UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: November 30, 2004 Commission File Number 000-49908
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CYTODYN, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 75-3056237
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 W. DeVargas Street, Suite 1, Santa Fe, New Mexico 87501
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(Address of principal executive offices) (Zip code)
(505) 988-5520
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common stock, no par value 8,069,307
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Class Number of shares outstanding at January 5, 2004
Transitional Small Business Disclosure Format: Yes No X
--- ---
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This document is comprised of 10 pages.
INDEX
Page
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PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet, November 30, 2004 (unaudited)............... 3
Condensed statements of operations, three and six months ended
November 30, 2004 (unaudited) and 2003 (unaudited)................ 4
Condensed statements of operations, six months ended
November 30, 2004 (unaudited) and 2003 (unaudited)................ 5
Notes to condensed financial statements (unaudited).................. 6
Item 2. Management's Discussion and Analysis or Plan of Operation... 11
Item 3. Controls and Procedures..................................... 13
PART 2 - OTHER INFORMATION
Item 1. Legal Proceedings........................................... 13
Item 2. Changes in Securities and Small Business Issuer
Purchases of Equity Securities............................ 14
Item 3. Defaults Upon Senior Securities............................. 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
Item 5. Other Information........................................... 14
Item 6. Exhibits.................................................... 15
Signatures.............................................................. 15
2
Part I, Item 1. Financial Statements
CYTODYN, INC.
(A Development Stage Company)
Condensed Balance Sheet
(Unaudited)
November 30, 2004
Assets
Current Assets:
Cash ...................................................... $ 14,836
-----------
Total current assets ........................ 14,836
Property and equipment, less accumulated
depreciation of $955 ...................................... 5,547
Deposit ....................................................... 495
-----------
$ 20,878
===========
Liabilities and Shareholders' Deficit
Current Liabilities:
Accounts payable .......................................... $ 74,758
Accrued liabilities ....................................... 44,953
Indebtedness to related parties (Note 2) .................. 132,979
-----------
Total current liabilities ................... 252,690
-----------
Commitments and contingencies (Note 4) ........................ --
Shareholders' deficit:
Preferred stock, no par value; 5,000,000 shares authorized,
-0- shares issued and outstanding ...................... --
Common stock, no par value; 25,000,000 shares authorized,
8,069,307 shares issued and outstanding ................ 1,916,334
Additional paid-in capital ................................ 24,014
Outstanding stock awards (Note 4) ......................... 11,928
Accumulated deficit ....................................... (1,601,912)
Deficit accumulated during development stage .............. (582,176)
-----------
Total shareholders' deficit ................. (231,812)
-----------
$ 20,878
===========
See accompanying notes to condensed financial statements
3
CYTODYN, INC.
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Operating expenses:
General and administrative ............ $ 110,941 $ 45,686 $ 231,350 $ 49,621
Stock-based compensation (Note 4):
Financial consulting services ...... 11,928 -- 11,928 --
Legal fees, related party ............. -- -- -- --
Depreciation .......................... 459 -- 751 --
----------- ----------- ----------- -----------
Total operating expenses 123,328 45,686 244,029 49,621
----------- ----------- ----------- -----------
Operating loss ......... (123,328) (45,686) (244,029) (49,621)
Interest income ........................... 51 3 227 3
Interest expense .......................... (148) (145) (330) (145)
----------- ----------- ----------- -----------
Loss before income taxes (123,425) (45,828) (244,132) (49,763)
Income tax provision (Note 3) ............. -- -- -- --
----------- ----------- ----------- -----------
Net loss ............... $ (123,425) $ (45,828) $ (244,132) $ (49,763)
=========== =========== =========== ===========
Basic and diluted loss per share .......... $ (0.02) $ (0.01) $ (0.03) $ (0.01)
=========== =========== =========== ===========
Basic and diluted weighted average
common shares outstanding ............. 8,069,307 5,659,307 8,069,307 5,510,973
=========== =========== =========== ===========
See accompanying notes to condensed financial statements
4
CYTODYN, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended
November 30,
----------------------
2004 2003
--------- ---------
Net cash used in
operating activities ... $(169,473) $ (4,511)
--------- ---------
Cash flows from investing activities:
Property and equipment purchases ............ (3,167) --
--------- ---------
Net cash used in
investing activities ... (3,167) --
--------- ---------
Cash flows from financing activities:
Capital contributions by president (Note 2) . 512 --
Proceeds from notes payable issued to
related parties (Note 2) ................. -- 13,452
Repayment of notes payable to related
parties .................................. -- --
Proceeds from the sale of common stock ...... -- --
Payment of offering costs ................... -- --
--------- ---------
Net cash provided by
financing activities ... 512 13,452
--------- ---------
Net change in cash ..... (172,128) 8,941
Cash, beginning of period ....................... 186,964 3,238
--------- ---------
Cash, end of period ............................. $ 14,836 $ 12,179
========= =========
Supplemental disclosure of cash flow information:
Income taxes ................................ $ -- $ --
========= =========
Interest .................................... $ 330 $ --
========= =========
See accompanying notes to condensed financial statements
5
CYTODYN, INC.
(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, 2004 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
months ended November 30, 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".
Financial data presented herein are unaudited.
Note 2: Related Party Transactions
During the six months ended November 30, 2004, the Company's president paid
administrative expenses on behalf of the Company totaling $512. The payment has
been recorded as contributed capital and is included in the accompanying
condensed financial statements as "Additional paid-in capital".
As of May 31, 2004, the Company owed two officers promissory notes totaling of
$71,694. The notes are due on demand and carry no interest rate. The balance due
of $71,694 remained unpaid at November 30, 2004 and is included in the
accompanying condensed financial statements as Indebtedness to related parties.
As of May 31, 2004, the Company owed a director $61,285 for legal services
provided to the Company. As of November 30, 2004, no arrangements had been made
for the Company to repay this obligation. There is no interest carried on this
loan is due on demand. The Company anticipates that the director will continue
to provide legal services in the future. The balance due of $61,285 is included
in the accompanying condensed financial statements as Indebtedness to related
parties.
Note 3: 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
by a valuation allowance; therefore, the net benefit and expense resulted in
$-0- income taxes.
Note 4: Stock Awards
During the year ended May 31, 2004, the Company committed to grant a financial
representative warrants to purchase 426,000 shares of the Company's common
stock. The warrants carry an exercise price of $.30 per share, vest on the date
of grant and expire after five years from the date of grant. The warrants were
granted on November 25, 2004 and were included in the registration for the
public offering under our SB-2 filing. No warrants have yet been exercised.
6
The Company's common stock had no traded market value on the date of grant. The
market value of the stock was determined to be $.30 per share base on
contemporaneous sales of common stock to unrelated third party investors. The
weighted average exercise price and weighted average fair value of these options
as of November 30, 2004 were $0.30 and $0.028, respectively.
The fair value for the options granted during the six months ended November 30,
2004 was estimated at the date of grant using the Black-Scholes option-pricing
model with the following assumptions:
Risk-free interest rate............................ 2.00%
Dividend yield..................................... 0.00%
Volatility factor.................................. 0.00%
Weighted average expected life..................... 5 years
The following schedule summarizes the changes in the Company's outstanding stock
options:
Awards Outstanding and Exercisable
---------------------------------------- Weighted Average
Number of Exercise Price Exercise Price
Shares Per Share Per Share
------------------ ------------------ ------------------
Balance at May 31, 2004..................... 150,000 $0.50 to $1.50 $ 1.00
Awards granted........................... 426,000 $0.30 $ 0.30
Awards exercised......................... - $0.00 $ -
Awards cancelled/expired................. - $0.00 $ -
------------------ ------------------
Balance at November 30, 2004................ 576,000 $0.30 to $1.50 $ 0.48
==================
Note 5: Commitments
The Company has signed Personal Service Agreements with three officers that
cover the two years ended May 31, 2005 and 2006. Under the terms of the
agreements, if an officer is terminated by the Company without cause or
terminates service for good cause within three months of a change in control,
the Company is required to pay the officer the balance of the base salary for
the term of the agreement and for an additional 12 months after the expiration
of the term.
Note 6: Financial Information - Development Stage
Following is the Statement of Operations for the period in which the Company has
been in the development stage as required by SFAS No. 7.
7
October 28, 2003 Through November 30, 2004
Operating expenses:
General and administrative ....... $ 549,030
Stock-based compensation (Note 4):
Financial consulting services . 11,928
Legal fees, related party ........ 20,050
Depreciation ..................... 955
-----------
Total operating expenses ...... 581,963
-----------
Operating loss ................ (581,963)
Interest income ...................... 570
Interest expense ..................... (783)
-----------
Loss before income taxes ...... (582,176)
Income tax provision ................. --
-----------
Net loss ...................... $ (582,176)
===========
Following is the Statement of Cash Flows for the period in which the Company has
been in the development stage as required by SFAS No. 7.
8
October 28, 2003 Through November 30, 2004
Net cash used in
operating activities ....... $ (526,368)
-----------
Cash flows from investing activities:
Equipment purchases ........................... (6,502)
-----------
Net cash used in
investing activities ....... (6,502)
-----------
Cash flows from financing activities:
Capital contributions by president ............ 512
Proceeds from notes payable issued to
related parties (Note 2) ................... 111,194
Repayment of notes payable to related
parties (Note 2) ........................... (50,000)
Proceeds from the sale of common stock (Note 4) 540,000
Payment of offering costs (Note 4) ............ (54,000)
-----------
Net cash provided by
financing activities ....... 547,706
-----------
Net change in cash ......... 14,836
Cash, beginning of period ......................... --
-----------
Cash, end of period ............................... $ 14,836
===========
Supplemental disclosure of cash flow information:
Income taxes .................................. $ --
===========
Interest ...................................... $ 783
===========
Note 7: Litigation
CytoDyn of New Mexico, Inc. et al., v. Amerimmune Pharmaceuticals, Inc. et al.,
--------------------------------------------------------------------------------
Case number BC 290154, California Superior Court in and for the County of Los
--------------------------------------------------------------------------------
Angeles.
--------
The First Amended and Supplemental Complaint alleged causes of action for unfair
business competition, inducement of breach of contract, fraud and unjust
enrichment, and declaratory and equitable relief. This case was dismissed due to
the attorney's lack of attention to the case. The judge stated that the evidence
was not presented in an orderly and logical fashion..
Rex H. Lewis, a Defendant and former director and C.E.O. of Amerimmune
Pharmaceuticals, Inc. has filed a First Amended Cross-Complaint against CytoDyn
of New Mexico, Inc., Allen D. Allen, Corinne E. Allen, Ronald J. Tropp, Brian J.
McMahon , Daniel M. Stickland, M.D. and unknown others designated as "Does
101-150".
Mr. Lewis alleges, among other things, misrepresentations or failure to make
disclosures related to Cytolin and its development, approval and marketing;
interference with Amerimmune's attempt to complete clinical research related to
Cytolin and Mr. Lewis' actual or prospective business relationships; and libel
and slander of Mr. Lewis.
9
Currently the Cross-Complaint asserts causes of action for fraud, interference
with prospective business interests, libel and slander. The requested relief
includes damages (alleged to range from $3 million to $20 million or more),
punitive damages, costs and other "just and proper" relief.
The outcome of litigation is uncertain. Management believes that an unfavorable
result is unlikely with respect to the claims raised by the Complaint, and that
the claims raised by the Cross-Complaint are without merit. The defendants have
retained new counsel which are the same attorney's that represented us in the
following case that was decided in our favor.
Discovery is continuing. Trial is scheduled for June 2005.
CytoDyn, Inc., et al. v. Amerimmune, Inc. et al., Case number SC039250,
--------------------------------------------------------------------------------
California Superior Court in and for the County of Ventura.
-----------------------------------------------------------
The Declaratory Relief Sought and Attorneys' Fees Were Awarded.
The action was filed on April 21, 2004. CytoDyn and Allen D. Allen were the
plaintiffs. The defendants were Amerimmune Inc., its parent Amerimmune
Pharmaceuticals, Inc., and unknown others designated as "Does 1-100".
The action concerned a Conditional License Agreement, dated February 24, 2000,
between Allen D. Allen and CytoDyn of New Mexico, on one hand, and Amerimmune,
Inc., on the other. The complaint alleged that the Conditional License Agreement
licensed to the defendants technology and patents related to Cytolin and
assigned to defendants an FDA approved investigational new drug application
related to Cytolin. Further, it alleged that the defendants breached the
Conditional License Agreement, resulting in its termination.
The principal relief sought was a declaration that the license granted and the
assignment of the technology, patents and drug application made pursuant to the
Conditional License Agreement were terminated no later than September 12, 2001,
and that Allen and we are the owners of the technology, patents and
investigational new drug application, free of any claims of the defendants.
Costs, attorney's fees, and other "just and proper" relief also were sought.
This case was decided in favor of the plaintiffs, CytoDyn and Allen October 4,
2004.
Symbion Research International, Inc., v. Amerimmune, Inc. et al., Case number
--------------------------------------------------------------------------------
SC035668, California Superior Court in and for the County of Ventura.
---------------------------------------------------------------------
The complaint was filed on March 14, 2003. Symbion Research International, Inc
was the plaintiff. Amerimmune, Inc. was the remaining defendant. We were not a
party to this action, however the action affects intellectual property which
will be purchased by us.
A default judgment was entered on December 18, 2003. A judgement was entered in
favor of Symbion Research International ("Symbion") on September 17, 2004
granting the declarative relief sought by Symbion .
The action concerned intellectual property generated in connection with services
provided by Symbion with respect to early phase FDA clinical trials of Cytolin,
including research data and a patent application filed in 2002. The complaint
alleged that Symbion performed early phase FDA trials (designated in the
Complaint as "Phase Ia" and "Phase Ib/II", on behalf of Amerimmune pursuant to
an oral agreement, and that Amerimmune failed to pay Symbion for its services,
and otherwise breached its obligations under the agreement.
10
The complaint asserted causes of action for breach of oral contract, account
stated, work and labor done, fraud, and declaratory and injunctive relief. The
relief sought included a declaration that Symbion is the owner of the
intellectual property resulting from the services provided by Symbion.
The intellectual property generated in the early phase FDA clinical trials is
necessary to obtain approval for, and to conduct, further FDA clinical tests of
Cytolin. Because a satisfactory result was obtained in this action, we have
negotiated an agreement with Symbion that will allow the use in subsequent
phases of clinical test of Cytolin of the research data generated in the early
phases. CytoDyn will purchase this data from Symbion in order to apply for FDA
registration of Cytolin for $362,000 in cash and stock options.
Part I. Item 2. Management's Discussion and Analysis or Plan of Operation
-------- ---------------------------------------------------------
Plan of Operation
During the next 12 months, our objectives are:
o To continue our clinical trials of Cytolin,
o To continue our efforts to protect our technology by obtaining
additional patents in The United Kingdom European Union and Hong Kong.
o To develop an established market for our shares,
o To raise funds to support our research and development efforts, the
clinical trials relating to Cytolin, and our general and
administrative expenses, and
o To explore joint venture arrangements for other possible
pharmaceutical products.
Continuing Clinical Trials. Phase I clinical trials were conducted by Symbion
Research International under the sponsorship of Amerimmune, Inc. during 2002.
Symbion became the owners of that clinical data which will be purchased by us
for $362,000 See Exhibit 10.5.2. We believe that the data from these trials
support approval by the FDA of Phase II trials, and we intend to seek approval
for the Phase II trials. We will work with Symbion International and their Phase
I trial data and we plan to submit our application for approval of Phase II/III
pivotal studies. If the Phase II/III study is approved, we expect it, together
with the pre-Phase II/III efforts, to cost an estimated $2,050,000 to
$3,350,000, plus estimated manufacturing and supply costs of $350,000 to
$400,000. These trials can take anywhere from 29 to 42 months. Until we have met
with the FDA, which we plan to do within the next 6 months, we cannot be certain
what additional studies, assuming that Phase II/III study supports the efficacy
and safety of Cytolin, will be required to receive marketing approval.
If we are unable to complete clinical trials on a timely basis, with favorable
results, our costs will increase significantly and we may not have enough
capital to support further research and development and continue in business.
Also, if we incur significant delays in being able to market our product, even
if we are ultimately able to do so, we will be delayed in earning revenues and
probably will require additional financing to continue in business.
Patents
During fiscal year 2004, several European patents were granted with respect to
our technology. The new patents are covered by our License Agreement with Allen
D. Allen, our president. These patents are designated European Patent No. 94
912826.8, for the United Kingdom, Germany, France, Switzerland, Italy, the
Netherlands, Portugal, Spain, and Sweden, and are the counterparts to our United
States Patent No. 5424066. Patents are pending in those same countries which, if
granted, will be the equivalent of our United States Patent No. 5651970. We
11
estimate the costs associated with these pending patents to be approximately
$65,000, including amounts we have already spent. We may file additional patents
during the current fiscal year including Hong Kong, if our research and
development efforts warrant them. We do not have any other potential patents
identified at this time.
Litigation
For a thorough discussion of our pending litigation, please see the section
entitled "Legal Proceedings." In Part 2, Item 1.
We were plaintiffs in two pending cases, CytoDyn of New Mexico, Inc. et. al., v.
Amerimmune Pharmaceuticals, Inc. et al., Case number BC290154 and the other in
Ventura County, in a case captioned CytoDyn, Inc., et al. v. Amerimmune, Inc. et
al., Case number SC039250., each involving our rights to the patented technology
underlying Cytolin and any other products we might wish to develop. The first
case was dismissed and the second case was decided in our favor.
Establishing a Market and Obtaining Funding
We will require funding during the 2005 fiscal year in order to continue our
research and development efforts and to stay in business. The amount of that
funding is directly related to the clinical trials we are able to conduct and
the amounts we will need for our company operations.
We filed a registration statement on Form SB-2 on June 1, 2004, covering the
sale of 250,000 shares of common stock at $0.75 per share, for total proceeds of
$187,500, to be used primarily for general and administrative expense, SEC
compliance costs, and legal and accounting fees. This registration statement has
not yet gone effective, and we cannot assure that it will or that the shares
that would be offered would sell. We intend, if this offering does go effective
and if the shares sell, to seek an established market for our securities on an
established quotation system, such as the NASD over-the-counter bulletin board,
which we hope would give us a wider base of investors. We may not, however, be
able to achieve our goals.
In addition to operating funds, we will need from approximately $2,700,000 to
$4,100,000 for research and development, including clinical trials, and
manufacturing and supply costs, depending upon whether we are approved by the
FDA to conduct a Phase II/III pivotal study.
We do not have any of this funding arranged or secured, and we do not yet have
plans for raising the funding we require. We anticipate that we will seek the
funding through further equity offerings, either by private placement or by
registered offering, or by possible joint venture arrangements with other
parties. If we are unable to secure the necessary funding, we will not be able
to conduct our research and development activities or to continue in business.
Exploring Joint Ventures
While we continue to pursue FDA approval of our Cytolin product, we are also
considering entering into joint ventures to develop other types of products. We
have, for instance, entered into a nondisclosure agreement with another
development stage biotech company to discuss the possibility of the joint
development of drugs to treat neuropsychiatric diseases or disorders. These
discussions are in the early stages and we do not know if we will enter into a
joint venture or other arrangement with this company or if any products might
ensue from our efforts.
We may also pursue joint ventures or other arrangements to obtain funding for
our Cytolin-related endeavors, but we have not pursued this possibility and do
not have any prospects at this time.
12
Other Matters
We do not expect, in the next 12 months, to make any significant expenditures
for equipment. We expect to hire additional management once additional funding
is secured. Otherwise we do not expect to make any significant changes in the
number of employees that we have. We have no off-balance sheet arrangements.
Part I. Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
------------------------------------------------
We maintain controls and procedures designed to ensure that information
required to be disclosed in the reports that we file or submit under
the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. Based upon their evaluation
of those controls and procedures performed within 90 days of the filing
date of this report, our chief executive officer and the chief
financial officer concluded that our disclosure controls and procedures
were adequate.
(b) Changes in internal controls
----------------------------
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to
the date of the evaluation of those controls by the chief executive
officer and chief financial officer.
Part 2. Other Information
Item 1 - Legal Proceedings.
CytoDyn of New Mexico, Inc. et al., v. Amerimmune Pharmaceuticals, Inc. et al.,
Case number BC 290154, California Superior Court in and for the County of Los
Angeles
The First Amended and Supplemental Complaint alleged causes of action for unfair
business competition, inducement of breach of contract, fraud and unjust
enrichment, and declaratory and equitable relief. This case was dismissed due to
the attorney's lack of attention to the case. The judge stated that the evidence
was not presented in an orderly and logical fashion. The company may appeal this
case given the costs associated with it and the relief awarded to us in the case
below.
Rex H. Lewis, a Defendant and former director and C.E.O. of Amerimmune
Pharmaceuticals, Inc. has filed a First Amended Cross-Complaint against CytoDyn
of New Mexico, Inc., Allen D. Allen, Corinne E. Allen, Ronald J. Tropp, Brian J.
McMahon , Daniel M. Stickland, M.D. and unknown others designated as "Does
101-150".
Mr. Lewis alleges, among other things, misrepresentations or failure to make
disclosures related to Cytolin and its development, approval and marketing;
interference with Amerimmune's attempt to complete clinical research related to
Cytolin and Mr. Lewis' actual or prospective business relationships; and libel
and slander of Mr. Lewis.
Currently the Cross-Complaint asserts causes of action for fraud, interference
with prospective business interests, libel and slander. The requested relief
includes damages (alleged to range from $3 million to $20 million or more),
punitive damages, costs and other "just and proper" relief.
The outcome of litigation is uncertain. Management believes that an unfavorable
result is unlikely with respect to the claims raised by the Complaint, and that
the claims raised by the Cross-Complaint are without merit. The defendants have
retained new counsel which are the same attorney's that represented us in the
following case that was decided in our favor.
13
Discovery is continuing. Trial is scheduled for June 2005.
CytoDyn, Inc., et al. v. Amerimmune, Inc. et al., Case number SC039250,
--------------------------------------------------------------------------------
California Superior Court in and for the County of Ventura.
-----------------------------------------------------------
The principal relief sought was a declaration that the license granted and the
assignment of the technology, patents and drug application made pursuant to the
Conditional License Agreement were terminated no later than September 12, 2001,
and that Allen and we are the owners of the technology, patents and
investigational new drug application, free of any claims of the defendants.
Costs, attorney's fees, and other "just and proper" relief also were sought.
This case was decided in favor of the plaintiffs, CytoDyn and Allen, on October
4, 2004 and the plaintiffs were awarded the declaratory relief sought and
attorneys' fees.
Symbion Research International, Inc., v. Amerimmune, Inc. et al., Case number
SC035668, California Superior Court in and for the County of Ventura. We were
not a party to this action; however the action affects intellectual property
which is important to us.
A default was entered against Amerimmune, Inc. on December 18, 2003. A judgment
was entered in favor of Symbion International on September 17, 2004 granting the
declarative relief sought.
The intellectual property generated in the early phase FDA clinical trials is
necessary to obtain approval for, and to conduct, further FDA clinical tests of
Cytolin. Because a satisfactory result was obtained in this action, we
anticipate negotiating an agreement with Symbion that will allow the use in
subsequent phases of clinical test of Cytolin of the research data generated in
the early phases. CytoDyn will purchase this data for $362,000 as stated under a
purchase agreement, $25,000 will paid from the SB-2 registration proceeds,
83,122 stock options will be granted with an exercise price of $0.75 per share
and $275,000 will be due and payable once the secondary round of financing has
been received. Please see Exhibit 10.5.2.
Item 2 - Changes in Securities and Small Business Issuer Purchases of Equity
Securities.
No response required.
Item 3 - Defaults Upon Senior Securities.
No response required.
Item 4 - Submission of Matters to a Vote of Security Holders.
No response required.
Item 5 - Other Information.
No response required.
14
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits:
1. 10.5.2: Buy-Sell Agreement Between CytoDyn, Inc. and
Symbion Research International, Inc.
2. 31.1: Certification by the CEO
3. 31.2: Certification by the CFO
4. 32.1: Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 - CEO
5. 32.2: Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 - CFO
(b) Reports on Form 8-K:
None.
SIGNATURES
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the three and six months ended November 30,
2004 have been included.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYTODYN, INC.
(Registrant)
DATE: January 5, 2005 BY: /s/ Allen D. Allen
--------------- ---------------------------
Allen D. Allen
President and CEO
15