SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CYTODYN, INC.
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(Name of Registrant as Specified In Its Certificate)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CYTODYN, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 31, 2006
TO OUR SHAREHOLDERS:
You are cordially invited to the Annual Meeting of Shareholders of CytoDyn,
Inc., a Colorado corporation. The meeting will be held on Tuesday, January 31,
2006 at 11:00 a.m., local time, at Sportsmens Lodge, 12825 Ventura Blvd, Studio
City, California 91604 for the following purposes (as more fully described in
the Proxy Statement accompanying this Notice):
1. To elect five directors to serve for a term until the 2006 Annual
Meeting of Shareholders or until his or her successor is elected.
2. To ratify the appointment of Cordovano and Honeck, P.C. as our
independent registered public accounting firm for the fiscal year
ending May 31, 2006.
3. To approve the company's proposed 2005 Stock Incentive Plan.
4. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Our Board of Directors recommends that you vote in favor of the foregoing
items of business, which are more fully described in the Proxy Statement
accompanying this notice.
Only our shareholders of record at the close of business on January 3, 2006
are entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he or she has returned a Proxy.
FOR THE BOARD OF DIRECTORS
/s/ Allen D. Allen
---------------------------
Allen D. Allen , Chairman
Executive Officer and Director
YOUR VOTE IS IMPORTANT
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
CYTODYN, INC.
________________
PROXY STATEMENT FOR THE 2005
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 31, 2006
________________
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
CytoDyn, Inc., for use at the Annual Meeting of Shareholders to be held Tuesday
January 31, 2006 at 11:00 a.m., local time, or at any postponement or
adjournment thereof (the "Annual Meeting"), for the purposes set forth herein
and in the accompanying Notice of Annual Meeting. The Annual Meeting will be
held at The Sportsmen Lodge, 12825 Ventura Blvd. Studio City, California 91604.
The telephone number at that location is (818) 769-4700 or (800) 821-8511 in US
& Canada.
Record Date and Principal Share Ownership
Holders of shares of our common stock of record at the close of business on
January 3, 2006 (the "Record Date") are entitled to notice of and to vote at the
Annual Meeting. The shares of our common stock are our only class of voting
securities. As of the Record Date, approximately 8,613,807 shares of our common
stock were issued and outstanding and held of record by approximately _
shareholders.
Revocability of Proxies
Shareholders who execute proxies retain the right to revoke them at any
time before they are voted. Any proxy given by a shareholder may be revoked or
superseded by executing a later dated proxy, by giving notice of revocation to
Secretary, CytoDyn, Inc., 227 E Palace, Suite M, Santa Fe, New Mexico 87501 in
writing prior to or at the meeting or by attending the meeting and voting in
person.
Shareholders Sharing the Same Last Name and Address
In accordance with notices we sent to certain shareholders, we are sending
only one copy of our annual report and proxy statement to shareholders who share
the same last name and address, unless they have notified us that they want to
continue receiving multiple copies. This practice, known as "householding," is
designed to reduce duplicate mailings and save significant printing and postage
costs as well as natural resources.
If you received a householded mailing this year and you would like to have
additional copies of our annual report and/or proxy statement mailed to you or
you would like to opt out of this practice for future mailings, please submit
your request to Secretary, CytoDyn, Inc., 227 E. Palace Ave, Suite M, Santa Fe,
NM 87501.
Voting and Solicitation
Each shareholder is entitled to one vote for each share held as of the
Record Date. Shareholders will not be entitled to cumulate their votes in the
election of directors.
The cost of soliciting proxies will be borne by us. We expect to reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of our directors, officers, and regular
employees, without additional compensation, personally or by telephone or
facsimile.
Quorum; Abstentions; Broker Non-votes
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections appointed for the meeting who will determine whether
or not a quorum is present.
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of our
common stock issued and outstanding on the Record Date. Shares that are voted
"FOR," "AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting with respect to such matter.
Abstentions and broker non-votes are each included in the determination of
the number of shares present and voting for the purpose of determining whether a
quorum is present. Broker non-votes occur when shares held by a broker for a
beneficial owner are not voted with respect to a particular proposal because (1)
the broker does not receive voting instructions from the beneficial owner, and
(2) the broker lacks discretionary authority to vote the shares.
Abstentions will be treated as shares present and entitled to vote for
purposes of any matter requiring the affirmative vote of a majority or other
proportion of the shares present and entitled to vote. Accordingly, abstentions
will have the same effect as a vote against the proposal. With respect to shares
relating to any proxy as to which a broker non-vote is indicated on a proposal,
those shares will not be considered present and entitled to vote with respect to
any such proposal. Thus, a broker non-vote will not affect the outcome of the
voting on a proposal. Abstentions or broker non-votes or other failures to vote
will have no effect in the election of directors, who will be elected by a
plurality of the affirmative votes cast.
Any proxy which is returned using the form of proxy enclosed and which is
not marked as to a particular item will be voted for the election of the
directors, for the ratification of Cordovano and Honeck, P.C. as our independent
registered public accounting firm for the year ending May 31, 2006, for the
approval of the 2005 Stock Incentive Plan, and as the proxy holders deem
advisable on other matters that may come before the meeting, as the case may be,
with respect to the items not marked.
Other Business; shareholder Proposals
We do not intend to present any other business for action at the Annual
Meeting and do not know of any other business to be presented by others.
Pursuant to our bylaws, in order for business to be properly brought by a
shareholder before an annual meeting, our Secretary must receive, at our
corporate office, written notice of the matter not less than 120 days prior to
the first anniversary of the date our proxy statement was released to
shareholders in connection with the preceding year's annual meeting. We did not
receive any such notices from our shareholders for matters to be considered at
the Annual Meeting.
Under Rule 14a-4 promulgated under the Securities Exchange Act of 1934, as
amended, if a proponent of a proposal fails to notify us at least 45 days prior
to the current year's anniversary of the date of mailing of the prior year's
proxy statement, then we will be allowed to use our discretionary voting
authority under proxies solicited by us when the proposal is raised at the
meeting, without any discussion of the matter in the proxy statement. We were
not notified of any shareholder proposals to be addressed at our Annual Meeting,
and will therefore be allowed to use our discretionary voting authority if any
shareholder proposals are raised at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock
as of January 2, 2005, by (i) each person or entity who is known by us to own
beneficially more than 5% of the outstanding shares of common stock, (ii) each
of our directors, (iii) each of the executive officers named in the Summary
Compensation Table, and (iv) all of our directors and executive officers as a
group.
Approximate
Amount And Nature of Percent
Name And Address of Beneficial Owner (1) Beneficial Ownership (2) Owned
---------------------------------------- ------------------------ -----------
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Allen D. Allen 2,118,515 24.6%
Wellington A. Ewen (3) -0- *
Corinne e. Allen 1,604,071 18.6%
Ronald J Troop -0- *
Daniel M. Strickland 8,476 *
Peggy J. Pence -0- *
All Officers and Directors as a Group 3,731,062 43.2%
--------------------
* Less than 1%
(1) Unless otherwise indicated, the business address of each shareholder is c/o
CytoDyn, Inc., 227 E. Palace Ave, Suite M, Santa Fe, New Mexico 87501.
(2) Each shareholder has sole voting and investment power for the shares they
beneficially own. This table is based upon information supplied by
officers, directors, principal shareholders, and Schedules 13D and 13G
filed with the SEC. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission. Shares of common stock
subject to options and warrants currently exercisable, or exercisable
within 60 days of the January 3, 2006, are deemed outstanding for computing
the ownership percentage of the person holding such options or warrants,
but are not deemed outstanding for computing the ownership percentage of
any other person. Except as otherwise noted, we believe that each of the
shareholders named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them,
subject to applicable community property laws.
(3) Mr. Ewen has options to purchase 150,000 shares of common stock in
connection with an employment agreement. We know of no arrangements
concerning anyone's ownership of stock, which may, at a subsequent date,
result in a change of control
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors, officers and beneficial owners of more than 10% of our common
stock to file reports of ownership and reports of changes in the ownership with
the Securities and Exchange Commission. Such persons are required by Securities
and Exchange Commission regulations to furnish us with copies of all Section
16(a) forms they file.
Based solely on our review of the copies of such forms submitted to us
during the year ended May 31, 2005, we believe that all Section 16(a) filing
requirements applicable to our officers and directors were complied with.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Director and Nominees for Director
Our Board of Directors currently consists of five persons, all of whom are
standing for reelection at the Annual Meeting. In the event that any person
nominated as a director becomes unavailable or declines to serve as a director
at the time of the Annual Meeting, the proxy holders will vote the proxies in
their discretion for any nominee who is designated by the current Board of
Directors to fill the vacancy. It is not expected that any of the nominees will
be unavailable to serve.
The name of the nominees for election to the Board of Directors at the
Annual Meeting, age as of the Record Date, and certain information are set forth
below.
Name Age Principal Occupation
-------------------------- --- -----------------------------------------
Allen D. Allen 69 Chief Executive Officer, CytoDyn
Corinne E. Allen 38 Vice President Business Development,
Secretary, Treasurer, CytoDyn
Daniel M. Strickland, MD 60 Physician specializing in reproductive
endocrinology
Vera Stecher, Phd. 55 Medical Director, Pfizer Global
Pharmaceuticals Inc. - pioneered Viagra
Wellington A. Ewen 65 Chief Financial Officer CytoDyn
Allen D. Allen. Mr. Allen has been our chairman of our board and our
president and chief executive officer since October, 2003. Before joining
CytoDyn, he was the chairman of the board of directors and chief executive
officer of CytoDyn of New Mexico, Inc., since its inception in 1994. from 1990
to 1994 he was a research associate with Olive View-UCLA Medical Center where he
collaborated and published with various medical professors oribinal research on
HIV, dermatology and general immunology and was the co-investigator on an
autologous vaccine study. From1986 to 1990 Mr. Allen was director of scientific
affairs, Center for Viral Diseases, Northridge, California, where he conducted
and published original research on a large cohort of patients with complex
constellations of neuroimmunologic complaints. From 1971 to 1986 he was
president of Algorithms, Incorporated where he conducted and published original
research in the areas of artificial intelligence, perception, man and machine
systems and societal engineering. Over the past thirty years, he has published
numerous papers in the peer review science and medical journals. 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. 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. Mr. Allen received an Associates of Arts degree from the University of
California at Berkeley in 1957 and attended the University of California at Los
Angeles from 1957 to 1959. In 1953 he received a national ARS Student Award in
aeronautics from the American Rocket Society (now the Institute of Aeronautics
and Astronautics). Mr. Allen is the father of Corinne E. Allen, our Vice
President of Business Development.
Corinne E. Allen, CPA. Ms. Allen has been a director and our secretary
and treasurer since October 2003, and was until May 2004, our chief financial
officer. In May 2004, Ms. Allen became the vice president of business
development. From April 1995 to October 2003, she served as secretary and
treasurer of CytoDyn of New Mexico, Inc. where she was also a director from
June, 1994 to October 2003. Ms. Allen is a licensed Certified Public Accountant.
From 1999 to 2003, Ms. Allen was employed as a senior manager at Deloitte &
Touche, and, from 1992 to 1998 was a CPA at Hallquist Jones P.C. She has over 17
years experience in the accounting industry. Ms. Allen received a B.S. in
Business Administration from California State University Northridge with a
specialty in Accounting Theory and Practice in 1992. She has been a Certified
Public Accountant since January 1997. Ms.Allen is the daughter of Allen D.
Allen.
Daniel M. Strickland, MD. Dr. Strickland has been a director of
CytoDyn, Inc. since October, 2003. He served as a director of CytoDyn of New
Mexico, Inc. from 1999 to October 2003. From 1995 to 1998 he practiced with
Reproductive Endocrinologists, PC, Augusta, Georgia. From 1998 to the present he
has practiced with the Women's Health Clinic in West Jefferson, North Carolina.
From 1989 to 1995, Dr. Strickland was Chief, Reproductive Endocrinology, Ob-Gyn
Services Division, Saudi Aramco Medical Services Organization in Dhahran, Saudi
Arabia. From 1986 to 1989, Dr. Strickland served as Clinical Associate Professor
at the University of Texas Health Science Center in San Antonio, Texas. Dr.
Strickland served as a nuclear engineer for the U.S. Air Force before he became
a physician. 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. He holds U.S. patent No. 3,909,624 for a
Split-Ring Marx Generator Grading. Dr. Strickland received a Bachelor of Science
in Physics from the University of Georgia in 1966, and a Master of Science in
Nuclear Engineering from the Air Force Institute of Technology in 1969. Dr.
Strickland received his Doctorate of Medicine from Medical College of Georgia in
1977.
Vera J. Stecher, Phd. Dr. Stecher has been a Medical Director at
Pfizer, Inc. Pfizer Global Pharmaceuticals since 1996. This will be her first
term serving as Director for CytoDyn, Inc. Dr. Stecher was instrumental in the
development of Viagra, one of the nation's top 3 selling drugs on the market
today. She brings extensive knowledge and experience in the pharmaceutical
industry to CytoDyn. From 1994 to the present she has been employed by Pfizer.
From 1987 to 1994 she was a project team leader at Sanofi-Winthrop, and from
1981 to 1987 she served as Section Head of Immunology at the Sterling Winthrop
Research Institute. Dr. Stecher is the recipient of the Dr. Heinz Karger
Memorial Prize for Biochemical Immunology as well as the New York University's
Founders' Award. Dr. Stecher is a member of many professional societies and has
published numerous papers in the peer-review journals. She holds a Ph.D.
(honors) from New York University Medical School, Department of Pathology ,
Immunology /Basic Medical Sciences. She also holds a M.S. degree from University
of Wisconsin, Zoology Dept, Immunology/Biochemistry and a B.A. (cum lade) from
University of Buffalo, Biology Dept.
Wellington A. Ewen, CPA, MBA. Mr. Ewen, has been our chief financial
officer since May 6, 2004. From 1988 until 2000, Mr. Ewen was owner of
Wellington Ewen & Associates in Malibu, California, which represented many
clients as financial and accounting consultants. He also served as financial and
accounting officer for several development stage pharmaceutical companies,
including Entropin, Inc. from April 1998 to June, 2000. From February, 1999
until his resignation in 2000, he was the chief financial officer of Amerimmune,
Inc. From January, 2000 to July, 2000, he also served as a manager at
PriceWaterHouseCoopers in Los Angeles, California. Mr. Ewen is currently
licensed as a CPA in Oregon. He received his Bachelor of Science in 1963 and
Master of Business Administration from Cornell University in 1964.
Vote Required
The nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but have no other legal effect under Colorado law.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES SET
FORTH ABOVE.
Board Meetings, Committees and Directors Compensation
Our Board of Directors held no meetings during the fiscal year ended May
31, 2005. Although we have no formal policy requiring director attendance at
annual meetings of shareholders, directors are encouraged to attend the annual
meetings of shareholders.
We currently do not have audit committee. Our Board of Directors acts as
our audit committee. Similarly, the Board of Directors has determined that we do
not have an audit committee financial expert as defined under the Exchange Act
rules. We have been seeking, and continue to seek, an independent person to fill
this role.
It is our policy that director candidates recommended by shareholders will
be given appropriate consideration in the same manner as other director
candidates presented to the Board of Directors. Shareholders who wish to submit
a director candidate for consideration by the Board of Directors may do so by
submitting a comprehensive written resume of the recommended nominee's business
and educational experience and background and a consent in writing signed by the
recommended nominee that he or she is willing to be considered as a nominee and
if nominated and elected, he or she will serve as a director. Shareholders
should send their written recommendations of nominees accompanied by the
candidate's resume and consent to: Board of Directors, c/o CytoDyn, 227 E.
Palace Ave, Suite M, Santa Fe, New Mexico 87501. No director nominations by
shareholders have been received as of the filing of this proxy statement.
Shareholder Communications to the Board of Directors
Shareholders may submit communications to our Board of Directors or any
individual members of the Board of Directors by addressing a written
communication to: Board of Directors, c/o CytoDyn, Inc., 227 E Palace Avenue,
Suite M, Santa Fe, New Mexico 87501. Shareholders should identify in their
communication the addressee whether it is our Board of Directors or any
individual member of the Board of Directors. Shareholder communications will be
forwarded to our Secretary. Secretary will acknowledge receipt to the sender,
unless the sender has submitted the communication anonymously, and forward a
copy of the communication to the addressee on our Board of Directors or if the
communication is addressed generally to our Board of Directors to our
Chairperson of the Board of Directors.
Compensation of Directors
Our directors did not receive any compensation for their services as
directors.
Compensation Committee Interlocks and Insider Participation
During fiscal 2004, no member of our Board of Directors or executive
officer of CytoDyn served as a member of the Board of Directors or Compensation
Committee of any entity that has an executive officer serving as a member of our
Board of Directors.
RELATED PARTY TRANSACTIONS
Related Party Transactions, Actual or Proposed, In Last 2 Years. We
propose to be, or during the last two years were, party to certain transactions
involving amounts in excess of $60,000, in which our directors, executive
officers, others hold more than 5% of any class of our securities, or their
immediate family members, had or will have a material interest. The interested
parties and transactions are described below.
Agreement to Issue Warrants to J.P. Turner & Company, LLC. J.P.
Turner & Company, LLC, is a beneficial owner of 5.02% of our common stock, by
virtue of common stock warrants which it is entitled to receive pursuant to a
Financial Representative Agreement dated November 25, 2003. Pursuant to the
terms of that agreement:
o J.P. Turner acted as our agent in connection with a private offering
of our securities;
o We paid the sum of $54,000 to J.P. Turner;
o We are to issue to J.P. Turner warrants for the purchase of 426,000
shares of our common stock, at an exercise price of $0.30 per share;
o When issued, the warrants will:
o Vest immediately in favor of J.P. Turner;
o Be exercisable immediately and thereafter for 5 years;
o Contain customary anti-dilution provisions for stock
dividends, splits, mergers and sales of substantially all
assets;
o Contain a "cashless exercise" provision;
o We have granted J.P. Turner "piggyback" registration rights, at our
expense, with respect to the shares underlying the warrants;
o We are to indemnify J.P. Turner and others against certain losses
arising in connection with our material misrepresentations or
omissions, the performance by J.P. Turner of the agreement, or breach
of representations or warranties by an investor; and
o The term of the agreement is 12 months, subject to termination upon 45
days written notice.
Agreement with Symbion Research International, Inc. Our director,
Peggy C. Pence, PhD., is the President and Chief Executive Officer of Symbion
Research International, Inc. On October 1, 2003, we entered into a Master
Agreement for Professional Services with Symbion. The agreement describes
general terms and conditions intended to apply to services which Symbion may
provide for us, most likely in connection with the conduct of future FDA
clinical trials of Cytolin. That agreement requires an advance payment of
$25,000 to Symbion, of which $5,000 is to serve as a retainer and the remaining
$20,000 is to be applied against billing for services that may be rendered. We
have made the advance payment. We also have had discussions with Symbion
regarding the possible conduct of Phase II and III trials, and these discussions
have resulted in Symbion providing us with a cost estimate:
o based on the assumption that the Phase I trials will not have to be
repeated and that the FDA will approve the currently designed Phase
II/III study;
o that services related to the end of Phase I and the Pre-Phase II
meeting will cost between $50,000 and $100,000;
o that services related to the Phase II/Phase III pivotal study will
cost between $1,250,000 and $1,750,000; and
o that the cost to the Investigators will be between $750,000 and
$1,500,000, plus the costs of materials, investigational product
manufacturing or supplies.
Acquisition of the Assets of CytoDyn of New Mexico. Allen D. Allen,
our President, Chief Executive Officer and the Chairman of our Board of
Directors, Corinne E. Allen, our Vice President of Business Development,
Secretary, Treasurer and Director, Ronald J. Tropp and Daniel M. Strickland,
M.D., our directors, and Brian J. McMahon, our former executive vice president,
formerly also served as executive officers or directors of CytoDyn of New
Mexico, Inc. In October 2003, we acquired the assets of CytoDyn of New Mexico,
Inc. and changed our name to CytoDyn, Inc. In connection with that transaction:
o we issued to CytoDyn of New Mexico 5,362,640 post reverse- split
shares of our common stock;
o Allen D. Allen ultimately received 2,118,515 shares of our post
reverse-split common stock and indirectly benefited from our
assumption of debts in the amount of $71,694 owed to him and Corinne
E. Allen by CytoDyn of New Mexico;
o Corinne E. Allen ultimately received 1,736,335 shares of our post
reverse-split common stock 1 and indirectly benefited from our
assumption of debts in the amount of $71,694 owed to her and Allen D.
Allen by CytoDyn of New Mexico;
o Daniel M. Strickland, MD, who is a member of our board of directors,
ultimately received 8,476 shares of our post reverse-split common
stock; and
o James B. Wiegand, who until this transaction had been our president,
retained 400,000 shares of our post reverse-split common stock.
Services Provided by Ronald J. Tropp. Our director, Ronald J. Tropp,
Esq., has provided legal services to us, and to CytoDyn of New Mexico, for a
number of years. Currently, we owe him the sum of $87,185 for these services. No
arrangements have been made for the payment of this obligation. We anticipate
that Mr. Tropp will provide additional legal services to us in the future.
Indemnification, Legal Costs and Fees Incurred by Directors and
Officers. Allen D. Allen, Corinne E. Allen, Ronald J. Tropp and Daniel M.
Strickland, M.D., our directors, and Brian J. McMahon, our former Executive Vice
President, are named as Cross-Defendants in a Cross-Complaint filed in the
California Superior Court in and for Los Angeles County in an action originally
captioned CytoDyn of New Mexico, Inc. et al., v. Amerimmune Pharmaceuticals,
Inc. et al., Case number BC 290154. The Cross-Complaint is based upon alleged
acts and omissions of these individuals occurring before we entered into the
Acquisition Agreement with CytoDyn of New Mexico. In a separate proceeding, in
Ventura County, California, captioned CytoDyn, Inc., et al. v. Amerimmune, Inc.
et al., Case number SC039250, Allen D. Allen is our co-plaintiff. Our Articles
of Incorporation and by-laws provide that we will indemnify directors, officers,
and enumerated others against certain liabilities and expenses arising because
of the indemnitee's corporate status or relationship. We have not determined
whether we have an obligation to indemnify Messrs. Allen, McMahon, Tropp and
Strickland and Ms. Allen with respect to any liability that may arise under the
Cross-Complaint. We have, however, assumed responsibility for the payment of the
legal fees and costs of counsel who jointly represent us and any of Messrs.
Allen, McMahon, Tropp and Strickland and Ms. Allen in the Los Angeles County
proceeding. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons, we have 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.
Note Given and Debt Owed to Allen D. Allen. In January 2004 we
issued to Allen D. Allen a non interest bearing promissory note, payable on
demand, in the original principal amount of $22,788. The note reflects advances
made to us by Mr. Allen during the years ending on May 31, 2003 and May 31,
2004. In addition, we owe the sum of $10,000 to Mr. Allen, who advanced that
amount to CytoDyn of New Mexico for further payment to Rexray Corporation in
connection with the acquisition of the assets of CytoDyn of New Mexico. The sum
owed does not bear interest and is payable on demand. During the May 31, 2005
debt owed to Mr. Allen by an additional $12,000. The total debt owed to Mr.
Allen is $44,787.
Notes Given to Corinne Allen. In January 2004, we issued to Corinne
E. Allen two non interest bearing promissory notes, each payable on demand, in
the original principal amounts of $50,000 and $38,906. The notes reflected
advances made to us by Ms. Allen during the years ending on May 31, 2003 and May
31, 2004. The $50,000 note was paid in full in February, 2004. The $38,906 note
remains outstanding and does not bear interest. o
o Contributions of Cash. Mr. Allen contributed $ in additional paid in
capital during the year ended May 31, 2005.
EXECUTIVE OFFICER COMPENSATION
The following table provides an overview of compensation that we paid to
our Named Executive Officers for the fiscal years ended May 31, 2005, 2004 and
2003
Long-Term
Compensation
Awards
Securities All Other
Annual Compensation Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options ($)*
--------------------------- ---- ---------- --------- ------------ ------------
Allen D. Allen 2003 98,000(1) 0 0 0
President and Chief 2004 98,000(1) 0 0 0
Executive Officer 2005 0 0 0 0
James E. Weigand 2003 0 0 0 0
President (2) 2004 45,000(3) 0 0 0
2005 0 0 0 0
---------
(1) Mr. Allen's employment agreement with CytoDyn provides for a salary of
$98,000. He was paid a total of $32,668 as of the end of each fiscal year.
(2) Mr. Weigand resigned as President following the acquisition of certain
assets of CytoDyn of New Mexico on October 28, 2003.
(3) Paid for services rendered to CyoDyn in connection with the above
referenced acquisition.
Employment and Change in Control Agreements
Personal Service Agreements. All of our Named Executive Officers have personal
service agreements with us. Among other things, each agreement:
o Is effective for two years after its effective date;
o May be terminated by us:
o Without cause, immediately upon written notice,
o With "cause", immediately upon notice specifying the cause, or
o Upon the death or disability of the executive;
o May be terminated by the executive:
o Voluntarily, upon 4 weeks notice,
o Within a specified period after a "change in control", upon two
weeks notice, and
o For "good reason", if we do not cure the reason within 30 days of
notice;
o Entitles the executive, upon termination by him or her within the specified
period after a "change of control" and with "good reason", to:
o Base salary for the remainder of the term and 12 additional
months,
o Immediate vesting of all stock options,
o Four month period in which to exercise options thereby vested,
o Payment of our portion of premiums under our health plan for the
shorter of 12 months or the executive's eligibility for coverage
under a health plan offered by the executive's new employer, and
o Payment of our portion of premiums under our life insurance plan
or an equivalent amount for 12 months;
o Entitles the executive, upon termination by him or her without cause or for
"good reason", to:
o Base salary for the remainder of the term and 12 additional
months, and
o Payment of our portion of premiums under our health plan for the
shorter of 12 months or the executive's eligibility for coverage
under a health plan offered by the executive's new employer;
o Restricts the solicitation of persons who were our officers, directors,
executives, consultants or employees;
o Restricts the disclosure of confidential information during or after the
term of the Agreement; and
o Requires the disclosure and assignment to us of all "Innovations" developed
by the executive individually or jointly during the period of employment
and that relate in any way to our business.
Proprietary Information And Inventions Agreement. Wellington E. Ewen, our Chief
Financial Officer, and Corinne E. Allen, our Vice President for Business
Development, have signed and delivered to us a Proprietary Information and
Inventions Agreement For Employees. Among other things, each agreement provides
that:
o It is effective from the first date of employment until five years from the
date of termination of employment. Employment is defined to include any
time retained as a consultant or on contract.
o The employee will refrain from any activity that is hostile, adverse or
competitive, or otherwise interferes with the executive's service, to us;
o We are the sole owner of the "Proprietary Information" and all patents and
other rights related to it
o Any rights that the employee has or may acquire in the "Proprietary
Information" are assigned to us;
o The "Proprietary Information" will be kept in confidence and trust during
and after employment;
o All works made by the employee during employment that fall within our scope
of our business are Works for Hire, and we will have the sole and exclusive
copyrights in them;
o All "Inventions" made by the employee (either alone or jointly) during the
period of employment, will be disclosed to us and we will be the sole owner
of them, and any related patents and rights.
Change Of Control Agreement. Allen D. Allen, our President and Chief Executive
Officer, and Corinne E. Allen, our Vice President for Business Development, have
signed and delivered to us a Change of Control Agreement. Among other things,
each agreement provides that:
o The Agreement will terminate at the time the executive's employment with us
terminates or is terminated;
o Upon termination of the executive's employment by us without "cause" or by
him or her with "good reason", in either case within 6 months after a
"change of control", the executive will be entitled to:
o Base salary for the remainder of the term and 12 additional
months,
o Immediate vesting of all stock options,
o 4 month period in which to exercise options thereby vested,
o Payment of our portion of premiums under our health plan for the
shorter of 12 months or the executive's eligibility for coverage
under a health plan offered by the executive's new employer, and
o Payment of our portion of premiums under our life insurance plan
or an equivalent amount for 12 months.
STOCK PERFORMANCE GRAPH
Since our common stock has been trading on the Over the Counter Bulletin
Board for less than a month, we are unable to generate the requisite Stock
Performance Graph.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Approval of Services. The Board of Directors has resolved to establish
an audit committee composed of our chief financial officer, Wellington Ewen,
Corinne Allen, a director and our Vice President of Business Development, and an
independent member when that person is identified. The audit committee does not
yet have a charter. Pending proper establishment of the audit committee, the
Board of Directors pre-approves all engagements for audit and non-audit services
provided by the Company's principal accounting firm, Cordovano and Honeck, P.C.
Audit Fees. The aggregate fees billed during the fiscal years ended May
31, 2005 and 2004 for professional services rendered by our principal accounting
firm, Cordovano and Honeck, P.C., for the audit of the financial services
included in the Form 10-KSB, and for the review of the interim condensed
financial statements included in the Form 10-QSB, were approximately $4,030 and
$2,500, respectively. Included here are fees associated with the review by
Cordovano and Honeck, P.C. of a registration statement filed with the SEC and
the related issuance of independent accountant consent letters.
Audit Related Fees. The aggregate fees billed during the fiscal years
ended May 31, 2005 and 2004 for assurance and related services rendered by our
principal accounting firm, Cordovano and Honeck, P.C., were approximately $5,750
and $3,000 respectively. Assurance and related service fees include the audit of
employee benefit plan financial statements and audit-related due diligence
assistance on potential acquisitions.
Tax Compliance/Preparation Fees. The aggregate fees billed during the
fiscal years ended May 31, 2005 and 2004for professional services rendered by
our principal accounting firm, Cordovano and Honeck, P.C., for tax compliance,
tax advice, and tax planning were approximately and $0, respectively. Tax
compliance services include the preparation of income tax returns filed with the
Internal Revenue Service. Tax advice and planning services included assistance
with implementation of tax planning strategies and consultation on other tax
matters.
All Other Fees. The aggregate fees billed during the fiscal years ended
May 31, 2005 and 2004 for all other professional services rendered by our
principal accounting firm, Cordovano and Honeck, P.C., were approximately $896
and $0, respectively. Other services consisted of assistance with the
interpretation of new accounting standards and other related services.
The following is a summary of the fees billed to CytoDyn by Cordovano and
Honeck, P.C.for professional services rendered for the fiscal years ended May
31, 2005 and 2004:
Fiscal Fiscal
2005 2004
Fee Category Fees Fees
------------ --------- ---------
Audit Fees $ 4,030 $ 2,500
Audit Related Fees 5,750 3,000
Tax Fees 0 0
All Other Fees 896 0
--------- ---------
Total Fees $ 10,676 $ 5,500
========= =========
Cordovano and Honeck, P.C. has audited our financial statements
annually since May, 2002. Representatives of Cordovano and Honeck, P.C. are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions. If shareholders fail to ratify the selection, the Board
of Directors will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Board of Directors in its discretion may direct the
appointment of different independent auditors at any time during the year.
Vote Required
Ratification of the appointment of Cordovano and Honeck, P.C. as our
independent registered public accounting firm for the fiscal year ending May 31,
2006 will require the affirmative vote of the majority of the shares present in
person or by proxy at the meeting and entitled to vote. Proxies solicited by
management for which no specific direction is included will be voted "for" the
ratification of Cordovano and Honeck, P.C. as our independent registered public
accounting firm for the fiscal year ending May 31, 2006.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF CORDOVANO AND HONECK, P.C. AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING MAY 31, 2006.
PROPOSAL NO. 3
APPROVAL OF 2005 stock INCENTIVE PLAN
Description of the 2005 Stock Option Plan
General. The purpose of the 2005 Stock Incentive Plan is to enable us to
attract, retain and motivate our employees and consultants, as well as our
non-employee directors, by providing for or increasing the proprietary interests
of such employees, consultants or non-employee directors in CytoDyn. The maximum
number of shares of common stock that may be issued pursuant to awards under the
2005 Stock Incentive Plan is 1,600,000, subject to certain adjustments to
prevent dilution.
In the event that all or any portion of any option offered under the 2005
Stock Incentive Plan can no longer under any circumstances be exercised the
shares of common stock allocable to the unexercised portion of such option will
become available for grant or issuance under the 2005 Stock Incentive Plan.
Additionally, the number of shares available for issuance under the 2005 Stock
Incentive Plan will be subject to adjustment in the event of stock splits, stock
dividends or certain other similar changes in our capital structure.
Administration. The 2005 Stock Incentive Plan is to be administered by an
"Administrator," which, under the 2005 Stock Incentive Plan, shall be either the
Board of Directors or a committee appointed by the Board of Directors. Subject
to the provisions of the 2005 Stock Incentive Plan, the Administrator has full
authority to implement, administer and make all determinations necessary under
the 2005 Stock Incentive Plan.
The Board of Directors may from time to time alter, amend, suspend or
terminate the 2005 Stock Incentive Plan in such respects as the Board of
Directors may deem advisable; provided, however, that no such alteration,
amendment, suspension or termination shall be made that would substantially
affect or impair the rights of any person under any option granted to such
person without his or her consent.
Eligibility. The 2005 Stock Incentive Plan provides that awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of CytoDyn or of any parent or subsidiary corporation of CytoDyn,
whether now existing or hereafter created or acquired (an "Affiliated Company"),
as may be determined by the Administrator. In no event may any employee be
granted options under the 2005 Stock Incentive Plan for more than 800,000 shares
of our common stock in any one calendar year.
Terms of Stock Options. As discussed above, the Administrator determines
many of the terms and conditions of awards granted under the 2005 Stock
Incentive Plan, including whether an option will be an "incentive stock option"
(ISO) or a "non-qualified stock option" (NQSO). Each option is evidenced by any
agreement in such form as the Administrator approves and is subject to the
following conditions (as described in further detail in the 2005 Stock Incentive
Plan):
o Vesting and Exercisability: Options become vested and
exercisable, as applicable, within such periods as determined by
the Administrator and as set forth in the related stock option
agreement, provided that options must expire no later than ten
years from the date of grant (or five years with respect to ISOs
granted to optionees who own more than 10% of the outstanding
common stock). Option agreements may also provide that options
shall become vested upon the achievement of certain performance
goals, as determined by the Administrator.
o Exercise Price: The exercise price must be at least 100% of the
fair market value of a share of common stock at the time such
option is granted, provided that the exercise price of any ISO
granted to an optionee that owns more than 10% of the outstanding
common stock shall not be less than 110% of the fair market value
of a share of common stock at the time of grant.
o Method of Exercise: Payment of the exercise price may be made, in
the discretion of the Administrator, in cash, by check, by
delivery of shares of our common stock, through a broker-assisted
"cashless exercise," or any combination of the foregoing methods
of payment or any other consideration or method of payment as
shall be permitted by applicable corporate law.
o Termination of Service: Options cease vesting on the date of
termination of service or the death or disability of the optionee,
unless provided otherwise in the applicable option agreement or
unless otherwise determined by the Administrator. Under applicable
law, ISOs granted under the 2005 Stock Incentive Plan generally
expire no later than three months after the termination of the
optionee's service, except in the case of death or disability, in
which case the awards generally may be exercised up to 12 months
following the date of death or termination of service due to
disability.
o Change of Control: In the event of a change in control of CytoDyn
(as defined in the 2005 Stock Incentive Plan), the Administrator
may at its discretion provide for vesting arrangements in option
agreements, including arrangements which provide for full
acceleration of vesting upon a change in control whether or not
the acquiring entity agrees to assume or substitute for existing
options in such change in control.
o Additional Restrictions. No ISOs may be granted to an optionee
under the 2005 Stock Incentive Plan if the aggregate fair market
value (determined at the time of grant) of the stock with respect
to which ISOs first become exercisable by such optionee in any
calendar year under our stock option plans and any Affiliated
Company exceeds $100,000. To the extent an ISO exceeds this
$100,000 limit, that portion of the option in excess of such
limitation shall be treated as an NQSO. Options are
nontransferable, other than by will and the laws of descent and
distribution or in any manner permitted by the Administrator that
is not prohibited by the Code.
Summary of Federal Income Tax Consequences of the 2005 Stock Incentive Plan
The following is a brief summary of certain federal income tax consequences
of participation in the 2005 Stock Incentive Plan. The summary should not be
relied upon as being a complete statement of all possible federal income tax
consequences. Federal tax laws are complex and subject to change. Participation
in the 2005 Stock Incentive Plan may also have consequences under state and
local tax laws which vary from the federal tax consequences described below. For
such reasons, we recommend that each participant consult his or her personal tax
advisor to determine the specific tax consequences applicable to him or her.
Incentive Stock Options. No taxable income will be recognized by an
optionee under the 2005 Stock Incentive Plan upon either the grant or the
exercise of an ISO. Instead, a taxable event will occur upon the sale or other
disposition of the shares acquired upon exercise of an ISO, and the tax
treatment of the gain or loss realized will depend upon how long the shares were
held before their sale or disposition. If a sale or other disposition of the
shares received upon the exercise of an ISO occurs more than (i) one year after
the date of exercise of the option and (ii) two years after the date of grant of
the option, the holder will recognize long-term capital gain or loss at the time
of sale equal to the full amount of the difference between the proceeds realized
and the exercise price paid. However, a sale, exchange, gift or other transfer
of legal title of such stock (other than certain transfers upon the optionee's
death) before the expiration of either of the one-year or two-year periods
described above will constitute a "disqualifying disposition." A disqualifying
disposition involving a sale or exchange will result in ordinary income to the
optionee in an amount equal to the lesser of (i) the fair market value of the
stock on the date of exercise minus the exercise price or (ii) the amount
realized on disposition minus the exercise price. If the amount realized in a
disqualifying disposition exceeds the fair market value of the stock on the date
of exercise, the gain realized in excess of the amount taxed as ordinary income
as indicated above will be taxed as capital gain. A disqualifying disposition as
a result of a gift will result in ordinary income to the optionee in an amount
equal to the difference between the exercise price and the fair market value of
the stock on the date of exercise. Any loss realized upon a disqualifying
disposition will be treated as a capital loss. Capital gains and losses
resulting from disqualifying dispositions will be treated as long-term or
short-term depending upon whether the shares were held for more or less than the
applicable statutory holding period (which currently is more than one year for
long-term capital gains). We will be entitled to a tax deduction in an amount
equal to the ordinary income recognized by the optionee as a result of a
disposition of the shares received upon exercise of an ISO.
The exercise of an ISO may result in an "adjustment" for purposes of the
"alternative minimum tax." Alternative minimum tax is imposed on an individual's
income only if the amount of the alternative minimum tax exceeds the
individual's regular tax for the year. For purposes of computing alternative
minimum tax, the excess of the fair market value on the date of exercise of the
shares received on exercise of an ISO over the exercise price paid is included
in alternative minimum taxable income in the year the option is exercised. An
optionee who is subject to alternative minimum tax in the year of exercise of an
ISO may claim as a credit against the optionee's regular tax liability in future
years the amount of alternative minimum tax paid which is attributable to the
exercise of the ISO. This credit is available in the first year following the
year of exercise in which the optionee has regular tax liability.
Non-qualified Stock Options. No taxable income is recognized by an optionee
upon the grant of a NQSO under the 2005 Stock Incentive Plan. Upon exercise,
however, the optionee will recognize ordinary income in the amount by which the
fair market value of the shares purchased, on the date of exercise, exceeds the
exercise price paid for such shares. The income recognized by the optionee who
is an employee will be subject to income tax withholding by CytoDyn out of the
optionee's current compensation. If such compensation is insufficient to pay the
taxes due, the optionee will be required to make a direct payment to us for the
balance of the tax withholding obligation. We will be entitled to a tax
deduction equal to the amount of ordinary income recognized by the optionee,
provided that certain reporting requirements are satisfied. If the exercise
price of a NQSO is paid by the optionee in cash, the tax basis of the shares
acquired will be equal to the cash paid plus the amount of income recognized by
the optionee as a result of such exercise. If the exercise price is paid by
delivering shares of our common stock already owned by the optionee or by a
combination of cash and already-owned shares, there will be no current taxable
gain or loss recognized by the optionee on the already-owned shares exchanged
(however, the optionee will nevertheless recognize ordinary income to the extent
that the fair market value of the shares purchased on the date of exercise
exceeds the price paid, as described above). The new shares received by the
optionee, up to the number of the old shares exchanged, will have the same tax
basis and holding period as the optionee's basis and holding period in the old
shares. The balance of the new shares received will have a tax basis equal to
any cash paid by the optionee plus the amount of income recognized by the
optionee as a result of such exercise, and will have a holding period commencing
with the date of exercise. Upon the sale or disposition of shares acquired
pursuant to the exercise of a NQSO, the difference between the proceeds realized
and the optionee's basis in the shares will be a capital gain or loss and will
be treated as long-term capital gain or loss if the shares have been held for
more than the applicable statutory holding period (which is currently more than
one year for long-term capital gains).
Tax Withholding. Under the 2005 Stock Incentive Plan, we have the power to
withhold, or require a participant to remit to us, an amount sufficient to
satisfy Federal, state and local withholding tax requirements with respect to
any award granted under the 2005 Stock Incentive Plan. To the extent permissible
under applicable tax, securities, and other laws, the Administrator may, in its
sole discretion, permit a participant to satisfy an obligation to pay any tax to
any governmental entity in respect of any option up to an amount determined on
the basis of the highest marginal tax rate applicable to such participant, in
whole or in part, by (i) directing us to apply shares of common stock to which
the participant is entitled as a result of the exercise of an option, or (ii)
delivering to us shares of common stock owned by the participant.
Vote Required
Approval of the 2005 Stock Incentive Plan will require the affirmative vote of
the holders of a majority of the shares present in person or by proxy at the
meeting and entitled to vote. Proxies solicited by management for which no
specific direction is included will be voted "for" the approval of the 2005
Stock Incentive Plan.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE 2005 STOCK INCENTIVE PLAN.
OTHER MATTERS
We know of no other matters to be submitted to the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the shares they represent as the
Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Allen D. Allen
------------------
Allen D. Allen
Chief Executive Officer and Director
Santa Fe, New Mexico
January 3, 2006