HIV disease. Shares of common stock will be sold by an officer and
director of CytoDyn. CytoDyn's common stock is not currently listed or quoted on
any quotation medium. This offering will terminate 12 months from the date of
this prospectus.
-----------------------------------
The common stock offered is speculative and involves a high degree of dilution.
SEE RISK FACTORS ON PAGE 3.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Shares are offered at $0.75 per share. Since there is no minimum amount of
shares that must be sold, the proceeds of the offering may be $0 up to $187,500.
The offering is being self-underwritten through our officers and directors.
--------------------------------------------------------------------------------
Offering Price Commissions Proceeds to Company
-------------- ----------- -------------------
Per Share: $ .75 $ 0 $ 0.75
Total: $ 187,500 $ 0 $ 187,500
The date of this Prospectus is May 27, 2004
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AVAILABLE INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, will file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). CytoDyn intends to furnish its shareholders with
annual reports containing audited financial statements and such other reports as
we deem appropriate or as may be required by law.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety.
CYTODYN
CytoDyn is a development stage corporation, organized under the laws of the
state of Colorado on May 2, 2002. In October, 2003, CytoDyn acquired the
trademarks, CytoDyn, Cytolin, a trademark symbol, and the assignment of a patent
license agreement dated July 1, 1994 by and between Allen D. Allen and CytoDyn
of New Mexico, Inc., ("license"), which covers U.S. Patent No. 5424066,
describing a method for increasing CD4+ cell numbers through the use of
monoclonal antibodies directed against self-reactive, CD4 specific cytotoxic
T-cells, Patent No. 5651970 describing a method for inhibiting disease
associated with the Human Immunodeficiency Virus through the use of monoclonal
antibodies directed against anti-self cytotoxic T-lymphocytes or their lytics,
and Patent No. 6534057, describing a method for increasing the delayed-type
hypersensitivity response by infusing LFA-1-specific antibodies, as well as
foreign counterpart patents.
With the acquisition of this license, CytoDyn is a biotechnology research
company pursuing the discovery and development of a treatment for human
immunodeficiency virus (HIV.) The technology licensed by CytoDyn is a patented
and novel treatment approach to HIV disease. Instead of the traditional focus of
attacking the virus, our approach is to bolster the human immune system by an
injection of monoclonal antibodies. This approach is based on significant
scientific research. Our principal executive office is located at 200 West De
Vargas St., Suite 1, Santa Fe, NM 87501.
We are in the development stage and currently have no potential drugs approved
for commercial use. Our long-term viability, profitability and growth will
depend upon successful commercialization of potential drugs resulting from our
research and product development activities. To date, we have generated no
revenues.
5
THE OFFERING
------------
Common Stock offered........................ 250,000 shares
Common Stock to be outstanding
after the offering ......................... 8,399,307 shares
Use of Proceeds............................. CytoDyn intends to use
all of the net proceeds of this
offering for working capital and
general corporate purposes.
Risk Factors................................ The securities offered
hereby are speculative and
involve a high degree of
risk and immediate
substantial dilution and
should not be purchased by
investors who cannot afford
the loss of their entire
investment. See "Risk Factors."
FORWARD LOOKING STATEMENTS
This registration statement contains forward looking statements. Our expectation
of results and other forward looking statements contained in this registration
statement involve a number of risks and uncertainties. Among the factors that
could cause actual results to differ materially from those expected are the
following: business conditions and general economic conditions; competitive
factors, such as pricing and marketing efforts and the pace and success of
product research and development. These and other factors may cause expectations
to differ.
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the financial
statements appearing elsewhere in this Prospectus. Such information should be
read in conjunction with such financial statements, including the notes thereto.
6
BALANCE SHEET DATA:
As of February 29, 2004 (unaudited)
Assets
Cash ........................................... $ 174,613
Equipment, net ................................. 1,650
Deposit ........................................ 495
---------
176,758
=========
Liabilities and Shareholders' Deficit
Liabilities:
Accounts payable and accrued liabilities ... $ 93,881
Indebtedness to related parties (Note 3) ... 71,694
Total liabilities ......................... 165,575
Commitment (Note 7) ............................ --
Shareholders' deficit (Note 5):
Preferred stock ............................ --
Common stock ............................... 210,722
Additional paid-in capital ................. 8,415
Deficit accumulated during development stage (207,954)
Total shareholders' equity ................ 11,183
$ 176,758
=========
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STATEMENT OF OPERATIONS DATA:
May 2, 2002
Three Months Ended Nine Months Ended (Inception)
February 29, February 29, Through
-------------------------- -------------------------- February 29,
2004 2003 2004 2003 2004
----------- ----------- ----------- ----------- -----------
(Unaudited)
Operating expenses:
Stock-based compensation:
Incorporation and organization services $ -- $ -- $ -- $ -- $ 8,000
Compensation 10,703 -- 55,703 -- 55,703
Contributed services, related
party (Note 3) -- 240 -- 2,730 2,970
Contributed rent, related party (Note 3) -- 300 500 500 1,300
Rent, related party (Note 3) -- -- -- 400 500
Rent, other 1,485 -- 2,240 -- 2,240
Professional fees 101,631 1,025 114,127 3,115 120,337
Interest income (52) -- (55) -- (55)
Interest expense 296 -- 441 -- 441
Other 15,177 19 16,359 55 16,518
----------- ----------- ----------- ----------- -----------
Total operating expenses 129,240 1,584 189,315 6,800 207,954
----------- ----------- ----------- ----------- -----------
Loss before income taxes (129,240) (1,584) (189,315) (6,800) (207,954)
Income tax provision (Note 6) -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net loss $ (129,240) $ (1,584) $ (189,315) $ (6,800) $ (207,954)
=========== =========== =========== =========== ===========
Basic and diluted loss per share $ (0.02) $ (0.00) $ (0.05) $ (0.01)
=========== =========== =========== ===========
Basic and diluted weighted average
common shares outstanding * 6,674,862 * 590,000 * 3,909,985 * 578,334
* Restated for 1:2 reverse split of common stock
8
RISK FACTORS
RISKS RELATED TO OUR FINANCIAL CONDITION
Our accountant has expressed a substantial doubt that we can continue as a going
concern. If we do not continue as a going concern, investors could lose their
entire investment.
We have accumulated losses since our inception, and our independent accountant
has expressed that there is a substantial doubt that we may continue as a going
concern. If we do not continue as a going concern, there will be no way for
investors to recoup their investments.
We are a new business with a limited operating history and no revenues to date
and cannot commence operations unless we can overcome the many obstacles we
face.
We are a development-stage company with no prior business operations and no
revenues. We are presently engaged in the early stage development of certain
potential drugs. Unless we are able to secure adequate funding, we may not be
able to successfully develop and market our potential drugs and our business
will most likely fail. Because of our limited operating history, you may not
have adequate information on which you can base an evaluation of our business
and prospects. To date, our efforts have been allocated primarily to the
following: aggressively patenting our technology; organizational activities;
developing a business plan; obtaining interim funding; and conducting research
and working toward the ultimate successful development of our potential drugs.
In order to establish ourselves in the bio pharmaceutical market, we are
dependent upon funding by sales of our securities and the successful development
and marketing of our potential drugs. As a research and development company, we
face increased risks, uncertainties, difficulties and expenses such that an
investment in our common stock may be worthless if our business fails. We have a
history of losses and a large accumulated deficit and we expect future losses
that may cause our stock price to lose its value.
For the fiscal years ended 2002 and 2003, we incurred net losses of $8,953 and
$9,686, respectively, for a total cumulative net loss since inception of
$18,639. We expect to lose more money as we spend additional capital to develop
and market our technologies and establish our infrastructure and organization to
support anticipated operations. We cannot be certain whether we will ever earn a
significant amount of revenues or profit, or, if we do, that we will be able to
continue earning such revenues or profit. Also, the current economic weakness
may limit our ability to develop and ultimately market our technologies. Any of
these factors could cause our stock price to decline and result in you losing a
portion or all of your investment.
RISKS RELATED TO OUR BUSINESS
Our inability to retain and attract key personnel could cause our business to
fail.
We believe that our future success will depend on the abilities and continued
service of certain of our senior management and executive officers, particularly
our president and CEO and those persons involved in the research and development
of our potential drugs. If we are unable to retain the services of these
persons, or if we are unable to attract additional qualified employees,
researchers and consultants, we may be unable to successfully finalize and
eventually market our drugs being developed, which would have a material adverse
effect on our business.
9
Our research and development efforts may not result in commercially viable
potential drugs which could result in a loss of investment.
Our technologies are in the development stage. Further research and development
efforts will be required to develop these technologies to the point where they
can be incorporated into commercially viable or salable potential drugs. We have
set forth in this report our proposed research and development program as it is
currently conceived. We cannot assure you, however, that this program will be
accomplished in the order or in the time frame set forth. We reserve the right
to modify the research and development program. We may not succeed in developing
commercially viable potential drugs from our technologies. If not, our ability
to generate revenues from our technologies will be severely limited. This would
result in the loss of all or part of your investment.
We may not be able to successfully develop and market the potential drugs that
we plan to introduce, causing our business to fail.
We plan to develop a platform of antibodies to treat HIV disease. There are
numerous developmental and regulatory issues that may preclude the introduction
of these potential drugs into commercial sale. If we are unable to demonstrate
the safety, efficacy and feasibility of these potential drugs, successfully
transfer the technology for commercial-scale manufacturing to either internal,
joint venture or outsourced manufacturers or meet regulatory requirements or
resolve potential patent licensing requirements with respect to their marketing,
we may have to abandon them and alter our business plan. Such modifications to
our business plan will likely delay achievement of revenues. As a result, we may
have to seek additional financing, which may not be available on the timetable
required or on acceptable terms, or we may have to curtail our operations, or
both.
Our potential drugs have not yet been extensively tested on humans, and their
efficacy is not yet known. If we cannot develop effective potential drugs, our
business will fail.
There are numerous legal, scientific and regulatory risks that may prevent us
from carrying out its project to develop the proposed antibody therapy to treat
HIV disease and AIDS. Investment in the company must be considered highly
speculative because, among other reasons, only limited testing on humans has
been conducted. It is possible that proposed therapies will not be effective for
treating HIV disease or AIDS or that they will have adverse side effects on
human subjects which will prohibit or undermine their intended use.
Consequently, investment in the company's securities involves a high degree of
risk and only those persons of adequate financial means, who have no need for
liquidity with respect to the investment, and can bear the risk of losing all or
part of the investment, are suitable for investment in the Company.
In order to create our potential drugs, we will need to license or purchase
clones. If we are unable to do so, we may not be able to continue development of
our potential drugs.
The patents licensed by us cover the use of certain antibodies to treat HIV
disease. Antibodies are produced in a process similar to that of making wine. A
seed or "clone" is planted to grow a cell-bank. The cell is then used to grow a
crop of cell. Cells are harvested from the cell bank and then fermented or
otherwise processed to make raw antibodies. Finally, the raw antibodies are
purified and vialed using an FDA approved method. CytoDyn does not currently own
or license the clones used to produce antibodies. The Company has not yet
commenced negotiations with the owners of the needed clones, and there can be no
assurance that the Company will be able to obtain such an agreement. In the
event the Company is unable to obtain a clone license, its use of the antibody
will be restricted to research only. In order to protect our potential drugs, we
must be able to license the clones, and no such license has yet been negotiated.
10
We are dependent upon patents licensed from Allen D. Allen. The failure to
maintain these licenses may cause our business to fail.
We currently have the right to use patent and proprietary rights which are
material to the development of our HIV treatments, by assignment of a license
from Allen D. Allen, the owner of the patents. The license requires us to defend
the licensed patents from infringement. If we were to fail to defend or maintain
patents or other protections of the licensed patents and proprietary technology,
it may have a materially adverse effect on our ability to develop our potential
drugs.
We may not have opportunities to enter into strategic partnerships for the
commercialization of our technologies which could have a severe negative impact
on our ability to market our potential drugs.
We intend to enter into strategic partnerships or other relationships with
established biomedical, pharmaceutical and bio-pharmaceutical companies to
obtain the necessary regulatory approvals and to undertake the manufacturing and
marketing efforts required for commercializing our potential drugs. However, we
do not have commitments at this time from any potential partners. If we are
unable to enter into any new partnerships, then we may be unable to commence the
commercialization of our potential drugs.
A market for our potential drugs may not develop, causing a failure of our
business.
Our future success will depend, in part, on the market acceptance, and the
timing of such acceptance, of new potential drugs or technologies that may be
developed or acquired. To achieve market acceptance, we must make substantial
marketing efforts and spend significant funds to inform potential customers and
the public of the perceived benefits of these potential drugs. We currently have
limited evidence on which to evaluate the market reaction to potential drugs
that may be developed, and there can be no assurance that any potential drugs
will obtain market acceptance and fill the market need that is perceived to
exist.
Our business depends on our ability to protect our proprietary technology. If we
cannot protect it, our business may fail.
The biotechnology industry places considerable importance on obtaining patent,
trademark, and trade secret protection, as well as other intellectual property
rights for new technologies, potential drugs and processes. Our success depends,
in part, on our ability to develop and maintain a strong intellectual property
portfolio or obtain licenses to patents for potential drugs and technologies
both in the United States and in other countries. As appropriate, we intend to
file patent applications and obtain patent protection for our proprietary
technology. These patent applications and patents will cover, as applicable,
compositions of matter for our potential drugs, methods of making those
potential drugs, methods of using those potential drugs, and apparatus relating
to the use or manufacture of those potential drugs. We will also rely on trade
secrets, know-how, and continuing technological advancements to protect our
proprietary technology. We have entered, and will continue to enter, into
confidentiality agreements with our employees, consultants, advisors and
collaborators. However, these parties may not honor these agreements and we may
11
not be able to successfully protect our rights to unpatented trade secrets and
know-how. Others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets and
know-how. Although we encourage and expect all of our employees to abide by any
confidentiality agreement with a prior employer, competing companies may allege
trade secret violations and similar claims against us. We may collaborate with
universities and governmental research organizations which, as a result, may
acquire part of the rights to any inventions or technical information derived
from collaboration with them. To facilitate development and commercialization of
a proprietary technology base, we may need to obtain licenses to patents or
other proprietary rights from other parties. Obtaining and maintaining such
licenses may require the payment of substantial amounts. In addition, if we are
unable to obtain these types of licenses, our product development and
commercialization efforts may be delayed or precluded. We may incur substantial
costs and be required to expend substantial resources in asserting or protecting
our intellectual property rights, or in defending suits against us related to
intellectual property rights. Disputes regarding intellectual property rights
could substantially delay product development or commercialization activities.
Disputes regarding intellectual property rights might include state, federal or
foreign court litigation as well as patent interference, patent reexamination,
patent reissue, or trademark opposition proceedings in the United States Patent
and Trademark Office. Opposition or revocation proceedings could be instituted
in a foreign patent office. An adverse decision in any proceeding regarding
intellectual property rights could result in the loss or limitation of our
rights to a patent, an invention or trademark.
We will engage contract manufacturers to produce our potential drugs, including
our potential HIV drugs currently under development, which may diminish quality
control and subject us to regulatory enforcement.
Outsourcing our manufacturing processes to contract manufacturers may subject us
to problems in such areas as:
- lack of technical knowledge regarding regulated procedures; uncertain or
unreliable production yields;
- maintaining quality control and assurance; regulatory compliance, since
most rapid test manufacturers do not produce potential drugs that are as
stringently controlled as HIV diagnostics;
- misappropriation of intellectual property, particularly in foreign
countries where patent protection is less stringent, and depending on the extent
of manufacturing processes that are outsourced.
As a producer of potential drugs, we may be exposed to product liability and
recall risks for which insurance coverage is expensive, limited and potentially
inadequate.
12
We produce potential drugs, which, if approved for use by humans, subjects us to
risks of product liability claims or product recalls, particularly in the event
of false positive or false negative reports. The drug platform we are developing
is also subject to product liability claims with respect to safety of the
product, especially with regard to potential side effects. At the moment we have
no product liability insurance, but even if we are successful in obtaining
insurance for our potential drugs, a product recall or a successful product
liability claim or claims that exceed our insurance coverage could have a
material adverse effect on us. Product liability insurance is expensive. In the
future we may not be able to obtain coverage on acceptable terms, if at all.
Moreover, our insurance coverage may not adequately protect us from liability
that we incur in connection with clinical trials or sales of our potential
drugs.
Our management had voting control over all matters as of February 29, 2004,
submitted to a shareholder vote, which means that they, and not the investors,
had control over all company matters.
Our president holds 2,118,515 of our 7,519,307 shares outstanding as of February
29, 2004. Our Secretary and Vice President, Corinne Allen holds 1,736,335 of our
7,519,307 shares as of February 29, 2004. This gave them voting control over all
matters submitted to a vote of the shareholders. Currently, Allen and Corinne
Allen own 47% of the outstanding total shares of 8,069,307.
Technological changes may render our potential drugs obsolete.
The biopharmaceutical industry is subject to rapid and significant technological
change, and the ability of CytoDyn to compete is dependent in large part on its
ability continually to enhance and improve its potential drugs and technologies.
In order to do so, CytoDyn must effectively utilize and expand its research and
development capabilities, and, once developed, expeditiously convert new
technology into potential drugs and processes which can be commercialized. Our
competitors may succeed in developing technologies, potential drugs and
processes that render our processes and potential drugs obsolete. Certain
companies have filed applications for or have been issued patents and may obtain
additional patents and proprietary rights relating to potential drugs or
processes competitive with or otherwise related to those of CytoDyn. The scope
and viability of these patents, the extent to which CytoDyn may be required to
obtain licenses under these patents or under other proprietary rights and the
cost and availability of licenses are unknown, but these factors may limit the
Company's ability to market its potential drugs.
It is uncertain if healthcare facilities, providers and insurance companies will
approve benefits or reimbursement for their members for our potential drugs,
thus rendering them more expensive and more difficult to market.
The industry is subject to changing political, economic and regulatory
influences that may affect the procurement practices and operations of
healthcare industry participants. During the past several years, state and
federal government regulation of reimbursement rates and capital expenditures in
the United States has increased. Lawmakers continue to propose programs to
reform the United States healthcare system, which may contain programs to
increase governmental involvement in healthcare, lower Medicare and Medicaid
reimbursement rates or otherwise change the operating environment in the
healthcare industry. Healthcare industry participants may react to these
proposals by curtailing or deferring use of new treatments for disease,
including treatments utilizing the biologics that CytoDyn is developing.
13
RISKS RELATED TO REGULATORY APPROVALS AND CLEARANCES
The time needed to obtain regulatory approvals and respond to changes in
regulatory requirements could cause our business to fail.
Our proposed and existing potential drugs are subject to regulation by the FDA
and other governmental or public health agencies. In particular, we are subject
to strict governmental controls on the development, manufacture, labeling,
distribution and marketing of our potential drugs. In addition, we are required
to obtain approval or registration with foreign governments or regulatory bodies
before we can import and sell our potential drugs in foreign countries. The
process of obtaining required approvals or clearances from governmental or
public health agencies can involve lengthy and detailed laboratory testing,
human clinical trials, sampling activities and other costly, time-consuming
procedures. The submission of an application to the FDA or other regulatory
authority does not guarantee that an approval or clearance to market a product
will be received. Each authority may impose its own requirements and delay or
refuse to grant approval or clearance, even though a product has been approved
in another country or by another agency. Moreover, the approval or clearance
process for a new product can be complex and lengthy. This time span increases
our costs to develop new potential drugs as well as the risk that we will not
succeed in introducing or selling them in the United States or other countries.
Newly promulgated or changed regulations could also require us to undergo
additional trials or procedures, or could make it impractical or impossible for
us to market our potential drugs for certain uses, in certain markets, or at
all.
Failure to comply with FDA or similar international regulatory bodies or other
requirements may require us to suspend production of our potential drugs which
could result in further losses or inability to produce revenues.
We can manufacture and sell potential drugs, both in the United States and
abroad, only if we comply with regulations of government agencies such as the
FDA. We have implemented quality assurance and other systems that are intended
to comply with applicable regulations in the United States. Although we believe
that we have adequate processes in place to ensure compliance with these
requirements, the FDA could force us to stop manufacturing our potential drugs
if it concludes that we are out of compliance with applicable regulations. The
FDA could also require us to recall potential drugs if we fail to comply with
applicable regulations, which could force us to stop manufacturing such
potential drugs. We will face similar risks when we establish our international
manufacturing operations.
We depend upon our current officers and directors to continue our business. If
we lose any of these officers or directors, we may not be able to continue.
14
Our business is dependent upon our current officers and directors, Allen D.
Allen, Corinne Allen and Wellington A. Ewen. If any of these officers or
directors leaves office or resigns, there will be no management to run our
business.
We need to raise at least $150,000 in the next 12 months or we will not be able
to continue our business.
We need to raise at least $75,000 in this offering. If we fail to do so, and are
unable to raise at least $150,000 in the next 12 months by continuing to obtain
capital from or borrowing, we will not be able to operate our business.
RISKS RELATED TO OUR COMMON STOCK
A public market for our shares may never develop, making the shares illiquid.
A public market for our shares may never develop. This may make it difficult or
impossible for investors in our shares to sell them. If our shares are approved
for a quotation on the over-the-counter market, they may be thinly traded and
highly volatile.
If a trading market develops in our securities, it will be limited, which makes
transactions in our stock cumbersome and may reduce the value of an investment
in our stock.
There is no current market for our common stock, but, if one develops, shares of
our common stock are "penny stocks" as defined in the Exchange Act, which are
traded in the over-the-counter market on the over-the-counter bulletin board. As
a result, investors may find it more difficult to dispose of or obtain accurate
quotations as to the price of the shares of the common stock being registered
hereby. In addition, the "penny stock" rules adopted by the Commission under the
Exchange Act subject the sale of the shares of our common stock to certain
regulations which impose sales practice requirements on broker/dealers. For
example, brokers/dealers selling such securities must, prior to effecting the
transaction, provide their customers with a document that discloses the risks of
investing in such securities. Included in these documents are the following:
- the bid and offer price quotes in and for the "penny stock", and the
number of shares to which the quoted prices apply.
- the brokerage firm's compensation for the trade.
- the compensation received by the brokerage firm's sales person for the
trade.
In addition, the brokerage firm must send the investor:
- a monthly account statement that gives an estimate of the value of each
"penny stock" in the investor's account.
- a written statement of the investor's financial situation and investment
goals.
15
Legal remedies, which may be available to you as an investor in "penny stocks",
are as follows:
- if "penny stock" is sold to you in violation of your rights listed above,
or other federal or state securities laws, you may be able to cancel your
purchase and get your money back.
- if the stocks are sold in a fraudulent manner, you may be able to sue the
persons and firms that committed the fraud for damages.
- if you have signed an arbitration agreement, however, you may have to
pursue your claim through arbitration. If the person purchasing the securities
is someone other than an accredited investor or an established customer of the
broker/dealer, the broker/dealer must also approve the potential customer's
account by obtaining information concerning the customer's financial situation,
investment experience and investment objectives. The broker/dealer must also
make a determination whether the transaction is suitable for the customer and
whether the customer has sufficient knowledge and experience in financial
matters to be reasonably expected to be capable of evaluating the risk of
transactions in such securities. Accordingly, the Commission's rules may limit
the number of potential purchasers of the shares of our common stock. Resale
restrictions on transferring "penny stocks" are sometimes imposed by some
states, which may make transaction in our stock more difficult and may reduce
the value of the investment. Various state securities laws pose restrictions on
transferring "penny stocks" and as a result, investors in our common stock may
have the ability to sell their shares of our common stock impaired.
USE OF PROCEEDS
---------------
The proceeds to CytoDyn from the sale of the 250,000 shares of common stock
offered hereby are estimated to be approximately $187,500. CytoDyn expects to
use such net proceeds approximately as follows:
Approximate
Dollar Percentage of
Application of Proceeds Amount Net Proceeds
----------------------- ------ ------------
Proceeds $ 187,500
Offering Expenses (40,524)
-----------
Net proceeds $ 146,976
Working capital and general
corporate purposes $ 146,976 100%
--------
Proceeds from this offering will be insufficient to take our drug through Phase
II trials, which is expected to cost an estimated $3,000,000.
The allocation of the net proceeds of this offering set forth above represents
our best estimates based upon its current plans and certain assumptions
regarding our future revenues and expenditures. If any of these factors change,
CytoDyn may find it necessary or advisable to reallocate some of the proceeds
within the above-described categories or to use portions thereof for other
purposes.
16
CytoDyn anticipates, based on its currently proposed plans and assumptions
relating to its operations (including assumptions regarding the progress of its
research and development and the timing and costs associated with the Primary
Development Projects), that the net proceeds of this offering, together with our
existing capital resources, will be sufficient to satisfy our estimated cash
requirements for at least 12 months following the consummation of this offering.
CytoDyn estimates that an aggregate of $3,000,000 will be needed over
approximately the next three years to complete its research and development of
Cytolin. Such amount is in excess of the net proceeds of this offering and the
existing capital of CytoDyn. Therefore, unless CytoDyn generates significant
revenues during such period, which CytoDyn believes is unlikely, CytoDyn will
need additional financing to fully fund such development. CytoDyn has no current
arrangements with respect to, or sources of, additional financing and it is not
anticipated that any of the officers, directors or shareholders of CytoDyn will
provide any portion of our financing requirements. There can be no assurance
that, when needed, any additional financing will be available to CytoDyn on
commercially reasonable terms, or at all. In the event our plans change, or our
assumptions change or prove to be inaccurate, or if the net proceeds of this
offering, together with other capital resources, otherwise prove to be
insufficient to fund operations, CytoDyn could be required to seek additional
financing sooner than currently anticipated.
Proceeds not immediately required for the purposes described above will be
invested principally in United States Government securities, bank certificates
of deposit, money market funds or other short-term interest-bearing investments.
DIVIDEND POLICY
To date, CytoDyn has not declared or paid any cash dividends on its Common Stock
and does not expect to declare or pay any dividends in the foreseeable future.
Instead, CytoDyn intends to retain all earnings, if any, for use in our business
operations.
DILUTION
The difference between the public offering price per share of the common stock
and the pro forma net tangible book value per share of the common stock after
completion of this offering constitutes the dilution to investors in this
offering. Net tangible book value per share on any given date is determined by
dividing our net tangible book value (total tangible assets less total
liabilities) on such date by the number of outstanding shares of Common Stock.
17
At February 29, 2004, the net tangible book value of CytoDyn was $.001 per share
of Common Stock. After giving effect to the sale by CytoDyn of 250,000 shares of
Common Stock offered hereby, the pro forma net tangible book value of CytoDyn at
February 29, 2004 would have been $198,683, or approximately $0.02 per share of
common stock. This represents an immediate increase in net tangible book value
of $0.02 per share to the existing shareholders and an immediate dilution of
$0.73 per share to new investors. The following table illustrates this dilution
to new investors on a per share basis:
Public offering price per share of common stock .......... $0.75
Net tangible book value per share before offering......... $0.001
Increase per share attributable to new investors.......... $0.02
Net tangible book value per share after offering.......... $0.02
Dilution per share to new investors....................... $0.73
Percentage dilution....................................... 73%
The following table is a comparison of the number of shares purchased, the
percentage of shares purchased, the total consideration paid, the percentage of
total consideration paid, and the average price per share paid by the existing
stockholders and by new investors, assuming the sale of all 250,000 shares in
this offering.
Number of Purchase Percentage Percentage of Average price
Shares Price of Shares Consideration per share
------ ----- --------- ------------- ---------
New Investors 250,000 $187,500 3% 31% 0.75
Existing Investors 7,519,307 $408,664 97% 69% 0.06
BUSINESS
Organization
We are a development stage corporation, organized under the laws of the state of
Colorado on May 2, 2002 as Rexray Corporation. We were originally a blank check
company until October 28, 2003. On October 28, 2003, we entered into an
acquisition agreement with CytoDyn of New Mexico, Inc., pursuant to which we
effected a two for one reverse split of our common stock, and amended our
articles of incorporation to change our name to CytoDyn, Inc. Pursuant to the
acquisition agreement, we acquired a patent license agreement dated July 1, 1994
between CytoDyn of New Mexico, Inc. and Allen D. Allen, covering three United
States patents along with foreign counterpart patents which describe a method
for treating HIV disease with the use of monoclonal antibodies. We also acquired
the trademarks, CytoDyn and Cytolin, and a related trademark symbol. In exchange
for the intellectual property and trademarks and the sum of $10,000 in cash, we
issued 5,362,640 post-split shares of common stock to CytoDyn of New Mexico,
Inc. CytoDyn of New Mexico, Inc., has been, since its inception, a research and
18
development company and has never been profitable. CytoDyn of New Mexico, Inc is
in the process of dissolving and has distributed the 5,362,640 common shares
pro-rata to its shareholders. With the acquisition of the license, we are a
developmental stage biotechnology research company pursuing the discovery and
development of a treatment for human immunodeficiency virus (HIV.) The
technology licensed by us is a patented and novel treatment approach to HIV
disease. Instead of the traditional focus of attacking the virus, our approach
is to bolster the human immune system by an injection of monoclonal antibodies
that repair killer T-cells. This approach, while novel, is based on significant
scientific research.
Industry
The U.S. biotechnology industry is relatively healthy and poised for growth,
with more than 33,000 patents pending, according to a U.S. government survey and
report on the industry by the U.S. Department of Commerce. The survey, of 1,031
U.S. firms engaged in biotechnology activities, found that those companies held
just under 24,000 patents in the last quarter of 2002, while they had more than
33,000 patents pending.
The survey, promoted by the Commerce Department as the first comprehensive
survey of the U.S. biotech industry, found 1.1 million total employees in the
1,031 responding companies, with 130,000 employees engaged in biotech
activities. Those firms reported $50.4 billion in net sales related to biotech
in 2001, with an operating income of $9.4 billion. The biotech activities of the
responding firms reported a 1.1 percent growth in operating income in 2001,
compared to a 3.9 percent drop in operating income for respondents' overall
businesses.
The survey also found that biotech-related research and development spending in
2001 amounted to $16.4 billion, about 10 percent of all U.S. industry R&D that
year. Biotech R&D was a heavy expense for firms responding -- it accounted for
more than 33 percent of the respondents' biotech budgets, compared to less than
10 percent of the respondents' total business expenses. According to the survey:
- Most biotech firms in the U.S. are small businesses, with 90 percent of
respondents saying they had fewer than 500 employees, and 58 percent saying they
had fewer than 50 employees. Only 19 respondents reported having more than
15,000 employees.
- The value of added biotech business lines was at least $33.5 billion in
2001, or 33% of US GDP.
- Biotech related research and development accounted for about 10% of the
U.S. Industry research and development in 2001.
- About 44 percent of firms with 50 or fewer employees identified venture
capital, angel investors and stock offers as sources of funding in 2001, while
only 2 percent of companies with more than 500 employees used those methods.
Most large companies relied on in-house revenue for funding.
19
- Human health-related applications were the primary focus of 72 percent of
the respondents' biotech efforts. Between 12 and 14 percent of respondents
indicated their primary or secondary biotech activities were related to animal
health, agriculture/aquaculture or industrial and agricultural processing.
- Seventy percent of firms responding have been established since 1986,
with 29 percent established between 1993 and 2001, indicating a relatively young
industry poised for growth, according to Commerce Department officials.
- More than 66,000 of the firms' 130,000 biotech employees had technical
related jobs, with 55 percent of those technical jobs belonging to scientists.
The growth in the biotech workforce at respondents' companies averaged more than
12 percent annual between 2000 and 2002, compared to essentially no growth in
the U.S. workforce overall.
Source: The Department of Commerce Technology Administration and the
Biotechnology Industry Organization, "A survey of the Use of Biotechnology in
U.S. Industry," October 2003.
AIDS and HIV
More than forty million people worldwide are infected with HIV, the virus that
causes AIDS, acquired immune deficiency syndrome, and about three million people
die from it every year. Five million people were infected in 2003 alone. HIV
infected individuals ultimately develop acquired immune deficiency syndrome, or
AIDS. The mortality rate of this disease is believed to be 100%.Three-quarters
of those who have the disease live in Africa, where AIDS is now the leading
cause of death. As an immature market, new drugs and adjunct therapies with
novel mechanisms of action or unique resistance profiles are sorely needed in
the fight against HIV. Constant innovation, in terms of efficacy, side effect
profile and dosing are occurring. Current research and development for HIV is
focused on adjunctive therapy, which when combined with existing HAART (Highly
Active Anti-Retroviral Therapy) regimens reduce side effects, enhance the
efficacy of existing treatments and delay the progression of the HIV virus.
The majority of these therapies are currently in clinical trials in late stage
patients, where existing HAART regimens fail, due to a build-up of drug
resistance and a worsening of immune response. Choosing a proper salvage therapy
remains a vexing problem in HIV treatment, particularly for patients that have
failed multiple Protease Inhibitors (PIs). It is likely that salvage therapy
will become more prominent as currently treated HIV infected patients develop
resistance.
The general thrust of HIV and AIDS therapy has been to attempt to kill the virus
through treatment with classes of drugs known as synthetic nucleosides and
protease inhibitors. However, this treatment method has been problematic for two
primary reasons: 1) the virus can mutate to avoid the attack, rendering the
drugs ineffective, and 2) some patients have problems tolerating the drugs. Our
therapy is less toxic and it has been used by community physicians to treat
hundreds of patients with minimal adverse consequences.
20
Today, there are 19 AIDS drugs on the market. They fall into four general
classes: Nucleoside Reverse Transcriptase Inhibitors (NRTIs), Protease
Inhibitors (PIs), Entry Inhibitors (EIs); and Non-Nucleoside Reverse
Transcriptase Inhibitors (nNRTIs). These drugs are usually used in combinations
of three or more to create an effective antiviral therapy. In addition, almost
100 investigational new drug applications (INDs) have been submitted to the U.S.
Food and Drug Administration to conduct clinical trials on HIV candidates.
Source: UN AIDS (2003) AIDS epidemic update, December
According to a recently published report by the financial services firm Griffin
Securities, the HIV market is expected to triple in size by 2007, growing from
$5 billion dollars in sales to over $13 billion in sales by 2007. Growth in the
HIV market will continue to be driven by a rapidly growing HIV and AIDS
population. In the absence of therapeutic intervention, the vast majority of
individuals infected with HIV will ultimately develop AIDS, on average in about
10 years, which has a mortality rate approaching 100%. Experts say that the
drugs currently available only extend life, on average, 1.8 years.
The United States Centers for Disease Control estimate that 1 to 1.5 million
people are infected with HIV in the United States, and that approximately
384,906 persons in the United States were living with AIDS as of December 2002.
During 2002, 35,147 newly discovered cases of HIV infection were reported.
HIV infects other species of mammals but usually does not result in disease in
any species except the human species. Accordingly, the virus is called the human
immunodeficiency virus. HIV disease is similar to hepatitis, types B and C, in
that all of these diseases arise when the body is damaged by white blood cells,
or killer cells the immune system generates in response to a viral infection.
Our current potential drug, Cytolin, is a monoclonal antibody that blocks one
part of the flaw in the human immune system that makes humans especially
susceptible to developing acquired immune deficiency syndrome ("AIDS") when
infected with HIV.
The human immune system is the human body's primary defense mechanism against
disease. It consists of a vast collection of specialized cells and proteins that
assist in detecting and destroying foreign organisms and eliminating disease
cells. The body's immune defense mechanism is normally able to distinguish
between normal cells and those that appear to be foreign to the body by
recognizing proteins, or "antigens." In theory, upon recognition of a foreign
antigen, the immune system can mount an immune response against the foreign
organisms or cells.
Published medical research concerning AIDS has shown that HIV triggers a flaw in
the human immune system which leads to its destruction. Specifically, HIV
infected patients proliferate a CD8 "killer" cell which goes on a suicide
mission, killing off healthy CD4 cells, whether or not they are infected with
HIV. This erosion of CD4 cells, the watchdogs of the human immune system, leads
to the loss of the immune function. But for this immune system flaw, HIV
infection in humans might resemble infection in other species, such as large
cats and higher primates, which, when infected with HIV, do not experience a
self-destruction of their immune systems.
21
Sources: Zarling JM, Ledbetter JA, Sias J, et al: HIV-infected humans, but not
chimpanzees, have circulating cytotoxic T- Lymphocytes that lyse uninfected CD4+
cells. J Immunol 1990;144:2992-98
Adelman L. Woofsy D: T-cell homeostasis: implications in HIV infection. J Acquir
Immune Defic Syndr 1993; 6: 144-152
Allen AD, Mathisen, GE, Glover N, Au J: Immunization against the HIV-associated
anti-self, anti-CD4 cytotoxic T lymphocyte., AIDS 1993;7:1130.
Allen AD, Mathisen GE, Leader W, et al: T-cell homeostasis in HIV infection: new
evidence. J Acquir Immune Defic Syndr 1994;7:627-32
Our potential drug, Cytolin, was developed by our president, Mr. Allen, who
compares the behavior of HIV to the hepatitis B or C virus. When people are
infected with the hepatitis B or C virus, their liver becomes coated with
intercellular adhesion molecules. The killer cells of the human immune system
that respond to the infection are covered with lymphocyte function antigen-1. As
a result, the killer cells stick to the liver cells themselves and often destroy
them. The leading treatment for hepatitis is a naturally occurring protein
called interferon-alpha. This product removes the intercellular adhesion
molecules from the liver so the killer cells of the immune system do not destroy
it.
A similar process occurs with HIV, except that the CD4 cells of the immune
system are indiscriminately destroyed by the killer cells of the immune system.
Left with a paucity of CD4 cells, a person becomes susceptible to certain
cancers and other infections that normally would not prove to be fatal in a
person with an adequate amount of CD4 cells. This is the condition known as
AIDS. What scientists such as Joyce Zarling have shown is that animals can carry
the HIV infection without becoming ill, because the killer cells of the immune
system do not destroy the CD4 cells.
Mr. Allen has identified a family of monoclonal antibodies that protect the CD4
cells from the killer cells of the immune system in people infected with HIV.
This is similar to the manner in which interferon-alpha protects the liver from
killer cells in people infected with the hepatitis virus. Allen's portfolio of
U.S. and foreign patents covers the use of these antibodies for treating HIV
disease. This is opposed to current antiviral treatments for HIV infection
because the antibodies do not kill HIV. An advantage of the antibodies is that
the virus cannot become resistant to the antibodies because the antibodies have
no direct effect on the virus itself. This development of resistance has been
identified as one of several problems associated with current treatments for
AIDS. According to Edwin Bayrd, Executive Director of the UCLA AIDS Institute,
"It's very important to understand that the treatment of HIV infection is
problematic, hugely expensive, meets with only limited success and cannot yet
cure anybody."
22
Rather than trying to kill the virus, as most conventional methods of combating
HIV and AIDS do, an effort can be made to prevent the immune system from
succumbing to its long war of attrition with the virus. Chimpanzees, in fact, do
this naturally. Although chimpanzees can be infected with HIV just as easily as
humans, the infection does not appear to result in the development of AIDS in
chimpanzees.
Potential drugs
Cytolin
CytoDyn owns the license to a number of unique, patented methods for the
development of drug platforms which have been studied as a treatment for disease
associated with the Human Immunodeficiency Virus (HIV.) The lead drug candidate,
Cytolin, is based upon a monoclonal antibody which protects CD4 cells from being
destroyed by killer cells of the immune system, thus preventing the weakening of
the immune system.
The treatment now being developed by us is based on a large body of literature
that has been recently published in the peer review journals. This is relatively
new information and is therefore different from what doctors were taught only a
few years ago. Mr. Allen's idea, in developing Cytolin, was to inject an
antibody into a patient's bloodstream to arrest the CD8 suicide cell and prevent
it from killing off healthy CD4 cells. This approach offered certain solutions
to the problems previously associated with the other therapies. First, it
functions independently of and invisibly to the virus or its mutations. It
simply compensates for the flawed response, leaving the immune system to handle
the virus more effectively itself. Second, the antibody is not by nature a toxic
substance. It does not produce the side effects associated with other drug
therapies. Like all proteins, however, it can produce a serious allergic
reaction, which has been seen in less than 4% of all patients who have been
treated with Cytolin.
In 1993, a small group of scientists and doctors treated six HIV infected
patients with the antibody Cytolin. Blood and skin tests on these patients
demonstrated that the antibody was producing reductions in viral load and
improvements in the immune function of each patient. This study was published in
the peer review journal Medical Hypothesis. Based on the study and the
underlying science, Mr. Allen obtained a patent for the use of the Cytolin
antibody to treat HIV disease and a broader patent covering many such agents for
treating HIV or AIDS.
In 1994, a group of AIDS patients, along with their families and friends,
invested US $1.2 million to form CytoDyn's predecessor. This capital was used to
develop a commercial method of manufacturing Cytolin and to design a clinical
trial, all with the oversight of the FDA for fast-track development.
Meanwhile, some AIDS doctors began using Cytolin on their own initiative.
Licensed physicians in the U.S. can write a prescription to a pharmacy to
compound drugs for their own use, provided their State has licensed the pharmacy
as one equipped to compound potential drugs. (Originally, this was all that
pharmacies did; hence, the mortar and pestle that is their trademark.) During
1995 through 1997, something on the order of 300 AIDS patients were treated with
Cytolin with apparently good results. Four of the doctors using Cytolin allowed
CytoDyn's predecessor to send in an independent IRB (Institutional Review Board)
to inspect the medical records of the patients treated with Cytolin. This
allowed the IRB to send data to the FDA demonstrating safety and apparent
benefits for 188 patients treated over 18 months.
23
In 2002, Symbion Research International, a contract research organization,
successfully completed a Phase 1a/b clinical trial of Cytolin. The data from
this study replicated the earlier encouraging results from clinical practice.
However, certain practices by the previous licensee of CytoDyn's predecessor may
or may not delay progression to Phase 2 for purely legal reasons.
Data from clinical trials of Cytolin and feedback from individual doctors has
provided preliminary evidence that the treatment is a safe and effective for
treating HIV and AIDS. We intend to seek FDA approval for Cytolin as a treatment
methodology for certain patients suffering from HIV/AIDS. If approval is
obtained, we intend to market Cytolin by entering into license agreements with
various manufacturers and distributors. This process will require years of
clinical research.
Positive Data
Preliminary data from clinical experience with Cytolin shows an increase in CD4
T cells and a marked improvement in a skin condition known as cutaneous anergy.
An improvement in this skin condition reflects an improvement in cell-mediated
immunity. This suggests that patients might be somewhat less susceptible to the
opportunistic infections and cancers that define AIDS. The improvement in
cutaneous anergy was sometimes accompanied by a marked improvement in
HIV-related skin diseases, such as hard-to-treat fungal infections, and warts,
such as molluscum contagiosum. There was also a drop in viral burden, even in
patients on long-term antiviral therapy. However, this is an indirect effect of
Cytolin, which has no direct effect on HIV. The reduction in viral burden
reflects an improvement in the patient's natural defenses.
Although Cytolin controls the patents on using Cytolin as an HIV therapy, any
qualified pharmacy or laboratory can make up small quantities in conjunction
with a doctor for use in his or her own office. Four physicians in California
agreed to let an independent IRB inspect their medical records so that we could
transmit the physicians' data to the FDA. Those data demonstrate that Cytolin
has been used safely in 188 patients with AIDS and HIV disease for 18 months.
According to these data, for 25% of the patients for whom viral load data were
available, Cytolin produced average viral load reductions of .3 log. These
results held true for both patients who had used Cytolin alone and for patients
who had used other therapies as well.
Adverse Data
According to the data, about 4% of the patients experienced a potentially
serious allergic reaction to Cytolin. There are three side effects we would
expect to see when any protein is injected into a person, and all three have
been occasionally observed in patients treated with Cytolin. These side effects,
in ascending order of seriousness, are the following:
24
Protein Sickness. This refers to a very brief pain in the lower back that occurs
during or soon after the injection. The pain is usually mild to moderate but may
be severe. The cause is not known but it is conjectured that the pain is caused
by a spasm in the blood vessels that supply the kidneys. There is no known
danger or lasting damage. Most patients who experience this pain believe that
they strained a muscle in their lower back when getting off the examining table
or when getting into their car after the doctor's visit.
Serum Sickness. This refers to flu-like symptoms that may last for several
hours. Physicians familiar with this reaction report that it can be treated, or
even prevented, by taking an over-the-counter brand of ibuprofen (Advil for
instance).
Allergic Reaction. This is a potentially serious reaction. In its most severe
form, the anaphylactic reaction, it can be life-threatening if not treated
promptly. During 700 injections of Cytolin, there were seven allergic reactions
that required prompt treatment, a 1% incidence. Because of limited treatment
options, some doctors continued to treat patients with Cytolin even though they
were allergic to it. These patients were first inject with Benadryl to help
prevent an allergic reaction. Epinephrine (the treatment for an anaphylactic
reaction) was administered immediately if the symptoms of an allergic reaction
appeared. As of this writing, we know of no patient who was permanently harmed
by an allergic reaction to Cytolin. However, this could occur in the future if
many more patients are treated with Cytolin.
Cytolin can only be administered by a physician in an appropriate clinical
setting.
Additional Data
One of the independent doctors, Tim Hillis, M.D., conducted a detailed analysis
of the records of 50 patients on the therapy. In the very sickest of these
patients, those with late stage AIDS, he determined that 95% would have been
expected to die within a 12 month period. However, after over 18 months of
treatment with Cytolin, 50% of those patients remained alive. He also found
improvement in specific illnesses such as molluscum, or viral skin warts that
are common to HIV infected individuals, a condition which can be disfiguring,
and for which no effective treatment exists. Of the doctor's very sickest
patients, 57% had this disease. Half of the patients' health greatly improved
and half remained approximately the same. It would be expected that either no
change would occur in these patients or they would have experienced a worsening
of their condition. The improvements, however, in these patients' condition,
management believes, are the result of an enhanced immune function. It was also
noted that the therapy was even more effective in healthier patients. The report
concluded that Cytolin was safe, well tolerated and had demonstrated benefits in
many patients' health. However, because this was not a study which restricted
patients to the use of Cytolin alone, it is not possible to isolate conclusively
Cytolin's effect from that of other drug therapies that were used. Moreover,
when used by a significant number of patients as an exclusive therapy, Cytolin
did produce substantial reductions in viral load. These drops in viral load
alone did not prevent several of the patients using Cytolin as a monotherapy
from progressing clinically, demonstrating that patients should be using these
therapies in combination.
25
Manufacturing Process
Antibodies are produced in a process similar to that of making wine. A seed or
"clone" is planted to grow a cell-bank. The cell is then used to grow a crop of
cell. Cells are harvested from the cell bank and then fermented or otherwise
processed to make raw antibodies. Finally, the raw antibodies are purified and
vialed using an FDA approved method
Other Potential Drugs
As of this writing, and under bilateral non-disclosure agreements, CytoDyn is in
discussions with another development stage biotech company for the joint
development of drugs to treat neuropsychiatric diseases and/or disorders. If and
when our discussions are successful, a joint public announcement will be made.
However, there is no guarantee that any joint development will be undertaken or
that any patents will be issued. Even if patents are issued, there is no
guarantee that the other potential drugs can be successfully developed and taken
to market.
The patents licensed by us cover the use of certain antibodies to treat HIV
disease. We do not own the clone necessary for manufacturing Cytolin, which
would have to be licensed. Other clones for manufacturing antibodies covered by
licensed patents are in the public domain. If we cannot obtain the necessary
clones, we may not be able to manufacture our potential HIV treatment.
Production Facility
We will outsource all or some of the manufacturing to plants which meet GMP
(Good Manufacturing Practice) standards. GMP is a pre- requisite for all drugs,
regardless of their classification. In order to be certain that we are in
compliance throughout all the levels of the manufacturing process, periodic
reviews will be performed on the manufacturing facilities.
Product Liability Insurance
The testing, marketing and sale of therapeutic products for use in humans entail
an inherent risk of allegations of product liability, and there can be no
assurance that product liability claims will not be asserted against us. We have
not obtained product liability insurance, and there can be no assurance that we
will be able to obtain insurance coverage in the future on acceptable terms or
that any claims against us will not exceed the amount of such coverage.
26
Government Regulation
The production and marketing of therapeutic products for use in humans and
related research and development activities are subject to regulation by
numerous governmental authorities in the United States and other countries. In
the United States, such products and research are subject to FDA review for
safety and efficacy. The Federal Food, Drug and Cosmetic Act, the Public Health
Service Act and other federal statutes and regulations govern or influence the
testing, manufacture, safety, labeling, storage, record keeping, approval,
advertising and promotion of drugs. Noncompliance with applicable requirements
can result in criminal prosecution and fines, recall or seizure of potential
drugs, total or partial suspension of production, refusal of the government to
approve Biological License Applications ("BLAs"), Product License Applications
("PLAs"), New Drug Applications ("NDAs") or refusal to allow us to enter into
supply contracts. The FDA also has the authority to revoke product licenses and
establishment licenses previously granted.
In order to obtain FDA approval to market a new biological or pharmaceutical
product, we must submit proof of product safety, purity, potency and efficacy,
and reliable manufacturing capability, which will require us to conduct
extensive laboratory, preclinical and clinical tests. This testing, as well as
preparation and processing of necessary applications, is expensive,
time-consuming and often takes several years to complete. There is no assurance
that the FDA will act favorably in making such reviews. We may encounter
significant difficulties or costs in our efforts to obtain FDA approvals, which
could delay or preclude us from marketing any potential drugs that we may
develop. The FDA may also require post marketing testing and surveillance to
monitor the effects of marketed products or place conditions on approvals that
could restrict the commercial applications of products. Product approvals may be
withdrawn if problems occur following initial marketing, such as compliance with
regulatory standards is not being maintained. With respect to patented potential
drugs or technologies, delays imposed by governmental marketing approval
processes may materially reduce the period during which we will have the
exclusive right to exploit patented potential drugs or technologies. Refusals or
delays in the regulatory process in one country may make it more difficult and
time consuming for us to obtain marketing approvals in other countries.
The FDA approval process for a new biological or pharmaceutical product involves
completion of preclinical studies and the submission of the results of these
studies to the FDA in an Initial New Drug application, which must be approved
before human clinical trials may be conducted. The results of preclinical and
clinical studies on biological or pharmaceutical products are submitted to the
FDA in the form of a BLA, PLA or NDA for approval to commence commercial sales.
In responding to a BLA, PLA or NDA, the FDA may require additional testing or
information, or may deny the application. In addition to obtaining FDA approval
for each biological or chemical product, an Establishment License Application
("ELA") must be filed and the FDA must inspect and license the manufacturing
facilities for each product. Product sales may commence only when both BLA/ PLA/
NDA and ELA are approved. In certain instances in which a treatment for a rare
disease or condition is concerned, the manufacturer may request the FDA to grant
the drug product Orphan Drug status for a particular use. In this event, the
developer of the drug may request grants from the government to defray the costs
27
of certain expenses related to the clinical testing of such drug and be entitled
to marketing exclusivity and certain tax credits. We may seek Orphan Drug
designation in the future for proposed potential drugs. If these potential drugs
are the first such potential drugs approved, we may be entitled to seven year
marketing exclusivity in the U.S. for these potential drugs once regulatory
approval has been obtained. The seven year period of exclusivity applies only to
the particular drug for the rare disease or condition for which the FDA has
designated the product an Orphan Drug. Therefore, another manufacturer could
obtain approval of the same drug for an indication other than ours or could seek
Orphan Drug status for a different drug for the same indication.
Sales of biological and pharmaceutical potential products outside the United
States are subject to foreign regulatory requirements that vary widely from
country to country. Whether or not FDA approval has been obtained, approval of a
product by a comparable regulatory authority of a foreign country must generally
be obtained prior to the commencement of marketing in that country.
Our contract manufacturers will also subject to regulation by the Occupational
Safety and Health Administration ("OSHA") and the Environmental Protection
Agency ("EPA") and to regulation under the Toxic Substances Control Act, the
Resource Conservation and Recovery Act and other regulatory statutes, and may in
the future be subject to other federal, state or local regulations. Properties
We have recently relocated our principal offices to 200 West De Vargas St.,
Suite 1, Santa Fe, NM 87501. Management believes the office space is adequate
for our needs and it is adequately insured.
Patents
Patents which have been licensed to the company, are as follows:
U.S. Patent No.s 5424066 ("Method for increasing CD4+ cell numbers through the
use of monoclonal antibodies directed against self-reactive, CD4 specific
cytotoxic T-cells,") 5651970 ("Method for inhibiting disease associated with the
Human Immunodeficiency Virus through the use of monoclonal antibodies directed
against anti-self cytotoxic T-lymphocytes or their lytics",) and 6534057
("Method for increasing the delayed-type hypersenstivity response by infusing
LFA-1-specific antibodies"), and foreign counterparts.
CytoDyn owns the registered trademarks, CytoDyn and Cytolin, and a related
trademark symbol.
Competition
The pharmaceutical industry is an expanding and rapidly changing industry
characterized by intense competition. CytoDyn will compete with other more
established biotechnology companies with greater financial resources than us.
Our potential competitors include entities that develop and produce therapeutic
agents for treatment of human and animal disease. These include numerous public
and private academic and research organizations and pharmaceutical and
biotechnology companies pursuing production of, among other things, biologics
from cell cultures, genetically engineered drugs and natural and chemically
synthesized drugs. Almost all of these potential competitors have substantially
28
greater capital resources, research and development capabilities, manufacturing
and marketing resources and experience than CytoDyn. Our competitors may succeed
in developing potential drugs or processes that are more effective or less
costly than any that may be developed by CytoDyn, or that gain regulatory
approval prior to our potential drugs. Worldwide, there are many antiviral drugs
for treating HIV and AIDS. In seeking to manufacture, distribute and market the
various potential drugs we intend to develop, we face competition from
established pharmaceutical companies. All of our potential competitors in this
field have considerably greater financial and personnel resources than we
possess. Also, based on the premise that HIV patients lose their CD4 cells
because of the way some white blood cells stick together in people infected with
the virus, Johns Hopkins Medical School owns patents on specific antibodies
which are believed to prevent the clumping of white blood cells, which is known
as syncytia. It is possible that these antibodies may be licensed by Johns
Hopkins and marketed in competition with Cytolin. CytoDyn also expects that the
number of its competitors and potential competitors will increase as more
potential drugs receive commercial marketing approvals from the FDA or analogous
foreign regulatory agencies. Any of these competitors may be more successful
than CytoDyn in manufacturing, marketing and distributing its potential drugs.
There can be no assurance that CytoDyn will be able to compete successfully.
Employees
We have two full time and employees and one part time employee, engaged in
management and product development. CytoDyn is severely understaffed and will
expand its employee force upon completion of this offering. There can be no
assurance we will be able to locate or secure suit able employees upon
acceptable terms in the future.
Legal Proceedings
Allen D. Allen and CytoDyn of New Mexico, Inc. had previously licensed the
CytoDyn patents and trademarks to Amerimmune Pharmaceuticals, Inc. This license
was attached as Document 2 to the annual report on Form 10SB, filed by
Amerimmune with the Securities and Exchange Commission on June 29, 2000. The
license terminated under its own terms (paragraph 11.2 thereof) on August 14,
2001 when Amerimmune filed a quarterly report on Form 10Q with the Securities
and Exchange Commission, indicating that it would not abide by paragraph 6, page
8 of the license agreement. This provision of the license is required by federal
law. Amerimmune's C.E.O., Rex H. Lewis, subsequently filed for bankruptcy
protection for Amerimmune in the U.S. Bankruptcy Court in Las Vegas, Nevada, and
claimed therein that Amerimmune not only owned the rights it had abandoned under
29
the license, but also the major assets of its key vendors. After resigning as an
officer and director of Amerimmune, Lewis then attempted to by all such property
rights and other property allegedly owned by Amerimmune for the sum of $10,000.
This transaction was rejected by the Bankruptcy Court and the Chapter 7
bankruptcy case was dismissed by the U.S. Trustee. Further adverse action and
harassment by Mr. Lewis against CytoDyn and its assets are possible, but records
of the U.S. Patent and Trademark Office currently show that the patents are
owned by Allen D. Allen, the trademarks are owned by CytoDyn, and they are
unencumbered by any assignment. Our predecessor in interest, CytoDyn of New
Mexico, Inc., has brought a lawsuit in Los Angeles Superior Court against
Ammerimune's former officers and directors and we have been substituted in as
the plaintiff. Rex Lewis has filed a counterclaim against our predecessor's
officers and directors and our Los Angeles litigator, who has taken the case on
a partial contingency fee basis, believes this is retaliatory and a frivolous
defense strategy.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Since inception, CytoDyn, a development stage company, has been engaged almost
exclusively in research and development activities focused on developing
biologics for the treatment of human and animal diseases. CytoDyn has not yet
commenced any significant product commercialization and, until such time as it
does, will not generate significant product revenues. CytoDyn has incurred
significant operating losses since its inception resulting in an accumulated
deficit of $207,954 at February 29, 2004, and such losses are expected to
continue for the foreseeable future and until such time, if ever, as CytoDyn is
able to attain sales levels sufficient to support its operations.
PLAN OF OPERATIONS
CytoDyn, Inc. is a development-stage company that plans to develop therapeutic
agents for use against disease associated with HIV using licensed patented
technology. We intend to develop and obtain FDA approval for the use of
monoclonal antibodies to treat patients with HIV by protecting the cells of the
body's immune system that are otherwise killed by the disease. No revenues have
been derived from our licensed technology, but Phase I clinical trials have been
conducted with promising outcomes. We plan to continue clinical trials during
the next 12 months and thereafter as necessary. We plan to outsource the
manufacturing of the antibodies, as we do not have, and do not plan to have, our
own manufacturing facilities.
30
Strategy for Commercial Development
Our strategy is to raise sufficient capital to support any Phase I and II
clinical trials. Initial capital to support this strategy will be raised in
private placements of our securities, followed by offerings of registered
shares. After our initial offering of registered shares, we intend to seek to
establish a market of our securities on an established quotation system, such as
the NASD over-the-counter bulletin board, which we feel will enable us to reach
a wider base of investors who invest only in marketable securities. Each round
of financing will be priced to incorporate any increased company valuation as it
progresses through the trials estimated to take 24 months. After the completion
of Phase I and II clinical trials, we intend to raise capital to fund final
Phase III trials and concomitant product "rollout" and/or licensing deals or
partnerships with one or more established pharmaceutical firms.
We anticipate that the funds raised in this offering will satisfy our cash
requirements through May 2005, when additional financing will once again be
required, the amount of which will depend on the status of our operations.
CONTROLS EVALUATION BY MANAGEMENT
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, we carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures over financial reporting. This evaluation was carried out under the
supervision and with the participation of our management, including our
President, Chief Executive Officer and Chief Financial Officer. Based upon that
evaluation, our President, Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective.
There have been no significant changes in our internal controls or in other
factors, which could significantly affect internal controls subsequent to the
date we carried out our evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.
31
MANAGEMENT
The members of the Board of directors of CytoDyn serve until the next annual
meeting of stockholders, or until their successors have been elected.
The officers serve at the pleasure of the Board of directors. Directors serve a
term of one year, or until the following annual meeting of shareholders,
whichever period is longer.
The current executive officers, key employees and directors of CytoDyn are as
follows:
Name Age Position
-------------- --------- ----------------
Allen D. Allen 67 Chief Executive Officer,
Chairman, Board of Directors
Wellington A. Ewen 64 Chief Financial Officer
Corinne Allen 36 Secretary/Treasurer, Vice
President
Ronald J. Tropp, Esq. 60 Director
Daniel M. Strickland, MD 59 Director
Peggy J. Pence, PhD. 54 Director
Allen D. Allen. Mr. Allen is the Chief Executive Officer and Chairman of the
Board of Directors, since October 2003. Prior to that, he was the Chairman of
the Board of Directors and Chief Executive Officer of CytoDyn of New Mexico,
Inc., since its inception in 1994. Mr. Allen began his career as a theoretical
physicist and used his knowledge of science to contribute to the field of
neuroimmunology at its very inception during the Korean War. Over the past
thirty years, he has published numerous papers in the peer review science and
medical journals, and received a national award in aeronautics. He has also
served as an investigator on clinical research sponsored by major pharmaceutical
companies, such as Ortho Biotech (Johnson & Johnson, and Sanofi-Winthrop. Mr.
Allen invented and patented the family of HIV/AIDS therapies licensed to
CytoDyn. During our start-up phase of operations, he also serves as President
and Chief Executive Officer. He is a member of the American Physical Society and
the American Federation of Scientists, a life member of the Institute of
Electrical and Electronics Engineers, and a founding member of the Editorial
Board of Physics Essays.
Wellington A. Ewen, CPA, MBA, Chief Financial Officer, received his BS and MBA
from Cornell University. Over the past 10 years, Mr. Ewen has served as a
financial and accounting officer for several development stage pharmaceutical
companies and has extensive experience in meeting the challenges of the
industry. He has also served as a senior manager at PriceWaterHouseCoopers in
Los Angeles, California. Mr. Ewen is currently licensed as a CPA in Oregon and
was previously licensed as a CPA in California and New York.
32
Corinne E. Allen. Ms. Allen, a graduate of California State University
Northridge is the Secretary, Treasurer, Director and Vice President, of the
company since October, 2003. Prior to that, she served as Secretary, Treasurer,
of CytoDyn of New Mexico, Inc., since April, 1995 and as Director since July,
1994. Ms. Allen was recently employed as a senior manager at Deloitte & Touche,
and has 17 years experience in the accounting industry. Ms. Allen received a
B.S. in Business Administration with a specialty in Accounting Theory and
Practice from C.S.U.N. in 1992. She has been a certified public accountant since
November, 1995. Ms. Allen is the daughter of Allen D. Allen.
Ronald J. Tropp, Esq. Mr. Tropp is an attorney admitted to practice in New York
and California. He is a graduate of Swarthmore College and the University of
Wisconsin at Madison Law School. He has been a Director of the company since
October, 2003, and, prior to that time, served as Director for CytoDyn of New
Mexico, Inc. He is an attorney, admitted to practice in New York and California.
He has practiced entertainment and transactional law for over 25 years and has
been representing CytoDyn of New Mexico, Inc. since the Fall of 1999.
Previously, he served as corporate counsel and director for Pacific Coast
Medical Enterprises, which owned five acute care hospitals in Southern
California.
Daniel M. Strickland, MD. Dr. Strickland has been a Director of the company
since October, 2003, and, prior to that time, served as a Director of CytoDyn of
New Mexico, Inc. Dr. Strickland served as a nuclear engineer for the U.S. Air
Force before he became a physician. He received his BS degree in physics from
the University of Georgia, his MS in Nuclear Engineering from the Air Force
Institute of Technology, and his MD from the Medical College of Georgia. From
1986 through 1989, Dr. Strickland served as Clinical Associate Professor at the
University of Texas Health Science Center in San Antonio, Texas. He also served
as Flight Surgeon at the School of Aerospace Medicine at Brooks Air Force Base,
Texas in 1977. Dr. Strickland is board certified by the National Board of
Medical Examiners. He received training designations from the American College
of Surgeons, and the American Heart Association for Advanced Trauma Life Support
and Advanced Cardiac Life Support. In 1988 and 1989 he served on the Membership
Committee of the Alamo Chapter of Sigma Xi, the Scientific Research Society. Dr.
Strickland also belongs to Sigma Delta Chi, the Society of Professional
Journalists. He holds U.S. patent No. 3,909,624 for a Split-Ring Marx Generator
Grading.
Peggy C. Pence, PhD. Dr. Pence, a graduate of Louisiana Tech and Indiana
University, has been a Director of the company since October, 2003. Dr. Pence
has 30 years of experience in the research and development of traditional
pharmaceutical and biotechnology-derived potential drugs and medical devices,
and served 13 years of this time in the employ of Eli Lilly and Company. Dr.
Pence has served in management positions at emerging biotechnology companies,
including Serono Laboratories, Triton Biosciences (acquired by Berlex
Laboratories, Inc.), and Amgen. In 1992 Dr. Pence founded Symbion Research
International, the CRO (Contract Research Organization) that conducted the
successful phase 1 study of Cytolin.
33
EXECUTIVE COMPENSATION
The following table sets forth for the period ended May 29, 2004 compensation
paid or agreed to be paid by CytoDyn to its Chairman of the Board, and Chief
Executive Officer and our Secretary/Chief Financial Officer.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
------------------- ------------------------------------
Restricted Securities
Name and Other Annual stock Underlying LTIP All other
Principal Position Salary Bonus Compensation Awards Options/SAR's Payouts compensation
----------------------- ------- ------- ------------ ---------- ------------- ------- ------------
Allen D. Allen (2004)
Chief Executive Officer
and Chairman $98,000 -- -- -- -- -- --
Corinne Allen (2004)
Secretary/Treasurer
Vice President $50,000 -- -- -- -- -- --
Wellington A Ewen (2004)
Chief Financial Officer -- -- -- -- 150,000 -- --
------------------------------------------------------------------------------------------------------------------
*Mr. James Wiegand earned a total compensation of $45,000 from inception through
2003, for consulting services.
STOCK PLANS
We have a stock option plan for our Chief Financial Officer, Wellington Ewen, on
an earned basis. He will earn 50,000 shares with an exercise price of .$50 per
share in the first year, 50,000 shares with an exercise price of $1.00 in the
second year and 50,000 shares with an exercise price of $1.50 in the third year.
We do not have any other stock option or stock compensation plans in force at
this time.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of the date of this Prospectus and
as adjusted to reflect the sale of 250,000 shares offered hereby, based upon
information obtained from the persons named below, relating to the beneficial
ownership of shares of Common Stock by each person known to CytoDyn to own five
percent or more of the outstanding Common Stock, each director of CytoDyn and
all officers and directors of CytoDyn as a group.
34
Shares Percent Percent
Name and Address Beneficially Before After
of Beneficial Owner Owned Offering Offering
------------------- ----- -------- --------
Allen D. Allen 2,118,515 26.2% 25.2%
4236 Longridge Ave. #302
Studio City, CA 91604
Corinne Allen 1,736,335 21.5% 20.6%
200 W. Devargas Street
Suite 1
Santa Fe, NM 87501
Daniel M. Strickland, MD. 8,476 .001% .001%
P.O. Box 10
Lansing, NC 28643
Peggy C. Pence, PhD. 0 0% 0%
29219 Canwood Street, Suite 100
Agoura Hills, CA 91301
Ronald J. Tropp 0 0% 0%
20222 Oxnard St.
Woodland Hills, CA 91367
James B. Wiegand 400,000 5% 4.7%
16200 WCR 18E
Loveland, CO 80531
All officers and directors 3,863,326 47.8% 46%
as a group
--------
** A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Prospectus upon the
exercise of options or warrants. Each beneficial owner's percentage ownership is
determined by assuming that options that are held by such person (but not those
held by any other person) and that are exercisable within 60 days from the date
of this Prospectus have been exercised. Except as otherwise indicated, CytoDyn
believes that each of the persons named has sole voting and investment power
with respect to the shares shown as beneficially owned.
CERTAIN TRANSACTIONS
On May 3, 2002, we issued 800,000 shares of common stock to our former
president, James B. Wiegand, at .001 per share, in exchange for services valued
at $8,000. Mr. Wiegand is a sophisticated person who had superior access to all
corporate and financial information. The issuance was done in reliance upon
Section 4(2) of the Securities Act.
35
In October 2003, pursuant to the Acquisition Agreement between CytoDyn and
CytoDyn of New Mexico, Inc., we issued a total of 5,362,640 post-reverse split
shares of the common stock at a price of .01 per share, for a total of 53,264,
to CytoDyn of New Mexico, Inc., a corporation whose shareholders include Allen
D. Allen and Corinne Allen, in exchange for $10,000 cash and the trademarks
CytoDyn and Cytolin, as well as a related registered trademark symbol, and the
assignment of that certain patent license agreement dated July 1, 1994 by and
between Allen D. Allen and CytoDyn of New Mexico, Inc., which license covers
U.S. Patent No.s 5424066 ("Method for increasing CD4+ cell numbers through the
use of monoclonal antibodies directed against self-reactive, CD4 specific
cytotoxic T-cells,") 5651970 ("Method for inhibiting disease associated with the
Human Immunodeficiency Virus through the use of monoclonal antibodies directed
against anti-self cytotoxic T-lymphocytes or their lytics",) and 6534057
("Method for increasing the delayed-type hypersensitivity response by infusing
LFA-1-specific antibodies"). The issuance was made to sophisticated persons who
had access to all corporate and financial information, in reliance upon Section
4(2) of the Securities Act. As part of the Acquisition Agreement, we also
assumed $161,578 in liabilities, including $61,694 owed to Allen D. Allen and
Corinne Allen.
From October 2002 through October 2003, we paid rent to Amery Coast Corporation,
a corporation under control of affiliate James B. Wiegand, and paid rent to Mr.
Wiegand at the rate of $100 per month.
In October 2003, Allen D. Allen advanced us the sum of $10,000. The advance does
not bear interest and is payable on demand.
On October 28, 2003 we issued a promissory note to our former president, James
B. Wiegand in the principal amount of $30,000, to compensate Mr. Wiegand for
services rendered. The note bears interest at the rate of 5% per annum and was
paid in full in February 2004.
On December 26, 2003, Corinne Allen advanced us the sum of $50,000 for working
capital. The advance does not bear interest and is payable on demand. We repaid
in the advance in February 2004.
In February 2004, we issued 16,667 shares to our Executive Vice President, Brian
McMahon, at a price of $0.30 per share, for a total of $5,000, to repay Mr.
McMahon for a $5,000 debt, in reliance upon Section 4(2) of the Securities Act.
DESCRIPTION OF COMMON STOCK
CytoDyn is authorized to issue 20,000,000 shares of Common Stock, no par value,
and 5,000,000 shares of preferred stock at no par value. As of the date of this
Prospectus, there are 8,069,307 shares of common stock outstanding which are
held by 134 holders of record.
36
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by shareholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors in its discretion,
out of funds legally available therefore. In the event of liquidation,
dissolution or winding up of CytoDyn, the holders of Common Stock are entitled
to share ratably in the assets of CytoDyn, if any, legally available for
distribution to them after payment of debts and liabilities of CytoDyn and after
provision has been made for each class of stock, if any, having liquidation
preference over the Common Stock. Holders of shares of Common Stock have no
conversion, preemptive or other subscription rights, and there are no redemption
or sinking fund provisions applicable to the Common Stock.
TRANSFER AGENT AND REGISTRAR
Standard Registrar and Transfer of 673 Bluebird Lane NE, Albuquerque, New Mexico
87122, acts as our transfer agent.
REPORTS TO SHAREHOLDERS
CytoDyn is a reporting company, pursuant to Section 12(g) of the Exchange Act,
and is required to comply with periodic reporting, proxy solicitation and
certain other requirements of the Exchange Act.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, CytoDyn will have 8,069,307 shares of
common stock outstanding. These shares will be tradable without restriction or
further registration under the Securities Act. Of the 8,069,307 shares of common
stock outstanding as of the date of this Prospectus , 8,399,307 are deemed to be
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act, in that such shares were acquired by the shareholders
of CytoDyn in transactions not involving a public offering, and, as such, may
only be sold pursuant to a registration statement under the Securities Act, in
compliance with the exemption provisions of Rule 144, or pursuant to another
exemption under the Securities Act. Of such 8,399,307 restricted shares of
Common Stock, an aggregate of 890,000 shares are immediately eligible for sale,
without registration, under Rule 144.
In general, under Rule 144 as currently in effect, any person or persons whose
shares are aggregated who has beneficially owned restricted shares for at least
two years is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the then outstanding shares of the
issuer's common stock or the average weekly trading volume during the four
calendar weeks preceding such sale, provided that certain public information
about the issuer as required by Rule 144 is then available and the seller
complies with certain other requirements. Affiliates will be subject to the
provisions of Rule 144, except that the holding period requirement does not
apply to sales by affiliates of shares which are not restricted securities. A
person who is not an affiliate, has not been an affiliate within three months
prior to sale, and has beneficially owned the restricted shares for at least
three years is entitled to sell such shares under Rule 144 without regard to any
of the limitations described above.
37
Prior to this offering, there has been no market for the common stock and no
prediction can be made as to the effect, if any, that market sales of common
stock or the availability of such shares for sale will have on the market price
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of common stock may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair our ability to
raise capital through the sale of its equity securities.
PLAN OF DISTRIBUTION
The Shares shall be offered on a self underwritten basis in states in the States
of California, New Mexico and Colorado. The offering is self underwritten by
CytoDyn, which offers the Shares directly to investors through officers and
directors, who will offer the Shares by prospectus, to friends, former business
associates and contacts, and by direct mail to investors who have indicated an
interest in us. The offering is a self underwritten offering, which means that
it does not involve the participation of an underwriter or broker.
The offering of the Shares shall terminate 12 months after the date of this
prospectus, when all shares have been sold, or upon the order of the board of
directors.
We reserve the right to reject any subscription in whole or in part, or to allot
to any prospective investor less than the number of Shares subscribed for by
such investor.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for CytoDyn
by Kenneth G. Eade, of Santa Barbara, California. Mr. Eade will receive 80,000
shares of common stock as part of his compensation for services.
EXPERTS
The financial statements of CytoDyn inception on May 2, 2002 up to and including
May 31, 2003, appearing in this Prospectus and Registration Statement have been
audited by Cordovano and Honeck, LP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
38
ADDITIONAL INFORMATION
CytoDyn has filed with the Commission a Registration Statement under the
Securities Act with respect to the Common Stock offered by this Prospectus. This
Prospectus, filed as a part of such Registration Statement, does not contain all
of the information set forth in, or annexed as exhibits to, the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to CytoDyn
and this offering, reference is made to the Registration Statement, including
the exhibits filed therewith, which may be inspected without charge at the
Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, at the Chicago Regional Office, 500 West Madison Street,
Chicago, Illinois 60601-2511, and at the New York Regional Office, 7 World Trade
Center, New York, New York 10048. Copies of the Registration Statement may be
obtained from the Commission's Public Reference Section upon payment of
prescribed fees. Electronic registration statements made through the Electronic
Data Gathering, Analysis, and Retrieval system are publicly available through
the Commission's Web site at http://www.sec.gov. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and, where the contract or other document has been filed as
an exhibit to the Registration Statement, each statement is qualified in all
respects by reference to the applicable document filed with the Commission.
39
CYTODYN, INC.
A DEVELOPMENT STAGE COMPANY
INDEX TO FINANCIAL STATEMENTS
The financial statements of Rexray Corporation for the fiscal year ended May 31,
2003 and from inception to May 31, 2003, have been audited by our independent
accountants. The interim statements for the period ended February 29, 2004 are
prepared by management, and are not audited. They have been reviewed by our
independent accountant and included in our quarterly report on Form 10QSB.
Page
----
Report of Independent Auditors ............................. F-2
Balance Sheet of Rexray Corporation at May 31, 2003 ......... F-3
Statements of Operations at May 31, 2003 .................... F-4
Statements of Cash Flows at May 31, 2003 .................... F-5
Statements of Shareholder's Equity at May 31, 2003 .......... F-6
Notes to Financial Statements at May 31, 2003 ............... F-7
Interim Balance Sheet of CytoDyn, Inc. at
February 29, 2004 (unaudited) .............................. F-11
Interim Statements of Operations at
February 29, 2004 (unaudited) .............................. F-12
Interim Statements of Cash Flows at
February 29, 2004 (unaudited) ............................. F-13
Interim Statements of Shareholder's Equity at
February 29, 2004 (unaudited) .............................. F-14
Interim Notes to Financial Statements at
February 29, 2004 (unaudited) .............................. F-15
F-1
Report of Independent Auditors
To the Board of Directors and Shareholders
Rexray Corporation:
We have audited the accompanying balance sheet of Rexray Corporation (a
development stage company) as of May 31, 2003, and the related statements of
operations, changes in shareholders' equity, and cash flows for the year ended
May 31, 2003, the period from May 2, 2002 (inception) through May 31, 2002, and
the period from May 2, 2002 (inception) through May 31, 2003. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rexray Corporation as of May
31, 2003, and the results of its operations and its cash flows for the year
ended May 31, 2003, the period from May 2, 2002 (inception) through May 31,
2002, and the period from May 2, 2002 (inception) through May 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered significant operating losses since
inception, which raises a substantial doubt about its ability to continue as a
going concern. Management's plans in regard to this matter are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Cordovano and Harvey, P.C.
------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
July 29, 2003
F-2
REXRAY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MAY 31, 2003
Assets
Cash ...................................................... $ 76
========
Liabilities and Shareholders' Deficit
Liabilities:
Accounts payable and accrued liabilities .............. $ 1,500
--------
Total liabilities ....................... 1,500
--------
Shareholders' deficit (Notes 2 and 3):
Preferred stock, no par value; 5,000,000
shares authorized, -0- shares issued
and outstanding .................................... --
Common stock, no par value; 20,000,000
shares authorized, 1,180,000 shares
issued and outstanding ............................. 11,800
Additional paid-in capital ............................ 5,415
Deficit accumulated during development stage .......... (18,639)
--------
Total shareholders' deficit ............. (1,424)
--------
$ 76
========
See accompanying notes to financial statements
F-3
REXRAY CORPORATION
(A Development Stage Company)
Statements of Operations
May 2, 2002 May 2, 2002
(Inception) (Inception)
Year Ended Through Through
May 31, May 31, May 31,
2003 2002 2003
----------- ----------- -----------
Operating expenses:
Stock-based compensation (Note 2):
Incorporation and organization services . $ -- $ 8,000 $ 8,000
Contributed services, related party (Note 2) 2,970 -- 2,970
Contributed rent, related party (Note 2) ... 800 -- 800
Rent, related party (Note 2) ............... 400 100 500
Professional fees .......................... 4,710 1,500 6,210
Other ...................................... 73 86 159
----------- ----------- -----------
Total operating expenses ..... 8,953 9,686 18,639
----------- ----------- -----------
Loss before income taxes ..... (8,953) (9,686) (18,639)
Income tax provision (Note 4) .................. -- -- --
----------- ----------- -----------
Net loss ..................... $ (8,953) $ (9,686) $ (18,639)
=========== =========== ===========
Basic and diluted loss per share ............... $ (0.01) $ (0.01)
----------- -----------
Basic and diluted weighted average
common shares outstanding .................. 1,167,692 1,140,000
=========== ===========
See accompanying notes to financial statements
F-4
REXRAY CORPORATION
(A Development Stage Company)
Statement of Changes in Shareholders' Deficit
Accumulated
Deficit
Preferred Stock Common Stock Additional During
--------------------- --------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage Total
--------- --------- --------- --------- --------- --------- ---------
Balance at May 2, 2002 (inception) .......... -- $ -- -- $ -- $ -- $ -- $ --
May 2002, shares issued to an officer
in exchange for incorporation and
organization services provided to the
Company ($.01/share) (Note 2) ........... -- -- 800,000 8,000 -- -- 8,000
May 2002, shares sold in private placement
offering ($.01/share) (Note 3) .......... -- -- 340,000 3,400 -- -- 3,400
Net loss, period ended May 31, 2002 ......... -- -- -- -- -- (9,686) (9,686)
--------- --------- --------- --------- --------- --------- ---------
Balance at May 31, 2002 ..................... -- -- 1,140,000 11,400 -- (9,686) 1,714
July 2002, shares sold in private placement
offering ($.01/share (Note 3) ........... -- -- 20,000 200 -- -- 200
October 2002, shares issued in exchange
for filing services ($.01/share) (Note 3) -- -- 20,000 200 -- -- 200
Office space contributed by an
affiliate (Note 2) ...................... -- -- -- -- 800 -- 800
Services contributed by an officer (Note 2) . -- -- -- -- 2,970 -- 2,970
Expenses paid by an officer on behalf of
the Company (Note 2) .................... -- -- -- -- 1,645 -- 1,645
Net loss, period ended May 31, 2003 ......... -- -- -- -- -- (8,953) (8,953)
--------- --------- --------- --------- --------- --------- ---------
Balance at May 31, 2003 ..................... -- $ -- 1,180,000 $ 11,800 $ 5,415 $ (18,639) $ (1,424)
========= ========= ========= ========= ========= ========= =========
See accompanying notes to financial statements
F-5
REXRAY CORPORATION
(A Development Stage Company)
Statements of Cash Flows
May 2, 2002 May 2, 2002
(Inception) (Inception)
Year Ended Through Through
May 31, May 31, May 31,
2003 2002 2003
----------- ----------- -----------
Cash flows from operating activities:
Net loss ...................................... $ (8,953) $ (9,686) $ (18,639)
Adjustments to reconcile net loss to net cash
used by operating activities:
Stock-based compensation (Notes 2 and 3) .. 200 8,000 8,200
Contributed rent and services (Note 2) .... 3,770 -- 3,770
Changes in operating liabilities:
Increase in accounts payable and
accrued liabilities .................. 1,500 -- 1,500
----------- ----------- -----------
Net cash used in
operating activities .......... (3,483) (1,686) (5,169)
----------- ----------- -----------
Cash flows from financing activities:
Expenses paid by an officer on behalf of
the Company (Note 2) ........................ 1,645 -- 1,645
Proceeds from the sale of common stock (Note 3) 200 3,400 3,600
----------- ----------- -----------
Net cash provided by
financing activities .......... 1,845 3,400 5,245
----------- ----------- -----------
Net change in cash ............ (1,638) 1,714 76
Cash, beginning of period ......................... 1,714 -- --
----------- ----------- -----------
Cash, end of period ............................... $ 76 $ 1,714 $ 76
=========== =========== ===========
Supplemental disclosure of cash flow information:
Income taxes .................................. $ -- $ -- $ --
=========== =========== ===========
Interest ...................................... $ -- $ -- $ --
=========== =========== ===========
See accompanying notes to financial statements
F-6
REXRAY CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Organization and Basis of Presentation
Rexray Corporation (the "Company") was incorporated under the laws of Colorado
on May 2, 2002 to engage in any lawful corporate undertaking. The Company is a
development stage enterprise in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 7 and is a "blank check" company. The Company
has been in the development stage since inception and has no revenue-producing
operations to date. The Company's business plan is to evaluate, structure and
complete a merger with, or acquisition of, a privately owned corporation. The
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 financial
statements, the Company is a development stage company with losses since
inception. These factors, among others, may indicate that the Company will be
unable to continue as a going concern for reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability 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 generate sufficient cash
flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company intends to seek additional funding through equity
offerings to fund its business plan. There is no assurance that the Company will
be successful in raising additional funds.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles 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 financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less when acquired, to be cash equivalents. The
Company had no cash equivalents at May 31, 2003.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
Accounting for Income Taxes (SFAS 109). SFAS 109 requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
F-7
Earnings (Loss) per Common Share
Basic earnings per share is computed by dividing income available to common
shareholders (the numerator) by the weighted-average number of common shares
(the denominator) for the period. The computation of diluted earnings per share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if potentially dilutive common shares had been issued.
At May 31, 2003, there was no variance between basic and diluted loss per share
as there were no potentially dilutive common shares outstanding.
Organization Costs
Costs related to the organization of the Company have been expensed as incurred.
Financial Instruments
At March 31, 2003, the fair value of the Company's financial instruments
approximate fair value due to the short-term maturity of the instruments.
Stock-based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with Accounting Principles Board ("APB") Opinion 25, "Accounting for
Stock Issued to Employees" and complies with the disclosure provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation expense is based on the difference, if any, on the date of grant,
between the fair value of the Company's stock and the exercise price. The
Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS No. 123.
(2) Related Party Transactions
The Company paid rent to Amery Coast Corporation ("ACC"), an affiliate under
common control, for the period from May 2, 2002 (inception) through September
30, 2002. The office space was valued at $100 per month based on the market rate
in the local area and is included in the accompanying financial statements as
"rent, related party".
During the period from October 1, 2002 through May 31, 2003, ACC contributed
office space to the Company. The office space was valued at $100 per month based
on the history of prior payments and is included in the accompanying financial
statements as "contributed rent, related party" with a corresponding credit to
"additional paid-in capital".
An officer contributed time and effort to the Company valued at $2,970 for the
year ended May 31, 2003. The time and effort was valued by the officer between
$20 and $75 per hour based on the level of services performed and is included in
the accompanying financial statements as "contributed services, related party"
with a corresponding credit to "additional paid-in capital".
During the year ended May 31, 2003, an officer paid professional fees on behalf
of the Company totaling $1,645. The working capital contributions are included
in the accompanying financial statements as "additional paid-in capital".
During May 2002, the Company issued 800,000 shares of it's no par value
restricted common stock to an officer of the Company in exchange for
incorporation and organization services. On the transaction date, the Company's
common stock had no reliable market value. The value of the services could not
be objectively measured as the services were rendered by a related party. The
shares were valued by the Company at $.01 per share based on contemporaneous
common stock sales to unrelated third parties. Stock-based compensation expense
of $8,000 was recognized in the accompanying financial statements for the period
ended May 31, 2002.
F-8
(3) Shareholders' Equity
Preferred Stock
The Board of Directors is authorized to issue shares of preferred stock in
series and to fix the number of shares in such series as well as the
designation, relative rights, powers, preferences, restrictions, and limitations
of all such series. The Company had no preferred shares issued and outstanding
at May 31, 2002.
Private Placement Offering
From May 2002 through July 2002, the Company conducted a private placement
offering whereby it sold 360,000 shares of its no par value common stock for
$.01 per share pursuant to an exemption from registration claimed under section
4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D
promulgated thereunder. The Company relied upon exemptions from registration
believed by it to be available under federal and state securities laws in
connection with the offering. The shares were sold through the Company's officer
and director. The Company received proceeds from the offering totaling $3,600.
Stock for Services
During October 2002, the Company issued 20,000 shares of its common stock to a
vendor in exchange for financial printing services. The transaction was valued
at the cost of the services rendered. The number of shares issued was based on
the contemporaneous sale of common stock to unrelated third parties and other
analysis, or $.01 per share ($200).
(4) Income Taxes
A reconciliation of the U.S. statutory federal income tax rate to the effective
tax rate is as follows:
May 2, 2002
(Inception)
Year Ended Through
May 31,2003 May 31,2002
----------- -----------
U.S. Federal statutory graduated rate.......... 15.00% 15.00%
State income tax rate,
net of federal benefit....................... 3.94% 3.94%
Contributed rent and services.................. - 7.98% 0.00%
Net operating loss for which no tax
benefit is currently available............... -10.96% -18.94%
----------- -----------
0.00% 0.00%
=========== ===========
F-9
At May 31, 2003, deferred tax assets consisted of a net tax asset of $2,815, due
to operating loss carryforwards of $14,869, which was fully allowed for, in the
valuation allowance of $2,815. The valuation allowance offsets the net deferred
tax asset for which there is no assurance of recovery. The change in the
valuation allowance for the year ended May 31, 2003 and the period from May 2,
2002 (inception) through May 31, 2002 totaled $981 and $1,834, respectively. The
current tax benefit also totaled $981 and $1,834 for the year ended May 31, 2003
and the period from May 2, 2002 (inception) through May 31, 2002, respectively.
The net operating loss carryforward expires through the year 2023.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the deferred tax asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax assets is no longer
impaired and the allowance is no longer required.
Should the Company undergo an ownership change as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation,
which could reduce or defer the utilization of these losses.
F-10
CYTODYN, INC.
(Formerly Rexray Corporation)
(A Development Stage Company)
Condensed Balance Sheet
(Unaudited)
February 29, 2004
Assets
Cash ..................................................... $ 174,613
Equipment, net ........................................... 1,650
Deposit .................................................. 495
---------
$ 176,758
=========
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable and accrued liabilities ............. $ 93,881
Indebtedness to related parties (Note 3) ............. 71,694
---------
Total liabilities ...................... 165,575
---------
Commitment (Note 7) ...................................... --
Shareholders' equity (Note 5):
Preferred stock ...................................... --
Common stock ......................................... 210,722
Additional paid-in capital ........................... 8,415
Deficit accumulated during development stage ......... (207,954)
---------
Total shareholders' equity ............. 11,183
---------
$ 176,758
=========
See accompanying notes to condensed financial statements
F-11
CYTODYN, INC.
(Formerly Rexray Corporation)
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
May 2, 2002
Three Months Ended Nine Months Ended (Inception)
February 29, February 29, Through
-------------------------- -------------------------- February 29,
2004 2003 2004 2003 2004
----------- ----------- ----------- ----------- -----------
Operating expenses:
Stock-based compensation:
Incorporation and organization services$ .. -- $ -- $ -- $ -- $ 8,000
Compensation ................................ 10,703 -- 55,703 -- 55,703
Contributed services, related party (Note 3) -- 240 -- 2,730 2,970
Contributed rent, related party (Note 3) .... -- 300 500 500 1,300
Rent, related party (Note 3) ................ -- -- -- 400 500
Rent, other ................................. 1,485 -- 2,240 -- 2,240
Professional fees ........................... 101,631 1,025 114,127 3,115 120,337
Interest income ............................. (52) -- (55) -- (55)
Interest expense ............................ 296 -- 441 -- 441
Other ....................................... 15,177 19 16,359 55 16,518
----------- ----------- ----------- ----------- -----------
Total operating expenses ........ 129,240 1,584 189,315 6,800 207,954
----------- ----------- ----------- ----------- -----------
Loss before income taxes ........ (129,240) (1,584) (189,315) (6,800) (207,954)
Income tax provision (Note 6) ................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net loss ........................ $ (129,240) $ (1,584) $ (189,315) $ (6,800) $ (207,954)
=========== =========== =========== =========== ===========
Basic and diluted loss per share ................ $ (0.02) $ (0.00) $ (0.05) $ (0.01)
=========== =========== =========== ===========
Basic and diluted weighted average
common shares outstanding ................... * 6,674,862 * 590,000 * 3,909,985 * 578,334
=========== =========== =========== ===========
* Restated for 1:2 reverse split of common stock (see Note 2)
See accompanying notes to condensed financial statements
F-12
CYTODYN, INC.
(Formerly Rexray Corporation)
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
May 2, 2002
Nine Months Ended (Inception)
February 29, Through
-------------------------- February 29,
2004 2003 2004
----------- ----------- -----------
Net cash used in
operating activities ........ $ (191,741) $ (2,720) $ (196,910)
----------- ----------- -----------
Cash flows from investing activities:
Equipment purchases .............................. (1,722) -- (1,722)
----------- ----------- -----------
Net cash used in
investing activities ........ (1,722) -- (1,722)
----------- ----------- -----------
Cash flows from financing activities:
Expenses paid by an officer on behalf of
the Company (Note 3) .......................... 2,500 900 4,145
Proceeds from related party advance (Note 3) ..... 10,000 -- 10,000
Proceeds from the sale of common stock (Note 5) .. 405,000 200 408,600
Payment of offering costs ........................ (49,500) -- (49,500)
----------- ----------- -----------
Net cash provided by
financing activities ........ 368,000 1,100 373,245
----------- ----------- -----------
Net change in cash .......... 174,537 (1,620) 174,613
Cash, beginning of period ............................ 76 1,714 --
----------- ----------- -----------
Cash, end of period .................................. $ 174,613 $ 94 $ 174,613
=========== =========== ===========
Supplemental disclosure of cash flow information:
Income taxes ..................................... $ -- $ -- $ --
=========== =========== ===========
Interest ......................................... $ -- $ -- $ --
=========== =========== ===========
Non-cash investing and financing transactions:
Net liabilities acquired in exchange for common
stock in CytoDyn agreement (Note 2) ........ $ (161,578) $ -- $ (161,578)
=========== =========== ===========
Common stock issued as payment of
accounts payable (Note 5) .................. $ 5,000 $ -- $ 5,000
=========== =========== ===========
See accompanying notes to condensed financial statements
F-13
CYTODYN, INC.
(Formerly Rexray Corporation)
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 1: Basis of Presentation
The condensed financial statements presented herein have been prepared by the
Company in accordance with the instructions for Form 10-QSB and the accounting
policies in its Form 10-KSB filed for the year ended May 31, 2003 and should be
read in conjunction with the notes thereto.
In the opinion of management, the accompanying condensed financial statements
contain all adjustments (consisting only of normal recurring adjustments) which
are necessary to provide a fair presentation of operating results for the
interim periods presented. The results of operations presented for the three and
nine months ended February 29, 2004 are not necessarily indicative of the
results to be expected for the year.
The Company is in the development stage in accordance with Statements of
Financial Accounting Standards (SFAS) No. 7 "Accounting and Reporting by
Development Stage Enterprises". On October 28, 2003, CytoDyn, Inc. (the
"Company" or the "Registrant", formerly known as Rexray Corporation) closed an
Acquisition Agreement with CytoDyn of New Mexico, Inc. ("CytoDyn NM") (see Note
2).
Financial data presented herein are unaudited.
Note 2: Acquisition Agreement
Terms
-----
On October 28, 2003, the Registrant closed an Acquisition Agreement with CytoDyn
NM. Under the terms of the Acquisition Agreement, CytoDyn NM:
- Assigned the patent license agreement between CytoDyn NM and Allen D. Allen
covering United States patent numbers 5424066, 5651970, and 6534057, and related
foreign patents and patents pending, for a method of treating HIV disease with
the use of monoclonal antibodies;
- Assigned its trademarks, CytoDyn and Cytolin, and related trademark symbol;
and
- Paid $10,000 in cash
CytoDyn of NM retained all other assets, including its shares of Amerimmune
Pharmaceuticals, Inc.
F-14
In consideration for the above, the Registrant:
- Effected a one-for-two reverse split of its common stock;
- Issued 5,362,640 shares of its common stock to CytoDyn NM;
- Amended its Articles of Incorporation to change its name to CytoDyn, Inc.; and
- Accepted $161,578 in liabilities related to the assigned assets
Other Compensation
------------------
The Registrant issued a promissory note in the amount of $30,000 to its former
president, James B. Wiegand, for payment of services rendered in connection with
the acquisition. This note was paid during the fiscal quarter ended February 29,
2004.
Change in Control
-----------------
Following the closing of the Acquisition Agreement, CytoDyn NM held 5,362,640,
or 85.8 percent, of the Registrant's 6,252,640 common shares issued and
outstanding, which resulted in a change in control of the Registrant.
Accounting and Valuation
------------------------
The same party (CytoDyn NM) controlled the assigned assets and liabilities
before and after the closing of the Acquisition Agreement. Therefore, the
assigned assets and liabilities were recorded on the books of the Registrant
based on CytoDyn NM's book value on the closing date. On October 28, 2003, the
book value of the assigned assets and liabilities was $-0-, and $161,578,
respectively. As a result, the Registrant credited liability accounts for
$161,578 with an offset against "common stock." Note 3: Related Party
Transactions
On December 26, 2003, an officer advanced the Company $50,000 for working
capital. The advance did not bear interest and was due on demand. The Company
repaid the advance in February 2004.
As part of the above Acquisition Agreement, the Company acquired $161,578 in
liabilities of which $61,694 is owed to officers and directors. The liabilities
were incurred as a result of maintaining the patents and other intangible
assets. The $61,694 is included in the accompanying condensed financial
statements as "Indebtedness to related parties".
During October 2003, an officer advanced the Company $10,000. The advance does
not bear interest and is due on demand. The advance is included in the
accompanying condensed financial statements as "Indebtedness to related
parties".
F-15
During the six months ended November, 30, 2003, an officer contributed $2,500 to
the Company for working capital. The working capital contributions are included
in the accompanying financial statements as "Additional paid-in capital".
During the period from October 2002 through October 27, 2003, Amery Coast
Corporation ("ACC"), at that time an affiliate under common control contributed
office space to the Company. The office space was valued at $100 per month based
on the market rate in the local area and is included in the accompanying
financial statements as "Contributed rent, related party" expense with a
corresponding credit to "Additional paid-in capital".
The Company paid rent to ACC from May 2002 through September 2002. The office
space was valued at $100 per month based on the market rate in the local area
and is included in the accompanying financial statements as "Rent, related
party".
Note 4: Note Payable
Effective October 28, 2003, the Company issued a $30,000 promissory note to its
former president as payment for services related to the CytoDyn NM Acquisition
Agreement. The note carried a five percent interest rate and was due on January
27, 2004. The Company repaid the $30,000 note, and $442 in accrued interest, in
February 2004.
Note 5: Shareholders' Deficit
During the fiscal quarter ended February 29, 2004, the Company sold 1,250,000
shares of its common stock at $.30 per share for net proceeds totaling $325,500,
after deducting commissions of $37,500 and offering costs of $12,000. The
Company relied upon exemptions from registration believed by it to be available
under federal and state securities laws in connection with the sales.
During February 2004, the Company issued 16,667 shares of its common stock as
payment for a $5,000 officer liability ($.30 per share).
During September 2003, the Company sold 600,000 shares of its common stock for
gross proceeds totaling $30,000 ($.05 per share). The Company relied upon
exemptions from registration believed by it to be available under federal and
state securities laws in connection with the sales. The shares were sold through
the Company's former officer and director.
F-16
Following is a schedule of changes in shareholders' deficit for the nine months
ended February 29, 2004:
Common stock Additional
----------------------- Paid-In Retained
Shares Amount Capital Deficit Total
---------- ---------- ---------- ---------- ----------
Balance, June 1, 2003 .............. 1,180,000 $ 11,800 $ 5,415 $ (18,639) $ (1,424)
Capital contributed by an officer .. -- -- 2,500 -- 2,500
September 2003, sale of common
stock, $.05/share ................ 600,000 30,000 -- -- 30,000
October 2003, reverse split of
common stock ..................... (890,000) -- -- -- --
October 2003, common stock issued in
CytoDyn NM Acquisition Agreement . 5,362,640 (161,578) -- -- (161,578)
February 2004, sale of common, less
offering costs of $49,500 at
$.30/share ....................... 1,250,000 325,500 -- -- 325,500
February 2004, common stock issued
as payment for officer liability . 16,667 5,000 -- -- 5,000
Office space contributed by an
affiliate ........................ -- -- 500 -- 500
Net loss for the nine months
ended February 29, 2004 .......... -- -- -- (189,315) (189,315)
---------- ---------- ---------- ---------- ----------
Balance, February 29, 2004 7,519,307 $ 210,722 $ 8,415 $ (207,954) $ 11,183
========== ========== ========== ========== ==========
Note 6: Income taxes
The Company records its income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". The Company incurred net operating losses for all
periods presented resulting in a deferred tax asset, which was fully allowed
for; therefore, the net benefit and expense resulted in $-0- income taxes.
Note 7: Commitment
The Company entered into a non-cancelable operating lease for office space that
commenced November 14, 2003 and expires November 30, 2004. Payments required
under the operating lease are $495 per month.
F-17
No dealer, salesperson or any other individual has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offer made by this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by CytoDyn. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities other than the securities
offered by this Prospectus, or an offer to sell or a solicitation of an offer to
buy any security by any person in any jurisdiction in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, imply that the information in
this Prospectus is correct as of any time subsequent to the date of this
Prospectus.
CYTODYN, INC.
----------------------------------
PROSPECTUS
250,000 SHARES
TABLE OF CONTENTS Page
----------------- ----
Prospectus Summary ........................ 5
Risk Factors .............................. 9
Use of Proceeds ........................... 16
Dividend Policy ........................... 17
Dilution .................................. 17
Capitalization ............................ 18
Selected Financial Data ................... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations Business ...................... 30
Management ................................ 32
Principal Shareholders .................... 34
Certain Transactions ...................... 35
Description of Common Stock ................ 36
Shares Eligible for Future Sale ........... 37
Underwriting .............................. 38
Legal Matters ............................. 38
Experts ................................... 38
Additional Information .................... 39
Index to Financial Statements ............. F-1
Until June 23, 2004 (25 days after the CYTODYN, INC.
date of this Prospectus), all dealers 200 West De Vargas St. Suite 1,
effecting transactions in the registered Santa Fe, New Mexico 87501
securities, whether or not participating 505-988-5520
in this distribution, may be required to
deliver a Prospectus. This is in addition
to the obligation of dealers to
delivering a Prospectus when acting as
underwriters and with respect to their
unsold allotments or subscriptions.
40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 101-117 of Colorado Corporate Statutes provides for the indemnification
of our officers, directors, employees and agents under certain circumstances,
for any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative; and "expenses" includes without
limitation attorneys' fees and any expenses, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with the proceeding if that person acted in good faith and in a manner the
person reasonably believed to be in the best interests of the corporation and,
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct of the person was unlawful.
Our articles of incorporation contain a provision for the indemnification of
CytoDyn's directors in Article Eight , which provides that we shall indemnify to
the maximum extent permitted by law, any director, officer, agent, fiduciary or
employee against any claim or expense incurred by reason of being a party to any
legal proceeding, except for acts or omissions involving intentional misconduct,
fraud or a knowing violation of law. Article VI of our bylaws contain similar
provisions.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of CytoDyn, pursuant to the foregoing provisions, or otherwise, CytoDyn has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemized statement of all expenses in
connection with the issuance and distribution of the securities being
Registered, all of which are estimated.
Securities and Exchange Commission filing fee ............ $ 23.75
Printing and engraving expenses .......................... $ 1,000.00
Legal Fees and expenses .................................. $ 25,000.00
Registrar and transfer agent fees ........................ $ 1,000.00
Accounting fees and expenses ............................. $ 10,000.00
Blue sky fees and expenses ............................... $ 3,500.00
-----------
Total ............................................... $ 40,523.75
41
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On May 3, 2002, we issued 800,000 shares of common stock to our former
president, James B. Wiegand, at .001 per share, in exchange for services valued
at $8,000. Mr. Wiegand is a sophisticated person who had superior access to all
corporate and financial information. The issuance was done in reliance upon
Section 4(2) of the Securities Act.
From May 17, 2002 through May 21, 2002, we issued 340,000 shares to 34
shareholders at .01 per share, for a total of $3,400 cash. All investors were
sophisticated and received access to corporate and financial information. The
issuance was made in reliance upon Regulation D of the Securities Exchange
Commission.
In October 2003, pursuant to the Acquisition Agreement between CytoDyn and
CytoDyn of New Mexico, Inc., we issued a total of 5,362,640 post-reverse split
shares of the common stock at a price of .01 per share, for a total of 53,264,
to CytoDyn of New Mexico, Inc., a corporation whose shareholders include Allen
D. Allen and Corinne Allen, in exchange for $10,000 cash and the trademarks,
CytoDyn and Cytolin, as well as a related registered trademark symbol, and the
assignment of that certain patent license agreement dated July 1, 1994 by and
between Allen D. Allen and CytoDyn of New Mexico, Inc., which license covers
U.S. Patent No.s 5424066 ("Method for increasing CD4+ cell numbers through the
use of monoclonal antibodies directed against self-reactive, CD4 specific
cytotoxic T-cells,") 5651970 ("Method for inhibiting disease associated with the
Human Immunodeficiency Virus through the use of monoclonal antibodies directed
against anti-self cytotoxic T-lymphocytes or their lytics",) and 6534057
("Method for increasing the delayed-type hypersenstivity response by infusing
LFA-1-specific antibodies"). The issuance was made to sophisticated persons who
had access to all corporate and financial information, in reliance upon Section
4(2) of the Securities Act. As part of the Acquisition Agreement, we also
assumed $161,578 in liabilities, including $61,694 owed to Allen D. Allen and
Corinne Allen.
In September 2003, we issued a total of 600,000 shares of common stock at $0.05
per share, for a total of $30,000, to sophisticated persons with access to all
corporate and financial information, in a private offering, in reliance upon
Section 4(2) of the Securities Act.
From October 2002 through October 2003, we paid rent to Amery Coast Corporation,
a corporation under control of affiliate James B. Wiegand, and paid rent to Mr.
Wiegand at the rate of $100 per month.
In October 2003, Allen D. Allen advanced us the sum of $10,000. The advance does
not bear interest and is payable on demand.
42
On October 28, 2003 we issued a promissory note to our former president, James
B. Wiegand in the principal amount of $30,000, to compensate Mr. Wiegand for
services rendered. The note bears interest at the rate of 5% per annum and was
paid in February 2004.
On December 26, 2003, Corinne Allen advanced us the sum of $50,000 for working
capital. The advance does not bear interest and is payable on demand. We repaid
in the advance in February 2004.
From January 7, 2004 through April 30, 2004, we sold 1,800,000 shares of our
common stock at the price of $0.30 per share, for a total of $540,000, to 23
persons, in a private offering in reliance upon exemptions contained in
Regulation D.
In February 2004, we issued 16,667 shares to our Executive Vice President, Brian
McMahon, at a price of $0.30 per share, for a total of $5,000, for repayment of
debt.
In the second quarter of 2004, we issued warrants to J.P. Turner, the financial
representative in our private placement, to purchase 405,000 common shares over
five years at an exercise price of $0.30 per share.
ITEM 27. EXHIBITS
Number Description
------ -----------------------------
* 3.1 Articles of Incorporation of CytoDyn.
** 3.2 Certificate of Amendment to Articles of Incorporation of CytoDyn.
* 3.3 Bylaws of CytoDyn.
****4.1 Specimen Common Stock Certificate.
****5.1 Opinion of Kenneth G. Eade, Attorney at Law.
*** 10.1 Acquisition agreement dated September 30, 2003 between Rexray
Corporation and CytoDyn of New Mexico, Inc.
*** 10.2 Amendment No. 1 to agreement dated September 30, 2003 between
Rexray Corporation and CytoDyn of New Mexico, Inc.
**** 23.1 Consent of Kenneth Eade (included in Exhibit 5.1).
**** 23.2 Consent of Cordovano and Honeck
**** 99.1 Subscription Agreement
* Incorporated by reference to Registration Statement on Form 10KSB12ga,
filed July 11, 2002;
** Incorporated by reference to Current Report on Form 8K, filed November
12, 2003
*** Incorporated by reference to Amended Current Report on Form 8K/A,
filed December 1, 2003
**** Filed herewith.
43
ITEM 28. UNDERTAKINGS.
The undersigned Company undertakes to:
(a)(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(I) Include any prospectus required by Section 10(a)(3) of the Securities Act;
ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) Include any additional or changed material information on the plan of
distribution. (2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering. (3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of CytoDyn, pursuant to the provisions referred to under Item 24 of this
Registration Statement, or otherwise, CytoDyn has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by CytoDyn of expenses incurred or paid by a director, officer
or a controlling person of CytoDyn in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of competent jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(f)(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by CytoDyn under Rule 424(b)(1), or (4), or 497(h) under the
Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
44
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Studio City, State of California, on May 26, 2004.
CYTODYN, INC.
By: Allen D. Allen
-------------------------------
Allen D. Allen,
Chairman of the Board and President
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
------------------------- ----------------------------- ------------
/s/ Allen D. Allen Chairman of the Board, May 27, 2004
------------------------- President, and Director
Allen D. Allen
/s/ Corinne Allen Secretary/Treasurer, Director May 27, 2004
-------------------------
Corinne Allen
/s/ Wellington A. Ewen Chief Financial Officer May 27, 2004
-------------------------
Wellington A. Ewen
/s/ Ronald J. Tropp Director May 27, 2004
-------------------------
Ronald J. Tropp
/s/ Daniel M. Strickland Director May 27, 2004
-------------------------
Daniel M. Strickland
/s/ Peggy J. Pence Director May 27, 2004
-------------------------
Peggy J. Pence
45
EXHIBIT INDEX
Number Description
------ -----------------------------
* 3.1 Articles of Incorporation of CytoDyn.
** 3.2 Certificate of Amendment to Articles of Incorporation of CytoDyn.
* 3.3 Bylaws of CytoDyn.
**** 4.1 Specimen Common Stock Certificate.
**** 5.1 Opinion of Kenneth G. Eade, Attorney at Law
*** 10.1 Acquisition agreement dated September 30, 2003 between
Rexray Corporation and CytoDyn of New Mexico, Inc.
*** 10.2 Amendment No. 1 to agreement dated September 30, 2003
between Rexray Corporation and CytoDyn of New Mexico, Inc.
**** 23.1 Consent of Kenneth Eade (included in Exhibit 5.1).
**** 23.2 Consent of Cordovano and Honeck
**** 99.1 Subscription Agreement
____________
* Incorporated by reference to Registration Statement on Form 10KSB12G/A,
filed July 11, 2002
** Incorporated by reference to Current Report on Form 8K, filed November
12, 2003
*** Incorporated by reference to Amended Current Report on Form 8K/A, filed
December 1, 2003
**** Filed herewith.
46